2010 Peru - Telecoms, Mobile, Broadband and Forecasts

Excellent growth opportunities in Peru’s burgeoning telecom markets

Peru has one of the highest GDP growth forecasts for Latin America. This should serve to increase the country’s GDP per capita, which is well below the regional average. The country’s economy has rebounded strongly from the global downturn and is experiencing a boom time, with numerous building projects under way.

Yet, despite the country’s high growth rates, there has been little improvement in the conditions of the rural poor. Peru is marked by a strong disparity between the relatively modern coastal region and the interior, where the mostly indigenous people live on a subsistence economy, isolated by lack of transport and communications facilities.

Fibre optic networks cover the length of the Peruvian coast, but do not reach the hinterland. Due to Peru’s rugged territory, VSAT satellite networks have been used to provide rural telecom coverage. The government aims to bridge the digital divide through rural universalisation projects.

Peru’s fixed-line infrastructure reflects the country’s poverty map. Most fixed-lines in service are concentrated in the capital city. Teledensity is 22.8% in the province of Lima, but it is only 1.0% in the mountainous region of Huancavelica.

Besides poverty, other factors that have inhibited fixed line uptake include fixed-to-mobile substitution, expensive telephone services, and geographical inaccessibility in the rugged Andean mountains and lowland Amazon jungles. Though the price of fixed-line rental has dropped, it was one of the highest in Latin America until 2007.

Despite liberal licensing laws, Telefónica del Perú (TdP) maintains a stranglehold over the last mile. Teledensity has been stagnating, even though it is among the lowest in South America. Long-distance telephony is more competitive than local telephony, but there, too, TdP remains the market leader by an enormous margin.

The way forward may well be through the mobile network, where mobile broadband may fulfil a need that the fixed infrastructure has been unable to satisfy. Indeed, the only truly competitive telecom sector in Peru has been the mobile one, and Peru’s mobile penetration compares favourably with the country’s economic indicators. In line with the global trend, Peruvians have been turning to mobile handsets in preference to the traditional fixed-line phone. But again, mobile penetration is highly unequal geographically, ranging between 133.2% in the provinces of Lima and 16.5% in the Huancavelica region.

Three companies compete in the mobile market: Telefónica, trading as Movistar, is the leader; América Móvil, trading as Claro, is in second place; and third is Nextel del Perú.

Mobile broadband is growing strongly, driven by the shortage of fixed broadband accesses. The service is available in about 250 of Peru’s 1,832 districts, reaching all 11 coastal regions plus four mountainous ones. The service, however, is unavailable in the remaining 10 hinterland regions.

Peru’s mobile broadband market structure has been largely determined by entry date. Claro, the first operator to launch services, is the clear leader, with a market share of about 78%. Movistar follows, with a 20% share, and Nextel comes last with 2%.

Internet user penetration in Peru used to be higher than average for Latin America, a remarkable feat considering Peru’s poor economic indicators. But while other countries have raced ahead thanks to broadband growth, Peru has fallen behind. Lack of market competition has made TdP’s ADSL service one of the most costly in Latin America.

The only competition comes from other broadband technologies. Within only two years of launching services, triple-player Telmex Peru has managed to wrest market share in both broadband and cable TV. In 2009, the number of cable modem subscribers almost doubled.

Market highlights:

• Peru’s telecom business should be a profitable investment target in 2010/11. With the country’s economy growing by 6% or more, GDP per capita and the population’s spending power will continue to increase, driving demand for ICT services.
• The Peruvian government is planning a mobile spectrum auction in the second half of 2010 to find a fourth mobile player.
• Mobile number portability was introduced in January 2010; it inspired an immediate interest from consumers and attracted more porting requests compared with neighbouring countries.
• By end-2010, the government will have distributed 600,000 laptops to schoolchildren under the One Laptop Per Child project. All the laptops have wireless Internet access, and will be shared by more than one student, so as to reach three million children across Peru.
• Having won a WiMAX licence, Russia’s Yota promises to cover 12 regions of the country with a WiMAX network.
• Long Term Evolution could reach Peru by 2013.
• Digital Terrestrial TV has been launched in Peru using the Brazilian version of Japan’s ISBD standard.

Peru Internet, broadband, fixed-line, and mobile statistics – 2009 - 2010

(Source: BuddeComm based on industry data)

For those needing an objective and high-level strategic analysis on Peru, this report is essential reading and gives further information on:

• Regulatory challenges in Peru and the government’s plans to reform the telecom sector.
• Projects subsidised by the FITEL universalisation fund; Peru’s private investment promotion agency, ProInversión, is in charge of tenders, which are held using the reverse bid system
• An analysis of Peru’s broadband market, including ADSL, cable modem, and WiMAX.
• Mobile market outlook and developments, including company performance, ARPU, spectrum awards, and mobile data services.
• The development of 3G and mobile broadband services in Peru.
• How different scenarios are likely to affect the fixed-line, mobile, and broadband markets in the ten years to 2020.

Data in this report is the latest available at the time of preparation and may not be for the current year.