2011 Venezuela - Telecoms, Mobile, Broadband and Forecasts

Venezuela’s broadband and mobile sectors are falling behind

Venezuela was the only country in South and Central America to experience negative GDP growth in 2010. The six-quarter-long recession has been blamed on falling oil prices, reduced oil production, severe drought followed by floods, sky-high inflation, capital flight, currency depreciation, nationalisations, foreign currency regulations, and an unfavourable environment for private business and investment. Unless radical changes are implemented, the outlook for the Venezuelan economy is not promising. Even with oil revenues rising, lack of investment will prevent the country achieving stable, long-term development goals.

State-owned CANTV dominates Venezuela’s fixed-line, mobile, and broadband markets. Although a number of private operators compete in all three sectors, their business has been dwindling. While Venezuela’s economy contracted by 1.4% in 2010, its telecommunications industry registered a 9.3% growth, performing better than any other sector. But the expansion involved primarily CANTV, as most private companies in all but pay TV saw flat or declining results. Private investment has been dampened in the telecom sector as it has in other Venezuelan industries.

Nevertheless, according to Venezuela’s investment promotion council Conapri, some private investment opportunities still exist in the telecom market, particularly in outsourcing, web-based business, wireless networks, and VoIP.

Venezuela’s fixed-line infrastructure continues to expand, though it has slowed down considerably due to the recession. In rural areas, substantial improvements since 2006 have made service availability relatively high for Latin America. CANTV controls about 87% of Venezuela’s fixed lines in service. Competing companies in local and long-distance telephony are seeing their operations and market share steadily shrink.

Fixed broadband penetration in Venezuela is below average for Latin America, lagging behind most of the region’s major markets. State-owned incumbent CANTV has a monopoly in the provision of ADSL, with which it dominates the fixed broadband sector. The only competition comes from cable modems, wireless broadband, and satellite.

There exists no wholesale market for broadband in Venezuela. There are no ISPs in the country even acting as resellers of CANTV’s ADSL service. If the government were to introduce local loop unbundling, and allow private operators to lease bandwidth from CANTV for broadband services, competition would bring down prices and improve quality (and speed), and we could expect to see a boom in the country’s broadband and ICT sector. CANTV would be able to focus on infrastructure, recovering its investment costs from lease income, rather than trying to operate as a cumbersome, vertically integrated company.

Pay TV penetration is relatively high for Latin America. The market leader is satellite TV operator DirecTV, closely followed by cable TV provider Inter. The two largest cable TV companies, Inter and NetUno, provide triple-play services combining telephony, cable modem broadband, and television. Inter’s network is bi-directional and 100% digitised.

Venezuela’s mobile penetration is about 104% and slightly above the Latin American average. The mobile industry has reached a high level of maturity but, after years of double-digit growth, it was badly hit by the recession, and the number of mobile subscribers shrank for the first time.

Mobile broadband has become an attractive alternative for internet users, as well as an important source of revenue for mobile companies faced with a near-saturated market. In early 2011, over one third of all broadband subscriptions in Venezuela were mobile.

Market highlights:

• A large proportion of Venezuela’s fixed-line infrastructure is based on fixed-wireless technology. Mobile operators Movistar and Digitel offer local and long-distance services over fixed-wireless, while CANTV has been using fixed-wireless to expand the reach of its telephone network.
• A submarine fibre-optic cable dubbed ALBA-1 between Venezuela and Cuba is due to become operational before the end of 2011.
• Broadband in Venezuela is slower and more expensive than in other Latin American countries. In fact, Venezuela’s mean download speed is the 11^th slowest in the world, and the second slowest in Latin America after Bolivia.
• CANTV plans to launch IPTV in 2011, but before it can do so it will need to increase the speeds and drop the prices of its ADSL service.
• For digital terrestrial television, Venezuela has adopted the ISDB-Tb standard, and the first transmissions are expected to take place in five Venezuelan cities during 2011.
• Mobile operator Movistar plans to deploy LTE infrastructure in Venezuela’s major cities in the second half of 2011, but is waiting for the necessary mobile spectrum.
• Smart phones have found wide acceptance in Venezuela, particularly Blackberry – so much so that Venezuela is the number one country in Latin America for Blackberry handsets.
• Venezuela is the regional leader in terms of SMS traffic, the number of text messages being more than double the number of minutes the average Venezuelan talks on a mobile phone.

Venezuela internet, broadband, fixed-line, and mobile statistics – 2009 - 2011

(Source: BuddeComm based on industry data)

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

• The repercussions of the economic situation on Venezuela’s fixed-line, mobile, and broadband sectors, together with industry outlook and forecasts.
• Fixed-line infrastructure growth since the renationalisation of CANTV and its nationwide network expansion project due for completion in 2012.
• An analysis of Venezuela’s broadband sector, including prices and download speeds.
• The development and expansion of mobile broadband and 3G services in Venezuela.

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