Publication Overview

This report includes scenario-based forecasting for the fixed-line, mobile and broadband markets in the major Latin American countries. Scenario forecasting presents us with an opportunity to address the market variables and their likely impact on future growth. Essentially, our scenario forecasts provide bands between higher and lower limits within which growth is expected to occur.

Researchers:- Lucia Bibolini, Henry Lancaster
March 2013 (11th Edition)

Executive Summary

Mobile growing well beyond 100% penetration in Latin America

Economic background

From 2013 to 2020, GDP in Latin America and the Caribbean (LAC) is expected to grow by approximately 4% per annum – slightly above the projected world average of about 3%. Predictions indicate that Panama, Peru, and Paraguay will be LAC’s fastest growing economies, while Brazil will recover from its 2012 slump, and growth will remain robust in Argentina, Chile, Colombia, Mexico, Uruguay, and most of Central America. Prospects are generally weaker, however, in the Caribbean.

Fixed line market

Growth in the telecom market is likely to follow the existing fixed-to-mobile substitution pattern. In fact, in the lower growth scenarios, Latin America’s fixed-line market could even shrink over the years to 2020. Incumbents generally seem reluctant to invest in fixed infrastructure, although new entrants using VoIP, wireless technologies, or triple play solutions are attracting a growing number of subscribers. The market share of these companies, however, remains comparatively small, and the incumbents continue to dominate the region’s fixed line industry.

In the higher fixed-line growth scenarios, on the other hand, assuming healthy GDP growth rates and appropriate regulatory measures, the number of fixed lines could begin to increase again, because teledensity is low and operators may eventually need to roll out more lines to meet the demand for ADSL broadband. Furthermore, a few governments are looking into network sharing and Local Loop Unbundling (LLU), which could boost both the fixed-line and broadband markets.

Mobile market

Like the rest of the world, LAC is turning increasingly towards mobile solutions and away from the traditional telephone. In fact, the region is well ahead of the world average, having reached an estimated 115% mobile penetration at end-2012 against a global rate of around 96%.

Most LAC countries have passed 100% mobile penetration milestone, and growth is set to continue well beyond this mark. More and more people own multiple mobile accounts – either one phone for work and one for personal use, or one phone for each mobile company in order to take advantage of special offers. The growing popularity of mobile broadband also means that an increasing number of users require at least two SIM cards, one for their mobile phone and one for their USB modem.

Fixed broadband market

The fixed broadband market in LAC should increase substantially over the years to 2020, as regional penetration is low compared with the world average (in early 2013, it was about 8.4% in LAC versus 9.2% globally). More and more LAC countries are adopting national broadband plans, as governments begin to realise the strategic importance of high-speed internet for GDP growth and socioeconomic development.

In the higher growth scenario, we estimate that fixed broadband penetration could grow to 21% by 2020. Given the region’s general economic indicators, there is ample room for expansion. Although the situation varies from country to country, the region as a whole should be a fertile ground for broadband investment.

On the other hand, fixed broadband is close to saturation in some of the region’s major urban centres, while provincial towns and rural areas may end up turning to mobile rather than fixed broadband. Although ADSL penetration still has room for growth within the existing infrastructure, eventually it will hit a bottleneck due to the low number of fixed lines. In this scenario, fixed broadband may be replaced by mobile broadband. In fact, fixed-to-mobile substitution is already affecting the data market as the younger generations rely more and more on their mobile phones for calls, text messaging, and internet browsing. With faster mobile broadband technologies, mobile broadband could eventually reduce the need for fixed broadband.

Market Highlights

• The 2014 FIFA World Cup and the 2016 Olympic games, both to be held in Brazil, should provide a strong boost for Brazil’s telecom market.
• The mobile market is being boosted by the growth of 3G handsets and mobile broadband.
• Long Term Evolution (LTE) networks – dubbed 4G mobile – have been launched in Puerto Rico, Brazil, Colombia, and Uruguay; deployments are under way or planned in several other countries.
• Countries with national broadband plans include Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Peru, and Uruguay.

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