2016 Latin America - Mobile Network Operators and MVNOs

Economic turmoil placing pressure on mobile operators across Latin America

Although there are a number of smaller operators across the region, the mobile market in Latin America continues to be dominated by three operators which each have businesses in multiple countries. The smallest of these four is Luxembourg-based Millicom International, which trades as Tigo. The operator reported having 32.5 million subscribers in its six markets in Central and South America as of March 2016. Telefónica Group reported having 186.4 million subscribers in the region. For reporting purposes the Group now separates its Brazilian unit from the remaining units which come under the Telefónica Hispanoamérica umbrella (including Argentina, Chile, Peru, Colombia, Mexico, Ecuador and Uruguay). Mexico’s América Móvil, trading as Telcel in its domestic market and as Claro in the remaining 16 markets in the region, reported having 285.2 million subscribers. Other international players include Telecom Italia, which has more than 75 million mobile subscribers in Brazil, and AT&T Mexico, which although is the smaller operator in that country has ambitions to develop its North American Mobile Service area covering more than 400 million people in Mexico and the US. To this end AT&T Mexico secured spectrum in the AWS band earlier in 2016 to facilitate roaming and other services for its subscribers in the two countries.

The dominance of these operators is being gradually eroded as a result of efforts by a number of national regulators to facilitate the entry of MVNOs and to encourage the participation of smaller players in spectrum auctions. In Mexico, Telcel is being obliged to reduce its market share from 68% as of early 2016 to below 50% by the end of 2018. The company is achieving this by selling assets regionally, which is making room for other operators. There are now several MVNOs offering services in Mexico, although collectively they only have a market share of about 1%.

Operators have had mixed results during the last few quarters. Although the general trend for customer acquisitions and revenue is encouraging, some markets have proved to be difficult. Countries such as Venezuela and Brazil are undergoing considerable economic hardship, as well as dysfunctional political processes, which has stymied revenue growth. América Móvil reported a 9.2% fall in the number of mobile subscribers in Brazil in the year to March 2016, which contributed to the 0.7% fall in revenue in the period. Telefónica Group suffered a 16.7% drop in reported revenue in its Hispanoamérica markets despite a modest lift in the number of subscribers, and a 13% drop in revenue for its Brazilian unit, the latter partly explained by a 10.% decline in the subscriber base. In addition, operators are facing revenue continued pressure from reduced mobile termination rates and regulated tariffs for call and data pricing, while the popularity of OTT messaging services has considerably reduced the volume of SMS traffic, and with it placed further stress on operator revenue.

As these several pressures will continue further into 2016, operators will be encouraged to invest in LTE infrastructure and enhance their mobile data and broadband offerings in a bid to secure revenue growth.