Frost & Sullivan: 2010 Predictions for Telecom Services Markets in Latin America

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Feb 24, 2010, 06:00 ET

BUENOS AIRES, Argentina, Feb. 24 /PRNewswire/ -- The year 2009 is over and though every initiative was judged in the shadow of the economic breakdown, we can see now that telecoms entering the IT space was a trend that was solidified in many of the most important Latin American markets.

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3G networks were deployed in the region, commercially operating in 20 countries in Latin America and the Caribbean. The arrival of the iPhone in regional markets triggered Internet usage and other services, such as application stores. On the other hand, the pay-TV market still holds promise. IPTV did not become a reality yet due to regulatory restrictions, and its slowness has yet to be resolved in many countries. Instead, video on demand has witnessed great advances.

In this scenario, 2010 brings both hope and anxiety. The following are Frost & Sullivan predictions for the year:

#1 Ultra broadband will gain traction.

The new digital lifestyle, which connects cameras, videogames, television sets, and a series of other home appliances into a single management device will require increasingly more bandwidth for producing, editing and playing files. New solutions and applications, such as intelligent homes, IPTV and Video on Demand will also drive demand for ultra broadband in Latin America.

It's expected that competition and the scale of clients will erode prices. As ultra broadband technologies were already in the market in 2009, it is likely that prices will start to decline slowly in 2010 for connections above 20MBps, which will also help to gain traction.

Bundling ultra broadband with other services will help increase the benefit perception of shifting bandwidths to the next level, as many other complimentary services will be offered for the premium-price charged for this new service.

#2 WiMAX is not dead!

"As many comments about the commercial failure of WiMAX as a broadband technology arise, I prefer to see it as a complimentary technology for ADSL, cable modem and 3G in Latin America, mostly for areas without coverage of these traditional services, such as rural, low competition, or low income areas" says Jose Roberto Mavignier, Frost & Sullivan industry manager.

The entry of specialized players, such as the Russian Yota in Nicaragua, and soon in Peru, clearly shows the market potential for these referred niches, and it will help to push WiMAX technology to these areas.

Also, small successful deployments, such as the cases of Entel in Chile and Telmex in Peru, will be strong references to new commercial initiatives.

#3 Mobile Marketing will timidly take off.

The great volume of iPhones and smartphones sold in the region over the last 2 years, along with the extensive rollout of 3G networks, created the foundation to leverage mobile marketing initiatives this year.

In addition, we will see new business models to leverage 3G adoption in the region, pushing on mobile marketing: iPhones given at no cost, for example, as long as subscribers agree to be hit by mobile advertising while in motion.

As operators and service providers develop the ability to increase the segmentation of customer bases in Latin America, the 1-to-1 marketing will be more successful and popular in the mobile marketing arena.

"Additionally, major Latin American and multinational brands and companies see the mobile phone as an opportunity and powerful interaction tool with users. Because of this, Frost & Sullivan believes that mobile marketing will begin to take off in Latin America in 2010, even if in a timid way," explains Jose Roberto Mavignier.

#4 Value-added services on broadband connections will become more popular in Latin America.

Given that competition is getting stronger for ADSL, with plenty of cable modem and 3G offers, all broadband connections will have to differentiate themselves with enhanced value-added services to raise ARPUs and maintain clients. Those VAS go from the following: firewall, antivirus, Internet filtering web hosting, limitless emails, content portal access, to video surveillance and speed connection verification. Hardware-based VAS will also be a stronger offer differentiator, as it is happening with Telefonica's Puesto de Trabajo in many countries of the region.

Mobile broadband in Latin America has already shown that it needs VAS to increase the benefit perception from its users. Besides traditional VAS such as antivirus, for instance, the offers of free USB modems, along with the sales of netbooks, will be important highlights for 2010.

#5 More MVNOs (mobile virtual network operators) will be created in the region.

It's likely that, after some success cases in 2009, a wider range of service providers as well as other companies and businesses may start to analyze and invest in similar MVNOs in the region. In addition, the imminence of a new regulation for MVNOs in Brazil, the largest market in the region, will become more attractive for other national and international investments, and may serve as well as an economy of scale to leverage other investments in the region.

Also in Brazil, recent unblocked handset regulation will also help to leverage investments, as client-acquisition costs will be fairly diminished, reducing barriers to new entries in the market.

Recent fixed mobile merged operations in the region will increase the competition in bundle of services - a key for fixed and cable service providers to opt for this business model to gain competitiveness in its bundles.

Furthermore, retail chains, football clubs and TV channels are non-Telecom related businesses that already showed interest in launching their own MVNOs operations, which is another assumption to reinforce this prediction.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.