August 4, 2009
Telefónica’s Q2 financial and operational results for its Central American mobile operations reveal just how competitive the region’s market is: During the quarter, Telefónica lost 24,500 net subscribers (around 29,500 in prepaid with a gain of 4,800 postpaid users). Financially, the operator was able to hold its EBITDA margins above 41% while revenue grew just 3% compared with the same period in 2008.
The second quarter is historically the weakest in terms of revenue due to the Easter holiday and airtime promotions for Mother’s Day, but operationally, the fact that net additions remained negative for a consecutive quarter despite heavy advertising in Guatemala and El Salvador shows that Telefónica is having a hard time recovering lost ground in terms of additions. On the other hand, financial results suggest that losing some of these customers might not be such a tragedy considering most of them were unprofitable. Nevertheless, we believe that Telefónica faces the risk of becoming a less relevant player if it keeps losing market share and does not move to protect its valuable postpaid customer base — even former niche player Digicel is aggressively going after contract customers.
The fact that Telefónica showed positive postpaid net additions (América Móvil reported negative net additions in Q2 2009) is a big achievement for Telefónica, considering that these are the most profitable customers and the fact that the operator lags Tigo and Claro in deploying a 3G network in Guatemala and El Salvador. I believe, though, that most of these additions in Panama came from mobile broadband, which should encourage the operator to accelerate the launch of a 3G broadband service in larger markets in the region. So far, Telefónica disclosed a capex of $10.65m (compared to $3.91m in Q1 2009), which could be interpreted as the company moving toward expanding its network, but we anticipate it will take some time to match Tigo and Claro’s infrastructure. Also, the numbers are well below 2008’s levels (where capex averaged around $42.4m per quarter), a logical consequence of a more cautious investment pattern due to the economic crisis since the operator is enjoying operational cash flows well above the levels we saw in 2008 ($72.5m per quarter in 2009 compared with $36.9m in 2008).
In terms of usage, Telefónica has kept its mobile traffic stable at 1,691m minutes, compared with 1,690m minutes in Q1 2009, so advertising has at least helped to keep remaining customers calling at the same pace. Considering that two of Telefónica’s markets (El Salvador and Panama) have a penetration exceeding 100%, I believe that traffic data will not change dramatically going forward and that the importance of value-added services coming from data will keep rising in the region.
— Jose Magana, Senior Analyst
Latin America Mobile Handset Forecasts
Forecast published quarterly
Our Mobile Handset Forecast products provide a complete picture of handset sell-through in each of 18 Latin American markets. The Excel output includes five years of historical data and five years of market projections for metrics such as total handset sales, handset sales by network technology, new handset sales (by technology, by technology generation, by feature set), smartphone handset sales, vendor market share and handset ASP. We believe our Handset Forecasts are superior because they capture sell-through (units sold to end users) rather than unit shipments (sales from manufacturers to distributors) and rely heavily on our Mobile Demand Forecasts. Moreover, they are based on extensive field research, and a consistent methodology that is applied to all markets.
Latin American Mobile Operator KPI Forecasts
Forecasts published quarterly
Our Mobile Operator Key Performance Indicators Forecast products provide a complete picture of wireline voice and data communications in each of 19 Latin American markets. The Excel output includes five years of historical data and five years of market projections for metrics such as subscription totals, market shares, net and gross additions, prepaid and postpaid subscriptions, business subscriptions, data ARPS, aggregate ARPS, prepaid and postpaid MOU, churn and total service revenue — all broken down for the mobile operators in the respective markets. We believe our Mobile Operator KPI Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.
Smartphones in Latin America: Big Opportunities for Operators and Suppliers
Telecom Insider published June 2009
Given operators’ interest in smartphones, intensified vendor competition and the potential for growth in Latin America, Pyramid Research estimates the region’s smartphone market will amount to 150m handset units over the next five years — growing from 3% of total handset unit sales in 2008 to 30% in 2014. This report examines the growth potential in Latin America’s smartphone market and the key drivers by analyzing operators’ and vendors’ strategies. It provides Pyramid Research’s five-year forecast on smartphone adoption in the region. Looking at vendor positioning, it focuses on three cases: Nokia, Research in Motion and Apple.
Multiplay Services in Latin America: Operators Target the Mass Market
Telecom Insider published June 2009
For Latin American operators, saturating the highest-income strata won’t keep penetration of fixed services growing and meet revenue expectations, given the region’s moderate GDP per capita. This report examines the multiplay strategies of several regional operators and the rationale for engaging lower-income segments. It compares costs of multiplay services across several markets to demonstrate the potential in Latin America for costs to come down, which would boost penetration. Case studies of NET Serviços in Brazil and Claro in Central America examine the strategic challenges and choices in expanding target markets through bundling.