October 13, 2009
Like some other Latin American countries, Guatemala is looking to generate more revenue by taxing one service that is used by rich and poor alike: mobile voice calls. While the proposed tax seems minimal – the equivalent of about $0.0122 per mobile minute – it could amount to a levy of about 16% for typical calling plans, a burden that will likely result in a decrease in usage, and increased pressure on the country’s mobile network operators.
Telecommunication services are an obvious target for closing government deficits – now widened by the recession – because they are dispersed among the population and transactions are outside the black market and therefore are easier to tax. Besides, the telecom industry already contributes with value-added taxes, import duties and income taxes.
The National Program of Emergency and Economic Recovery (PNERE) has not said how much they expect to collect from this tax. As we described in our Guatemala Country Intelligence Report, we expect the aggregate MOU for 2009 to be about 133 minutes per month. Assume for a moment that mobile demand is totally inelastic: the potential tax receipts would amount $19.61 per subscriber annually. The tax would represent about 16% of total ARPS – as per our Q3 2009 Pyramid Research Mobile Demand Forecast for Guatemala, annual mobile ARPS in 2008 was $122. But since demand is actually elastic, the tax would, if approved, have a substantial impact on MOU. The fact that demand is elastic also puts into perspective what may be the potential revenue that Guatemala could grab from such a measure.
In El Salvador, a $0.04 tax per minute was imposed on international incoming calls from the US in 2008. Data from the regulator shows that traffic plunged more than 40% after the levy was imposed. In the case of Guatemala, the real effect on mobile traffic of the proposed $0.012 tax is unknown, but clearly it wouldn’t be zero. The tax would have a negative impact on a sector that is moving toward all-you-can-eat plans, even for voice services, and would also harm the per-second billing system that has been so successful in cutting costs for users.
I also believe the tax could be regressive. If it is approved, we should expect a substitution effect from SMS and other messaging services. Here operators could mitigate the impact by attracting some of the lost minutes to messages. Moreover, the case for more data services will make more sense than ever, since users are switching their communications toward social networks, email, IM and other data services. Therefore, because low-income users rely more on voice services, they could end up paying a relatively larger cut than high-income users.
— Jose Magana, Senior Analyst
Communications Markets in Guatemala
Country Intelligence Report published August 2009
The telecommunications market in Guatemala generated $1.9bn in 2008, of which the mobile segment contributed 62%. Going forward, the market will expand at a CAGR of 5.3% to reach $2.8bn by 2014, when pay-TV, fixed broadband and mobile data will be the main contributors. Regional operator Claro has launched quadruple-play services to take advantage of the low penetration levels in broadband and pay-TV. On the other hand, we expect further declines in circuit-switched revenue and dial-up Internet, victims of fixed-to-mobile substitution and broadband adoption, respectively. In mobile services, we see strong growth in data (a 13.7% CAGR) due to a rise in mobile broadband and content. This Country Intelligence Report analyzes Guatemala’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.
Latin America Mobile Demand Forecast
Forecasts published quarterly
Our Mobile Demand Forecast products provide complete pictures of demand trends for 19 geographical markets in Latin America. The Excel output includes five years of historical data and five years of market projections for metrics such as GDP, mobile penetration, subscriptions (by operator, type of package, technology), ARPS and total mobile service revenue (data and voice). The Forecasts are based on extensive field research and use a consistent methodology across all markets, aiming to capture the total spending, from an end-user perspective, on mobile communication services in each market.
Latin America Mobile Operator KPI Forecasts, Q3 2008
Forecasts published September 2008
Updated on a quarterly basis, 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.