January 15, 2013
With smart devices taking the center stage at the first industry event of 2013, CES in Las Vegas, it is a good time for a 2012-2013 review/outlook of the smartphone market in Latin America, focusing on the two countries that are seeing the strongest adoption: Argentina and Chile.
Whereas Latin America continues to be a mixed picture, with feature phones and ULC handsets taking the lion’s share of handset sales in 2012 (together representing 65% of total sales), Argentina and Chile are now reaching a significant milestone. For the first time in these two countries, smartphone sales are outstripping the sales of other types of handsets.
In Argentina, government restrictions on imported goods (including ICT products) have led most of the major handset manufacturers to start production in the country, which has made it possible to keep up with local demand. Argentina’s smartphone sales were, in fact, higher in 2012 than in the other more advanced regional market, Chile, topping 42% of total sales, leaving 27% to mid-level handsets and another 27% to ULC phones.
Exhibit: Argentina handset sales by category, 2012
Source: Pyramid Research
Argentina still lacks the presence of Apple, which does not have a local factory, but this is not stopping the high phone replacement rate, which is driven by smartphone sales. The outlook for 2013 puts Argentina well ahead of other regional markets for smartphone adoption. Smartphone sales are expected to represent more than 53% of total sales, compared with 37% regionally, with the Android operating system reaching more than a 57% share of the smartphone OS market.
Exhibit: Smartphone sales as a percentage of total handset sales (excl. gray market), 2012-2017
Source: Pyramid Research
In 2012, the widening class gap in the handset world was also evident in Chile. Sales of smartphones and ULC phones reached 35% and 37% of total sales, respectively, with “middle-class” devices (messaging phones and feature phones) making up 5% and 23%. According to a report from the Ericsson ConsumerLab, almost 50% of mobile users in Chile plan to purchase a smartphone for their next upgrade, and 11% plan to purchase a tablet. For 2013, smartphones in the Andean country are set to represent more than 46% of total sales, with the Android OS maintaining more than a 45% share of the smartphone OS market.
Compare these figures with those of Brazil in 2012, where the “lower middle class” device, feature phones, represented a large 46% of total sales, with smartphones at 28%, in line with the Latin American average. One shouldn’t forget, however, that the Brazilian market was negatively affected by the ban on mobile phone sales imposed by regulator Anatel in response to local operators’ failure to meet quality standards. This had a significant impact on device subsidies and consequently on smartphone sales. Brazil is also expected to have strong smartphone sales growth in 2013. A further boost will come from the smartphone manufacturers’ and distributors’ commitment to fully pass on equipment taxation cuts to consumers, which resulted from new legislation in Brazil.
And now comes the crucial issue of prices. The $100 price point is seen by all major players as the threshold for smartphones to reach the mass market throughout the region. Increased competition brought by the likes of Huawei, ZTE and Alcatel helped bring the price of many devices closer to that $100 point, although they are definitely not quite there yet. In 2012, the smartphone average selling price was just over $180 in Latin America. For 2013, they should reach the range of $170. This year, with smartphone demand increasing and competition heating up, Argentina is already close to the $160 ASP, and Chile is going even further to the $150 ASP. Other major markets such as Brazil and Mexico are still in the $180 to $190 range.
As the two leading smartphone markets, Argentina and Chile are showing the extent to which price erosion reduces the distance between consumers and smartphones, helping operators develop attractive offers for smartphones and data plans at increasingly affordable prices. As the price of smartphones continues to decline throughout the region, operators will be able to widen their smartphone portfolio further and introduce more affordable devices into the market.
— Daniele Tricarico, Analyst
Pyramid Research Smartphone Forecast
Forecast published quarterly
The Smartphone Forecast tracks annual handset sell-through of total mobile handsets and smartphones for a ten-year period including five historical years and five forecast years. Smartphone sell-through is segmented by vendor and by operating system. Granular data is provided for each of more than 50 countries, making Pyramid’s smartphone forecast the most detailed on the market today.
Argentina: Affordable Mobile Broadband Access Is Key to Operator Growth
Country Intelligence Report published March 2012
The Argentinean telecom market generated an estimated US$13.6bn in 2011, up 11.6% from the previous year. The mobile voice and data segments alone generated 60.7% of the total revenues for the sector, while the pay-TV and telephony segments accounted for 18.5% and 9.4% of total revenue, respectively. As we move forward in our forecast, we expect mobile service revenue to increase its relative weight in the market, pushed by greater demand for mobile data services. Fixed circuit-switched voice will continue to lose ground as more customers migrate to mobile and VoIP services. In the media sector, the approval of Argentina’s new media law opens new opportunities for alternative operators and telecom cooperatives looking to launch in the IPTV services, while it penalizes dominant cable TV provider Cablevision, which could be forced to divest some of its assets.
Chile: Operator Opportunities in 4G and Quad-Play Bundles
Country Intelligence Report published November 2011
The telecommunications services market in Chile grew 16.4% in 2010 due to the expansion of mobile (voice and data) and pay-TV services. Going forward, we expect the market to expand at a 4.3% CAGR, fueled by an increase in revenue coming from fixed and mobile data services. We expect mobile data service revenue to account for 23% of total service revenue in 2016, compared with 15% in 2011. Pay-TV, which although remains largely underpenetrated in Chile at only 40% of households, will see moderate growth during the forecast period (only 4.2% CAGR). The main drivers of growth will be VoIP (11.8% CAGR), fixed broadband (8.2% CAGR) and mobile data (13.5% CAGR).