In developed markets, mobile broadband has been considered a problem for telecom operators, especially after the release of “all you can eat” data plans at very low prices and the rising adoption of data-intensive smartphones. This business model resulted in increasing investments in infrastructure that were not matched by a compensating return rate, which has led many operators, especially those outside the US, to abandon “all you can eat” plans for a tiered pricing model. Mobile operators in Latin America, however, see mobile broadband through different eyes. In developing countries, the preponderance of prepaid mobile services has an important impact on operators’ ARPU and churn, which leads mobile operators to struggle for the highest possible number of clients. It also affects how operators sell, benefit and profit from each individual service.
At first, operators used mobile broadband as a tool to attract and keep clients, but more importantly to get them to pay a recurring fee every month, something that does not happen on the prepaid model. Many operators in the Latin American region also used 3G mobile data services to differentiate themselves from the competition and to increase their value-added services revenue, which has for a long time consisted almost exclusively of SMS revenue. However, as the market evolved and all companies started offering 3G data plans at fixed prices, the service stopped being a differentiator and became a must-have to all operators. The competition resulted in falling prices and therefore decreasing revenues, the same trend seen in developed countries.
The crucial difference between Latin America and developed countries is that the low penetration of the Internet in Latin American countries led to a massive adoption of 3G Internet. The increasing number of subscribers attracted and kept through the offer of 3G compensated for the declining prices for the service, which is now making companies look for a different market strategy that foresees not only the post-paid segment, but also the prepaid. Since the majority of clients in Latin America choose the prepaid model for their voice services, operators in these countries are now looking for a way to introduce mobile data plans for pay-as-you-go users. Many of them are, therefore, engaged in launching prepaid 3G data offerings by the end of this year.
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