REGIONAL FORECAST REPORT LATIN AMERICA TELECOMS MARKET: TRENDS AND FORECASTS 2015 2020 PABLO IACOPINO and ROMAN ORVISKY
About this report This report provides: a 5-year forecast of more than 100 mobile and fixed KPIs for Latin America as a whole and seven key countries an in-depth analysis of the trends, drivers and forecast assumptions for each type of mobile and fixed service, and for key countries an overview of operator strategies and country-specific topics, in order to highlight similarities and differences by means of a cross-country comparison a summary of results, key implications and recommendations for mobile and fixed operators. Our forecasts are informed by on-the-ground regional market experts from our topic-led research programmes and our consulting division, as well as external interviews. In addition to our robust set of historical data, our forecasts draw on a unique and in-house modelling tool, which applies a rigorous methodology (reconciliation of different sources, standard definitions, top-down and bottom-up modelling). For the complete data set, see the accompanying Excel file at www.analysysmason.com/latam2015. Geographical Regions modelled: Latin America Countries modelled individually Argentina Brazil Chile Colombia Mexico Peru Venezuela REPORT COVERAGE Key performance indicators Connections Mobile Handset, mobile broadband 1, M2M 2 Prepaid, contract 2G, 3G, 4G Smartphone, non-smartphone Fixed Voice, broadband, IPTV, dial-up Narrowband voice, VoBB DSL, FTTH/B, cable, BFWA, other Voice traffic Fixed and mobile Outgoing minutes, MoU Revenue Mobile Service 3, retail Prepaid, contract Handset, mobile broadband 1, M2M 2 Handset voice, messaging, data Fixed Service 3, retail Voice, broadband, IPTV, dial-up, BNS DSL, FTTH/B, cable, BFWA, other ARPU Mobile: SIMs, handset Prepaid, contract Handset voice, data 1 Includes USB modem, and mid- and large-screen, but not handset-based data. 2 M2M connections and revenue figures include mobile services only. 3 Service revenue is the sum of retail and wholesale revenue. 2
Contents 8. Executive summary 9. Latin America s telecoms market offers significant growth opportunities for operators service revenue will reach USD140 billion by 2020 10. Mobile handset data services will be the largest source of retail revenue growth in LATAM between 2014 and 2020, followed by fixed broadband 11. Telecoms retail revenue will grow in all markets between 2014 and 2020, although regulatory activity will constrain growth in Chile and Mexico 12. Key trends, drivers and assumptions for the mobile and fixed markets 13. Key implications and recommendations for telecoms operators 14. Regional forecasts and cross-country comparison 15. Geographical coverage: We model the seven largest markets, which account for about 90% of Latin America s total telecoms service revenue 16. Market context: Mobile penetration exceeds 100% in all countries except Mexico, and Brazil and Mexico account for 61% of the region s revenue 17. Revenue and ARPU: Mobile handset data services will overtake mobile voice services in 2020 and become the largest source of retail revenue 18. Mobile penetration: Most handset markets are saturated and offer low growth prospects, and non-handset broadband take-up is slowing down 19. Mobile connections: LTE is making an impact in Latin America and will account for 19% of mobile SIMs (excluding M2M) by 2020 20. Smartphones and LTE: Brazil will have the highest smartphone population penetration and LTE take-up rates over the next 5 years 21. Mobile ARPU: Competition is set to intensify in all markets and will drive down ARPU, while Argentina and Venezuela will have high inflation 22. Fixed services: Cable services will gain the most subscribers driven by pay-tv bundles but DSL will retain the largest share through 2020 23. Fixed broadband: Household penetration will grow in all markets through 2019 as competition stimulates demand and multi-play adoption grows 24. Key drivers at a glance 25. Individual country forecasts 26. Argentina: Service revenue will reach ARS122 billion in 2020, but high inflation will be partly responsible for this growth 27. Argentina mobile: Penetration peaked in 2013 and will decline further as multiple-sim ownership shrinks 28. Argentina fixed: Broadband penetration growth will be mainly driven by single-play voice and pay-tv users adding broadband 29. Brazil: Service revenue will continue to grow through 2019 as LTE drives up data spending and fixed broadband take-up accelerates 30. Brazil mobile: LTE gains strength, but regulation, price competition and substitution to OTT services will reduce ARPU 31. Brazil fixed: The broadband market will become more dynamic thanks to fibre take-up and fixed mobile bundles 32. Chile: Data revenue growth will offset the decline in mobile voice revenue, which will be driven by MTR cuts and MVNO competition 33. Chile mobile: Mobile ARPU will remain almost stable as data usage compensates for the strong pressure on voice prices 34. Chile fixed: Fixed mobile substitution will drive down fixed voice revenue while fixed broadband will maintain solid growth 3
Contents 35. Colombia: Service revenue will stagnate after a peak in 2018 because fixed and mobile data growth will eventually slow down 36. Colombia mobile: OTT services will almost completely eliminate mobile messaging revenue by 2020 and LTE take-up will be slow 37. Colombia fixed: Growth in the broadband market will continue thanks to expanded coverage and service bundling 38. Mexico: Regulation will limit mobile revenue growth in the short term, but may ultimately unlock the market s potential 39. Mexico mobile: AT&T s market entry and Telefónica s presence will make the market more dynamic 40. Mexico fixed: Broadband growth will accelerate as operators invest in coverage and fixed voice remains resilient 41. Peru: Service revenue will reach PEN17 billion in 2020 as improvements in 3G and 4G networks drive mobile revenue 42. Peru mobile: Small operators are gaining momentum, which will make the mobile market more dynamic and drive growth 43. Peru fixed: Low-ASPU cable connections will drive a short-term decline in fixed broadband ASPU, but it will eventually stabilise 44. Venezuela: Service revenue will reach VEF238 billion in 2020, driven by data services and boosted by a high rate of inflation 45. Venezuela mobile: LTE will gain strength because operators have to meet population coverage targets conditions 46. Venezuela fixed: The broadband market will grow slowly because fixed competition is low and LTE will boost mobile Internet usage 47. About the authors and Analysys Mason 48. About the authors 49. About Analysys Mason 50. Research from Analysys Mason 51. Consulting from Analysys Mason 4
List of figures Figure 1: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Latin America, 2010 2020 Figure 2: Telecoms retail revenue growth by service type, Latin America, 2014 2020 Figure 3: CAGRs for fixed and mobile retail revenue (2014 2020) and market size by total retail revenue (2020), by country, Latin America Figure 4: Summary of key trends, drivers and assumptions for Latin America Figure 5: Mobile connections by technology generation and fixed broadband household penetration, by country, Latin America, 2020 Figure 6: Metrics for the seven countries modelled individually in Latin America, 2014 Figure 7: Telecoms retail revenue by service type, fixed voice and fixed broadband ASPU, and mobile ARPU, Latin America, 2010 2020 Figure 8: Telecoms retail revenue by service type, total service revenue and growth rates, Latin America, 2014 2020 Figure 9: Connections by type, and growth rates, Latin America, 2014 2020 Figure 10: Active mobile SIM penetration by country (excluding M2M), Latin America, 2010 2020 Figure 11: Mobile connections by technology generation (excluding M2M), and 3G and 4G s share of connections, Latin America, 2010 2020 Figure 12: Smartphones as a percentage of handsets, and LTE s share of total connections (excluding M2M), Latin America, 2014 and 2020 Figure 13: Mobile ARPU by country, Latin America, 2010 20201 Figure 14: Fixed broadband connections by type, and fixed voice, IPTV and mobile broadband connections, Latin America, 2010 2020 Figure 15: Fixed broadband penetration of households by country, Latin America, 2010 2020 Figure 16: Major forecast drivers and impact, by country, Latin America, 2015 2020 Figure 17: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Argentina, 2010 2020 Figure 18: Telecoms retail revenue by service type, total service revenue and growth rates, Argentina, 2010 2020 Figure 19: Connections by type, and growth rates, Argentina, 2010 2020 Figure 20: Mobile, smartphone and 4G penetration rates, Argentina, 2010 2020 Figure 21: Mobile ARPU by type, and mobile ARPU, Argentina, 2010 2020 Figure 22: Summary of key mobile market drivers and assumptions, Argentina Figure 23: Fixed penetration rates by service type, Argentina, 2010 2020 Figure 24: Fixed ASPU by service type, Argentina, 2010 2020 Figure 25: Summary of key fixed market drivers and assumptions, Argentina Figure 26: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Brazil, 2010 2020 Figure 27: Telecoms retail revenue by service type, total service revenue and growth rates, Brazil, 2010 2020 Figure 28: Connections by type, and growth rates, Brazil, 2010 2020 Figure 29: Mobile, smartphone and 4G penetration rates, Brazil, 2010 2020 Figure 30: Mobile ARPU by type, and mobile ARPU, Brazil, 2010 2020 5
List of figures Figure 31: Summary of key mobile market drivers and assumptions, Brazil Figure 32: Fixed penetration rates by service type, Brazil, 2010 2020 Figure 33: Fixed ASPU by service type, Brazil, 2010 2020 Figure 34: Summary of key fixed market drivers and assumptions, Brazil Figure 35: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Chile, 2010 2020 Figure 36: Telecoms retail revenue by service type, total service revenue and growth rates, Chile, 2010 2020 Figure 37: Connections by type, and growth rates, Chile, 2010 2020 Figure 38: Mobile, smartphone and 4G penetration rates, Chile, 2010 2020 Figure 39: Mobile ARPU by type, and mobile ARPU, Chile, 2010 2020 Figure 40: Summary of key mobile market drivers and assumptions, Chile Figure 41: Fixed penetration rates by service type, Chile, 2010 2020 Figure 42: Fixed ASPU by service type, Chile, 2010 2020 Figure 43: Summary of key fixed market drivers and assumptions, Chile Figure 44: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Colombia, 2010 2020 Figure 45: Telecoms retail revenue by service type, total service revenue and growth rates, Colombia, 2010 2020 Figure 46: Connections by type, and growth rates, Colombia, 2010 2020 Figure 47: Mobile, smartphone and 4G penetration rates, Colombia, 2010 2020 Figure 48: Mobile ARPU by type, and mobile ARPU, Colombia, 2010 2020 Figure 49: Summary of key mobile market drivers and assumptions, Colombia Figure 50: Fixed penetration rates by service type, Colombia, 2010 2020 Figure 51: Fixed ASPU by service type, Colombia, 2010 2020 Figure 52: Summary of key fixed market drivers and assumptions, Colombia Figure 53: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Mexico, 2010 2020 Figure 54: Telecoms retail revenue by service type, total service revenue and growth rates, Mexico, 2010 2020 Figure 55: Connections by type, and growth rates, Mexico, 2010 2020 Figure 56: Mobile, smartphone and 4G penetration rates, Mexico, 2010 2020 Figure 57: Mobile ARPU by type, and mobile ARPU, Mexico, 2010 2020 Figure 58: Summary of key mobile market drivers and assumptions, Mexico Figure 59: Fixed penetration rates by service type, Mexico, 2010 2020 Figure 60: Fixed ASPU by service type, Mexico, 2010 2020 Figure 61: Summary of key fixed market drivers and assumptions, Mexico Figure 62: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Peru, 2010 2020 Figure 63: Telecoms retail revenue by service type, total service revenue and growth rates, Peru, 2010 2020 Figure 64: Connections by type, and growth rates, Peru, 2010 2020 Figure 65: Mobile, smartphone and 4G penetration rates, Peru, 2010 2020 Figure 66: Mobile ARPU by type, and mobile ARPU, Peru, 2010 2020 6
List of figures Figure 67: Summary of key mobile market drivers and assumptions, Peru Figure 68: Fixed penetration rates by service type, Peru, 2010 2020 Figure 69: Fixed ASPU by service type, Peru, 2010 2020 Figure 70: Summary of key fixed market drivers and assumptions, Peru Figure 71: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Venezuela, 2010 2020 Figure 72: Telecoms retail revenue by service type, total service revenue and growth rates, Venezuela, 2010 2020 Figure 73: Connections by type, and growth rates, Venezuela, 2010 2020 Figure 74: Mobile, smartphone and 4G penetration rates, Venezuela, 2010 2020 Figure 75: Mobile ARPU by type, and mobile ARPU, Venezuela, 2010 2020 Figure 76: Summary of key mobile market drivers and assumptions, Venezuela Figure 77: Fixed penetration rates by service type, Venezuela, 2010 2020 Figure 78: Fixed ASPU by service type, Venezuela, 2010 2020 Figure 79: Summary of key fixed market drivers and assumptions, Venezuela 7
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Revenue (USD billion) Latin America telecoms market: trends and forecasts 2015 2020 Latin America s telecoms market offers significant growth opportunities for operators service revenue will reach USD140 billion by 2020 Figure 1: Telecoms retail revenue by service type and total service revenue (retail and wholesale), Latin America, 2010 2020 140 120 100 80 60 40 20 0 Retail revenue: Source: Analysys Mason Mobile voice Mobile broadband Service revenue (retail and wholesale): Mobile messaging Mobile M2M Fixed voice and narrowband Business network services Mobile handset data Fixed broadband and IPTV More than 60% of the revenue growth in Latin America (LATAM) between 2014 and 2020 will come from mobile services. LATAM s telecoms service market will be worth USD140 billion in 2020, up from USD123 billion in 2014 (at a 2.1% CAGR). Retail revenue (end-user spending) will account for USD134 billion of this, while wholesale (inter-company) revenue will account for the rest. Fixed and mobile data services will drive most of the growth. Smartphone adoption continues to be strong (Telefónica s smartphone user base in LATAM grew by 52% between 2013 and 2014, supporting 62% growth in mobile data traffic) and LTE is gaining momentum particularly in Brazil (which received a strong boost from the FIFA World Cup in 2Q 2014). The fixed broadband market will continue to grow as operators intensify their customer segmentation strategies to attract previously unserved users (household penetration is still low at 36% in LATAM in 2014), drive multi-play adoption (there are many single-play voice and pay-tv service users) and upgrade their customers to faster speeds (and higher ARPU levels). Leading operators are strengthening their positions through investments (in spectrum and fibre) and acquisitions. AT&T is set to acquire DirecTV (which had over 19 million pay-tv customers in LATAM at the end of 2014), as well as Iusacell and Nextel in Mexico. Telefónica s acquisition of GVT has been approved and MVNOs continue to enter some markets. 9
Argentina Brazil Chile Colombia Mexico Peru Venezuela LATAM Percentage of handsets Percentage of connections Latin America telecoms market: trends and forecasts 2015 2020 Smartphones and LTE: Venezuela will have the highest smartphone penetration, but Brazil will lead LTE take-up rates over the next 5 years Figure 12: Smartphones as a percentage of handsets, and LTE s share of total connections (excluding M2M), Latin America, 2014 and 2020 80% 70% 60% 50% 40% 30% 20% 10% 0% Smartphones as a percentage of handsets: Source: Analysys Mason 25% 20% 15% 10% 5% 0% 2014 2020 LTE s share of total connections (excluding M2M): 2014 2020 Smartphone adoption is quite strong in LATAM: 64% of handsets will be smartphones by 2020. Smartphone net additions reached 62.5 million in the region in 2014, up from 47.8 million in 2013. We estimate that LATAM had 174 million smartphone connections in 2014, of which Telefónica had the greatest share (43%). By 2020, there will be 489 million smartphone connections in the region. Venezuela had the highest smartphone penetration rate in LATAM in 2014 (at 45% of handsets, which will grow to 72% in 2020), as poor fixed broadband coverage pushes consumers towards mobile Internet access. Smartphones also remain somewhat of a status symbol in Venezuela more so than in other LATAM countries. Brazil will account for 43% of smartphone net additions in LATAM between 2014 and 2020. The country s LTE coverage is advanced because operators had to meet specific conditions for the FIFA World Cup and the addressable market is very large Brazil had about 200 million inhabitants in 2014, and further growth is expected among the migrant community. This makes the country appealing for vendors, which are likely to introduce inexpensive smart devices that encourage take-up of advanced data services even among low-spending users. We assume operators will continue to stimulate smartphone adoption via targeted campaigns to promote device upgrades, handset subsidies, as well as voice, SMS and data packages. 20
CONTENTS EXECUTIVE SUMMARY REGIONAL FORECASTS AND CROSS-COUNTRY COMPARISON INDIVIDUAL COUNTRY FORECASTS ABOUT THE AUTHORS AND ANALYSYS MASON 47
About the authors Pablo Iacopino (Senior Analyst) focuses on forecasting and analysing telecoms markets in Europe and Latin America. He leads Analysys Mason's Global Telecoms Forecasts and European Core Forecasts research programmes, and is the lead analyst for research on the Latin America region. Pablo is also a key contributor to our European Country Reports and Telecoms Market Matrix. Pablo joined Analysys Mason in 2012, after 8 years in the telecoms industry. He worked for 5 years in Strategy and Investor Relations at Telecom Italia, where he was responsible for European telecoms benchmarking, followed by 3 years in investment banking as a senior equity research analyst covering telecoms stocks. Pablo specialises in industry analysis, benchmarking, modelling, forecasts and valuation. He holds a Master's degree in business administration and a postgraduate Master's degree in statistics and economics from Università degli Studi di Roma 'La Sapienza'. Roman Orvisky (Research Analyst) is a member of the regional markets research team in London, contributing mainly to the Telecoms Market Matrix, European Core Forecasts and European Country Reports programmes. Prior to joining Analysys Mason in November 2014, he worked in the Transaction Services department of the Royal Bank of Scotland in a customer experience internship role. During his studies, Roman focused on consumer behaviour in an online context, and has experience in churn modelling in the telecoms sector, social network analysis and browsing data analysis. Roman holds a Bachelor's degree in business from Durham University, and an MSc in marketing research from the Tilburg University School of Economics and Management. 48
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