The New Look Of The LatAM Wireless Market.

A new eMarketer report examines the consolidation that has swept through Latin American telecommunications markets, dramatically reshaping the competitive landscape.

The Latin American wireless sector is now largely a two-horse race between Mexico’s América Móvil (AMX), the wireless arm of Telmex, and Spain’s Telefónica Móviles (TEM). Both have a sizable regional presence and compete directly in Latin America’s leading wireless markets.

Latin American wireless carriers are expected to add anywhere between 55 and 90 million new subscribers between 2004 and 2009. This constitutes significant growth, albeit not at the same rates as the beginning of the decade, which saw the region’s subscriber base double between 2001 and 2004 alone.

Four countries, Argentina, Brazil, Mexico and Colombia, will account for most of the growth (approximately 55 million subscribers), making them key markets for providers of wireless applications, handsets and services to target in the next five years. These four, plus Chile, represent close to 80% of the region’s total subscriber base, according to Yankee Group calculations.

“But as in other developing regions,” said Noah Elkin, Senior Analyst at eMarketer and author of the report, Latin America Wireless, “operators face significant challenges in offsetting falling voice revenues by graduating a largely pre-paid user population to higher value-added data services.”

Operators have increased their subscriber rolls by catering to pre-paid users who bear the lowest acquisition costs but who also produce the lowest ARPU and highest churn.

“Post-paid and corporate subscribers represent a far more attractive target for wireless carriers,” said Dr. Elkin, “but they also carry high initial costs.”

The status of mobile data and content in Latin America stands in marked contrast to the Asia-Pacific region, where operators generate 23% of ARPU from data alone. Western European carriers get 17% of ARPU from data. Latin America is actually ahead of North America in this measurement (5% vs. 4%), but this is primarily because most US wireless subscribers are locked into more expensive monthly voice plans, while the majority of Latin American users have opted for less expensive pre-paid calling. Pyramid Research is optimistic about the future of data, however, predicting mobile data ARPU will increase by 143% between 2004 and 2009. Carriers certainly will look to promote data services in an effort to stem falling voice ARPU.

“Although most of the major available wireless properties have been taken off the market, the prospect of competition for spectrum allocation and smaller regional assets, especially in Brazil, cannot be discounted,” said Dr. Elkin. “The rivalry will intensify when 3G licensing and deployment enter the picture, especially in countries with large subscriber bases like Mexico and Brazil. However, with operators still focused on recouping technology investments from the early part of the decade, realistically, that moment is a couple of years away.”

Dr. Elkin added, “On the other hand, the licensing phase, when it does take place, may provide an opening for other global carriers that have been absent from Latin America’s wireless markets to return to the region. Economic stability, continued prospects for growth and carriers’ financial situation all will play a part in their decisions.”