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Industry Report - Telecommunications - October 2010
A Company and Industry Analysis October 2010
CONTENTS
Current Environment
• Sector Overview
• Sector Performance
• Leading Companies
• Mergers and Acquisitions
Industry Profile
• Industry Size and Value - Fixed-line Broadband Market
- Mobile Broadband Market
- Fixed-line Market
• Sector Investment
• Policy and Regulatory
Environment
Market Trends and Outlook
• The Rise of Mobile Broadband
in Latin America
• Mobile Virtual Network
Operator Market Set to Take
Off
• WiMAX Gains Ground in
Latin America
• Market Outlook
Country Profiles
• Argentina
• Brazil
• Chile
• Mexico
• Peru
Currency Conversion Table
The Scope of this Report
Key References
Comparative Data
Reports Coverage
Current Environment — Key Points
• The Latin American telecommunications market showed strong growth over the past six months
despite the global economic slowdown still affecting several other world markets.
• Improved business conditions, the region’s large geographical size and strong levels of consumer
consumption spurred demand for mobile telephony, particularly in Brazil.
• The share prices of the top six leading companies dropped slightly by 1.22% on the NSYE over
the March-September period, but all stocks had rebounded by late September due to sustained
consumer spending and a recovery in investment.
• The level of merger and acquisition activity picked up in the region over the last six months, as
international telecoms companies looked to the region to target new opportunities, as other world
markets remained lackluster.
Industry Profile — Key Points
• Mexican and Brazilian telecoms companies dominate the Latin American telecommunications
industry.
• After the Asia Pacific, the region is home to the fastest growing telecoms markets in the world.
• The Latin American fixed-line broadband market lags behind most other regions of the world,
largely due to the costs of broadband for consumers and a lack of competition.
• Mobile broadband has grown in popularity in recent years due to the shift from fixed lines to
mobile phones. Geographical constraints on infrastructure have also boosted the mobile markets.
• Nevertheless, fixed-line services retain some market share, particularly in urban areas with good
infrastructure, where fixed-line costs challenge mobile services costs.
Market Trends and Outlook — Key Points
• Mobile broadband has become important to broadband services throughout Latin America driven by
an increase in 3G network deployments and upgrades to HSPA high-speed mobile data networks.
• With mobile penetration rates already above 100% in Argentina, Chile, Uruguay and Venezuela,
the mobile virtual network operator (MVNO) market is set to expand in Latin America.
• WiMAX is gaining ground in some markets, as there are many people in the region with no fixed
connectivity.
• Most Latin American telecoms markets are expected to show strong growth in 2011. The wireless
services markets throughout the region are particularly expected to grow robustly, thanks to the
accelerating deployment of high-speed internet access networks.
• Even so, the high cost of logistics and advertising and customer acquisition costs will limit the
number of players entering the market.
1
Latin America
Telecommunications Sectors
Adding Value to Information Since 1900
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Industry Report - Telecommunications - October 2010
2
Copyright Statement
Copyright 2010 by Mergent, Inc. All Information contained herein is
copyrighted in the name of Mergent, Inc. and none of such information may be
copied or otherwise reproduced, repackaged, further transmitted, transferred,
disseminated, redistributed or resold, or stored for subsequent use for any
such purpose, in whole or in part, in any form or matter or by any means
whatsoever, by any person without prior written consent from Mergent.
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Disclaimer
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by it to be accurate and reliable. Because of the possibility of human and
mechanical error as well as other factors, however, such information is
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OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS,
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of such damages, resulting from the use of, or inability to use, any such
information.
The Latin America Industry Reports are
published by Mergent, Inc., headquartered in
Fort Mill, South Carolina, USA. Each
industry sector report is updated every six
months. Mergent, Inc., a leading provider of
global business and financial information on
publicly traded companies, operates sales
offices in key North American cities as well as
London, Tokyo and Melbourne.
Publisher
Jonathan Worrall
Director
John Pedernales
Managing Editor
Peter O’Shea
Research Analyst
Kelly Ong Sheau Chi
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Industry Report - Telecommunications - October 2010
3
Current Environment
The Latin American telecommunications sector showed
signs of recovery over the last six months with growing
demand for services and higher revenues reported by
leading companies. Improved economic conditions and
a strong rebound in consumer consumption spurred
significant demand for mobile telephony, particularly in
Brazil, with 174 million lines, a 15.5% growth in 2009,
making the country the world’s fifth largest mobile
telephony market by users, according to the National
Agency of Telecommunications (ANATEL).
The total value of spending on information technology
products and services in Brazil represented more than
20% of the Latin American market. This was driven by
fierce competition among operators, while tax cuts led
to a 3.9% increase in household consumption and more
flexible terms of payment. The growth was also aided
by plans announced by the Government in May plans to
invest R$3.2 billion (US$1.88 billion) to offer broadband
services for R$35 (US$20.60) per month through its state-
run telecoms company Telecomunicacoes Brasileiras SA
(Telebras). Industry experts forecast this will help boost the
number of the internet users steadily in months to come,
aided by government projects aimed at improving points of
access throughout the country.
In Mexico, mobile customer growth experienced a
considerable slowdown in the first quarter, a 37.8%
decrease from the previous corresponding period of 2009 to
1.75 million mobile users, due largely to a tough economic
climate, according to the Federal Telecommunications
Commission (COFETEL). Many rural parts of the country
remain under-served by mobile network infrastructure,
with operators having been generally slow to expand their
business presence there. In September fixed-line telephone
giant Teléfonos de Mexico SAB de CV (Telmex) (NYSE:
TMX) announced plans to invest approximately US$765
million in optical fiber networks in some parts of Mexico to
enhance the download speed by four times to 20 megabits
a second.
Chile meanwhile continued to be a highly developed
telecoms market in the region, spurred by a combination of
rising incomes, growing personal computer (affordability,
and favorable demographics. According to the Chilean
Telecoms Regulator (SUBTEL), mobile phones sales
increased by 9.71% from the first half of 2009 to
CLP$29.08 million (US$600,516) in the first six months of
this year. Additionally, in an attempt to boost competition
in both the Chilean mobile telecommunications and digital
TV markets, Chile’s Government announced in August it
would create a telecommunications infrastructure provider
to concentrate solely on service provision by renting out
its infrastructure to third parties. The purpose of the plan is
to encourage companies that enter the market to have the
necessary resources to provide their best service quality to
their customers.
After Peru opened its market to private operators in the
early 1990s, along with other market-oriented economic
reforms, Peru’s telecommunications penetration has
risen. It had around 22.9 million mobile subscribers in
June this year, with a mobile penetration of 79.3 lines per
100 inhabitants, according to data from the Ministry of
Transports and Communications (MTC). It had nearly
772,000 internet subscribers, a 3.3% increase from 747,235
internet subscribers in June, thanks to government efforts
to boost competition and encourage fixed-line investment.
In August, the Peruvian telecom regulator (OSIPTEL)
approved a 15% reduction in mobile phone termination
rates (MTRs) — a measure that could cut the retail price
for mobile services and could result in a 30% rise in mobile
traffic over the near term.
Further south, driven by high demand in mobile broadband
services and the large number of pre-paid subscribers in
the market, the Argentine telecommunications market
remained healthy. According to the National Institute of
Statistics and Census (INDEC), Argentina’s telecoms
market remained one of the most advanced in the region.
The total spending on information technology products
and services amounted to US$3 billion in 2009, while
industry experts forecast it could reach US$4 billion by
2012. About 92% of all internet users were broadband
subscribers, with broadband charges cheaper in Argentina
than in most other Latin American countries. As a result,
industry experts estimate broadband subscribers are likely
to grow this year even in the wake of the global economic
slowdown, albeit at a much slower rate than previous
years.
Sector Overview
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Industry Report - Telecommunications - October 2010
4
Current Environment
Sector Performance
For the period from March 22 to September 20, the stock
prices of the top six leading companies by revenues as
tracked by Mergent dropped slightly by 1.22% on the New
York Stock Exchange (NSYE). Most stock prices were hit
hard in May when investors became more concerned about
the potential for fund withdrawals by foreigners from Latin
America and Europe as the sovereign debt problems in
Europe took their toll on markets.
Weaker-than-expected US data also weighed on stocks
and investor sentiment leading to a global sell-off on
fears of a waning economic recovery. As such, out of the
six companies, three Latin American telecoms company
stocks examined by Mergent lost an average of 12.15%
over the March-September period on the NYSE. These
were Tele Norte Leste Participações SA (NYSE: TNE),
Vivo Participações SA (NYSE: VIV) and Teléfonos de
Mexico SAB de CV.
After Brazil’s largest fixed-line phone company Tele Norte
Leste Participações SA, also known as Oi, announced it
would sell R$12 billion (US$6.78 billion) in stock to
existing shareholders as part of the Portugal Telecom
SGPS SA (NYSE: PT) agreement to buy a stake in Telemar
(BVSPA: TMAR5) in July, shares of Oi tumbled more than
17%. They fell to US$14.97 on July 16, the most since
December 2008 on the NYSE. Oi’s mobile-phone share
fell 19.74% in August, from 19.93% in the previous month,
after posting the smallest rise in new subscribers among its
closest rivals. Overall, its stock prices dropped US$4.06, or
14.07%, to US$14.07 on the NYSE on September 20.
Shares of the largest wireless carrier in Brazil, Vivo
Participações SA, also fell (by 7.89%) over the period to
US$25.92 on June 30, compared with US$28.14 on March
22 on the NYSE as the takeover battle between Spain’s
Telefónica SA (NYSE: TEF) and Portugal Telecom SGPS
SA raised uncertainty surrounding the future of Vivo. But
its share price rebounded and rose 13% from US$23.60 on
August 17 to US$26.67 on September 20 on the NYSE,
after Telefónica SA and Telecom SA reached an agreement
under which Telefónica bought Portugal Telecom’s stake
in Vivo for US$10 billion. Its plans involved combining
Vivo with its Sao Paulo-based fixed-line operator
Telecomunicacoes de Sao Paulo (NYSE: TSP).
The share prices of the biggest fixed-line telephone
company in Mexico, Teléfonos de Mexico SAB de CV,
remained insipid on the NYSE, closing at US$14.88 on
September 20, compared with US$16.53 on April 23,
after posting weak quarterly results as clients switched
to mobile services or cable providers’ voice plans. As of
Table 1: Leading Companies’ Share Price Movements on the New York Stock Exchange
Source: Mergent analysis, 2010
10%
-10%
0%
-20%
5%
-15%
-5%
-25%
2010 April May June July August
Telecomunicacoes de Sao Paulo
TIM Participações SA
Vivo Participações SA
Tele Norte Leste Participações SA
September
América Mõvil SAB de CV
Teléfonos de Mexico SAB de CV
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Industry Report - Telecommunications - October 2010
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Current Environment
late September, all leading Latin American telecom stocks
appeared to have recovered and were on the rise again. The
share prices of these companies were boosted by a rebound
in consumer spending and investment, after reassuring
comments from the US Federal Reserve Chief that seemed
to allay fears about the pace of economic recovery in the
US.
Leading Companies
Mexican and Brazilian telecoms companies continued to
dominate the Latin American telecommunications industry.
A Mergent analysis shows that the top seven companies,
as defined by total revenues in 2009, generated US$89.39
billion, a 34% increase from prior-year levels due largely
to the still low penetration rate and government support for
improving rural connectivity.
In 2009, all of the companies coped better with the global
economic downturn and continued to report solid growth
in revenues, except Brazil’s biggest fixed-line telephone
company, Tele Norte Leste Participações SA (BVSPA:
TNL3), also known as Oi. The company posted a net loss of
US$744.89 million in 2009, partly due to higher marketing
expenses, mostly linked to the campaigns to launch the Oi
fixed and Oi broadband portfolios nationwide. Nevertheless,
its net revenues more than double to US$17.13 billion in
2009, from US$8.04 billion a year earlier, due largely to the
expansion of its mobile user base and broadband internet
user base. The user base for fixed broadband in 2009 grew
to 4.21 million, up from 3.82 million in 2008. The addition
of its 3G broadband service added 64,000 new customers
in 2009. As a result, the number of broadband subscribers
to mobile and fixed-line services rose 18.8% to 741,000
in 2009.
Industry leader América Móvil SAB de CV (BMV: AMX)
reported total revenues up by 20.86%, from US$24.95 billion
in 2008 to US$30.15 billion in 2008. This was driven by a
faster increase of post-paid subscribers, strong demand for
wireless data services, following better coverage, quality
of service and an improved technological platform. The
company reported 36.79% year-on-year higher net income
to US$30.15 billion for the 2009 full year.
Despite the presence of large companies with a diversified
range of businesses locally and internationally, another
leading wireless operator in Brazil Vivo Participações SA
(Vivo) saw its net revenues jump 41.37% from US$6.64
billion in 2008 to US$9.38 billion in 2009. This was due
primarily to the growing substitution of fixed by mobile
traffic as a result of the penetration of mobile telephone
coverage in Brazil. The rise in its customer base in the last
quarters, improvements in its post-paid customer mix and
further activity in the pre-paid segment resulted in higher
sales. Vivo reported its net profit rose nearly twofold from
the previous year to US$491.54 million in 2009.
Mexico’s top provider of fixed-line telecommunications
services Teléfonos de Mexico SAB de CV (Telmex) saw its
net profit grow 7.37% from year-earlier levels to US$1.56
billion in the 2009 full year, thanks to lower financing
cost charges and income tax costs. However, Telmex’s
revenues improved slightly for the year, up 1.57% from
year-earlier levels to US$9.1 billion as demand fixed lines
weakened quite markedly. Demand for local and outgoing
Table 2: Leading Companies’ Share Price Movements on the New York Stock Exchange
Company Name Country TickerShare Price on Rise/Fall
(%)March 22 Sept 20
América Móvil SAB de CV Mexico AMX US$49.19 US$51.12 +3.92
Tele Norte Leste Participações SA Brazil TNE US$18.13 US$14.07 -22.39
Vivo Participações SA Brazil VIV US$28.14 US$26.67 -8.78
Teléfonos de Mexico SAB de CV Mexico TMX US$15.71 US$14.88 -5.28
Telecomunicacoes de Sao Paulo Brazil Telesp US$21.89 US$24.24 +10.74
TIM Participações SA Brazil TSU US$27.97 US$32.02 +14.48
Average Rise/Fall (%) -1.22
Source: Mergent analysis, 2010
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Industry Report - Telecommunications - October 2010
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Current Environment
international long distance calls picked up considerably
in 2009. Its total operating costs and expenses were
MEX$34.159 billion (US$2.71 billion) — 5% higher
than the prior year levels — after the company boosted its
marketing and advertising expenses to improve product
visibility and expand its market share.
In Brazil, fixed-line carriers Telecomunicacoes de Sao
Paulo SA (Telesp) and wireless carrier TIM Participações
SA showed positive financial results, with double digit sales
growth in 2009. Buoyed by strong demand for broadband
internet services, higher access lines and installation fees,
the Brazilian subsidiary of Spanish telecom giant Telefonica
SA, Telesp’s net profit rose by 20% in 2009 compared with
the previous year to US$1.04 billion. TIM Participações
SA reported its net profit grew by more than 59% from
US$77.27 million in 2008 to US$123.18 million in 2009.
This was largely due to higher sign-up fees in its post-paid
segment and continued demand for wireless broadband
with 41.1 million clients, a 12.9% year-on-year growth for
the 2009 full-year.
With multi-service package offerings that include several
telecommunications services with substantial discounts
(of up to 42%), Mexican-based telecommunications group
Telmex Internacional SAB de CV reported net revenues up
28.86% from US$5.49 billion in 2008 to US$7.07 billion
in 2009. Its net profit also surged 79.7% year-on-year to
US$730.46 million in 2009, driven by higher demand for
broadband services and other voice services. In an attempt
to capture more of Mexico’s broadband growth, Telmex
has sold almost two million computers on installment over
the last ten years.
Mergers and Acquisitions
Mergers and acquisitions continued to be the key means of
growing market share or entering a new market particularly
in Brazil. Many international telecoms companies
increasingly eyed this new and growing market niche
and continued to expand their presence in Latin America
to take advantage of the large and increasingly affluent
population. One of the most noteworthy deals in the
industry involved Telefónica SA, a Spanish-based telecom
company that signed an agreement with Portuguese-based
telecom company Telecom SGPS SA to buy its shares
in Brazilian mobile operator Vivo Participações SA at a
value of !7.5 billion (US$9.75 billion) on July 28. The
move complemented its faltering position in Brazil, with
the company planning to integrate its fixed-line operator
Telesp with Vivo and take a converged offering to the
lucrative enterprise market. This would make it one of the
leading telecommunications operators in Brazil.
In July, the largest telecommunications service provider
in Portugal, Portugal Telecom (NYSE: PT), paid up to
R$3.73 billion (US$2.20 billion) for a 22.4% stake in
Brazilian phone giant Oi operating unit Telemar Norte
Leste and R$4.24 billion (US$2.50 billion) for shares of
Telemar Participações, as part of a broader plan to expand
in Latin America. The move allowed Portugal Telecom to
gain a presence in Brazil, develop new technologies, gain
Table 3: Selected Financial Results of Leading Telecommunications Companies in Latin America (in US$)
CompanyDecember 31, 2009 December 31, 2008
Total Revenue Net Income Total Revenue Net Income
América Móvil SAB de CV 30,149,963,646 5,881,473,499 24,946,291,677 4,299,621,157
Tele Norte Leste Participações SA 17,128,690,937 (249,928,357) 8,036,028,119 494,960,314
Vivo Participações SA 9,379,872,017 491,536,852 6,635,069,113 167,138,319
Teléfonos de Mexico SAB de CV 9,097,458,090 1,563,521,272 8,956,810,157 1,456,189,672
Telecomunicacoes de Sao Paulo 9,054,614,909 1,245,613,699 6,853,521,177 1,037,945,933
TIM Participações SA 7,512,717,448 123,183,153 5,638,934,030 77,268,709
Telmex Internacional SAB de CV 7,068,665,453 730,460,268 5,485,345,048 406,390,215
Total 89,391,982,500 9,785,860,386 66,551,999,321 7,939,514,319
Source: Mergent analysis, 2010
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Industry Report - Telecommunications - October 2010
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Current Environment
scale in the growing Brazilian market and expand both
internationally and local operations.
With an aim to expand its market position in the fiercely
competitive Mexican wireless sector, Mexican telecoms
giant America Móvil SA de CV acquired 92.27% of the
shares in fixed-line carrier Telmex Internacional SAB de
CV in a cash and stock transaction valued at approximately
MEX$1.9 billion (US$150.76 million) in June.
Simultaneously, American Movil also acquired a 99.4%
stake in Carso Global Telecom SAB de CV, an investment
holding company operating in the telecommunications
industry. The acquisition not only made America Móvil a
full-service provider to offer converged wireless, wireline
voice, broadband and video services to over 250 million
subscribers, but also created a telecom powerhouse better
placed to take on rivals like Spanish-based Telefonica SA.
Nevertheless, some analysts warned that the tie-up would
be a drag on America Movil as shares of Telmex were
the worst performing stock in Mexico’s benchmark IPC
index last year and had lost value since mid-2008. Despite
uncertainty and concerns, the consolidation will dilute
America Movil’s value. Some analysts say the company has
strong growth potential and its shares will keep expanding
quickly over the next several years in Latin America as
Telmex plans to upgrade its wireline broadband network
with up to 20 Mbps speed capabilities.
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Industry Report - Telecommunications - October 2010
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Industry Profile
The overall Latin American telecoms market is still
relatively small as a regional service market, accounting
for about 10% of total global revenues in 2009, according
to the International Telecommunication Union (ITU).
Nevertheless, the region has become the fastest growing
telecoms market in the world, after the Asia-Pacific. A
combination of large geographical size and population,
rising disposable incomes and sustained investment in
mobile networks in recent decades has driven significant
growth in the region’s telecoms markets in recent years.
Brazilian telecoms companies dominate the market and
accounted for 52.48% of total telecom revenue in 2009.
A Mergent analysis shows that the top eight companies
by 2009 revenues posted combined revenues of US$95.63
billion, while Mexican telecoms companies — America
Móvil SAB de CV, Telefonos de Mexico SAB de CV and
Telmex Internacional SAB de CV — stood at US$45.44
billion in 2009.
Fixed-line Broadband Market
Given the average fixed-line broadband penetration in
the region is less than 10%, Latin America lags behind
many other regions of the world. According to a study
from the ITU, the total number of broadband internet
users in Latin America jumped by 38.2% from year-earlier
levels to 27.7 million in 2008. Apart from Caribbean
islands, almost one third of the region’s internet users
were in Brazil, while the highest user penetration rates
were found in Argentina and Chile. A report from the
OECD shows that the northern band comprising the US
and Canada enjoyed 73% internet user penetration, while
South America stood at about 34% last year. This was due
largely to the costs for broadband in the region and a lack
of competition.
For instance, the lowest monthly subscription rate for
broadband in the OECD countries averages US$19 in
purchasing power parity (PPP), while such services cost
US$29 and US$35 in Mexico and Chile, respectively, in
2009. The average connection speed in those countries
is normally 17 megabits per second (Mbps), while in
the most advanced countries in Latin America and the
Caribbean; however, it is no higher than 2 Mbps.
Mobile Broadband Market
In Latin America, mobile broadband has started to become
increasingly popular as people use their mobile phones
more often. Mobile service provider 3G Americas reports
that mobility serves more than half a billion users in Latin
America, with the average wireless penetration exceeding
86% in 2009, thanks to a hefty price drop, competitive
pricing and a saturated mobile voice market. Many mobile
operators offer very competitive capped data packages. As
such, the mobile telephony market in the region performed
strongly in 2009, with mobile subscriptions totaling 88.2%
of the region’s total population, compared with 55.2% in
the Asia-Pacific and 90.4% in North America, according
to ALACEL.
The global system for mobile communications and high-
speed packet access — GSM-HSPA — continues to be
the overwhelming mobile wireless technology leader for
mobile broadband deployments. The explosion of third
generation partnership project (3GPP) mobile broadband
subscriptions has highlighted the growing interest of mobile
use of advanced 3G technology services and applications,
and the growing proliferation of smartphones. The total
number of GSM-HSPA subscriptions in Latin America
comprises 91% market share in Latin America with more
than 464 million connections in 2009, of which 9.4 million
were 3G connections in 2009.
Fixed-line Market
Latin America’s largest fixed-line operator in terms of lines
in service is Telmex Internacional SAB de CV, controlled
by Mexican billionaire Carlos Slim. In terms of revenue,
Brazil’s Oi (Telemar) is in the lead, having overtaken
Telmex in 2007. The performance of Latin America’s fixed-
lines services was hit hard by cheap deals for mobiles and
mobile internet, the shift from fixed-lines to mobile phones
and geographical constraints on infrastructure expansion
particularly the remote Andean or rainforest regions. A
2009 study from ITU shows Latin America’s fixed-line
penetration comprised only 18.6% of the total population
and the fixed-line market grew by an average of 2.5% per
year in Latin America between 2004 and 2009, well below
Industry Size and Value
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Industry Report - Telecommunications - October 2010
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Industry Profile
growth rates for mobile subscriptions. Nevertheless, fixed-
line services will retain some market share, particularly
in urban areas with good infrastructure, where fixed-line
costs can challenge mobile services.
Sector Investment
There are increasing numbers of foreign investors who
are keen to invest in Latin America due to their large
populations and the demand for high-speed mobile services.
There is also a greater proportion of capital flowing within
Latin American markets, with the deregulation of most
countries’ markets in recent years. Last September, French
entertainment and telecoms group Vivendi SA (PAR: VIV)
announced plans to invest US$2.9 billion in a leading
alternative telecom operator in Brazil, GVT (BVSPA:
GVTT3). The aim was to seek growth in emerging markets
like Brazil. The friendly all-cash offer for GVT was for
approximately !2 billion (US$2.72 billion). The deal will
not only give GVT much greater scope to expand, but could
also accelerate the growth of its fixed-line telephone and
internet services into cities dominated by the competition.
In November 2009, Vivendi purchased around 37% of
GVT shares and had signed a deal to buy a further 19%
stake via irrevocable options with third parties.
Other firms are also continuing their push into emerging
markets, with some like Spanish telecom giant Telefonica
last December announcing plans to invest R$1.14 billion
(US$671.38 million) in Brazil by end of this year.
Telefonica has been facing a fall in revenue from its fixed-
line business in Spain. To address this Telefonica plans
to offer more competitively internet access plans. It also
announced it could acquire 21% of a pay television business,
Digital+, for !470 million (US$639.45 million) to develop
audiovisual and other businesses in Spain to strengthen the
content offering of its pay-TV service Imagenio.
Policy and Regulatory Environment
In May, the Brazilian Government launched R$11 billion
(US$6.48 billion) broadband program to improve access
to broadband internet services to low-income households.
The national broadband plan (PNBL) not only aims to
revive Telebras, the former state telecom monopoly, but
also aims to quadruple the number of municipalities with
internet broadband access by 2014, or the equivalent to 40
million households. A national fund for telecommunications
investments, known as Funntel, will finance additional
R$1.75 billion (US$1.03 billion) in research and
development to kick off the program.
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Industry Report - Telecommunications - October 2010
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Market Trends & Outlook
Mobile broadband has become important to broadband
services throughout Latin America driven by an increase
in 3G network deployments and upgrades to HSPA
high-speed mobile data networks. According to a study
by a wireless industry trade association, 3G Americas,
the Latin American and Caribbean regions continued
to see a dramatic increase in market share for 3GPP
technologies, rising to 92% at the end of the first quarter
of 2010. 3GPP technologies added a total of 68.6 new
connections, including 12.6 million Universal Mobile
Telecommunications System-High Speed Packet Access
(UMTS-HSPA) subscriptions, with a number of 486
million subscribers in the first quarter of 2010. This was
due largely to the rise of flat rate mobile data pricing,
further smartphone shipments and the greater availability
of high-speed mobile broadband.
The continuous effort of wireless operators in Latin America
to invest in mobile broadband infrastructure, devices and
innovative services, has produced a healthy jump in the
data contribution to service revenues reaching 19% in the
first half of 2010. The success of Apple’s iPhone and other
smartphones that offer downloadable applications through
their stores and allow customers to use thread-party VoIP
clients over WiFi and cellular broadband networks is
fueling the trend. Mobile broadband is a huge opportunity
for the telecommunications industry throughout the region.
Analysys Mason, a UK-based analyst firm, forecasts that
Latin America’s wireless network traffic is likely to reach
a 86% in compound annual growth rate (CAGR) over the
next five years.
Mobile Virtual Network Operator Market Set to Take
Off
With mobile penetration rates already above 100% in
Argentina, Chile, Uruguay and Venezuela, the mobile
virtual network operator (MVNO) market is set to expand
in Latin America. As of May 31, 2010, Latin America
represented a small share of the world’s 104 million
MVNO subscriptions, with the MVNO market only
having around 20 active MVNOs in the region, out of 550
MVNOs or resellers worldwide, according to ALACEL.
As such, MVNOs could play a bigger role going forward.
Mobile network operators now see MVNOs as a good
opportunity to grow their subscriptions and revenues by
offering mobile services.
For instance, Telecom Argentina (NYSE: TEO) negotiated
an MVNO agreement in August with Uruguay’s state-
owned telecoms company, Antel, to offer mobile telephony
in Uruguay’s mobile market. In Mexico, cable TV operator
Megacable recently unveiled plans to launch an MVNO
operation in Mexico in partnership with Telefonica SAB de
CV. Megacable has over 1.7 million cable TV subscribers in
more than 200 local markets, and is one of Mexico’s largest
triple play providers. Through the partnership, Megacable
became the first firm in Mexico to offer quad-play offering
of mobile, fixed-line phone, internet and TV. According to
figures released by Informa Telecoms & Media, MVNO
subscriptions in Latin America could grow at a CAGR of
28% to 6.6 million by 2013.
WiMAX Gains Ground in Latin America
WiMAX is gaining ground in some Latin American
markets, as there are many people in the region with no
fixed connectivity. WiMAX plays well in environments
in which the business model is developing from being an
alternative to wired broadband access into a means for
strengthening operator offers through service bundling.
Additionally, WiMAX is also used to penetrate markets
where operators still do not have a fixed-line network.
With relatively little construction and infrastructure in
rural areas, it is easy to install a tower and power an area
reaching up to 30 miles with high-speed internet. Major
urban centers like Sao Paulo, Buenos Aires, and Mexico
City won’t be the only ones to benefit; eventually remote
communities that currently have no broadband internet
services will be able to access such wireless features.
According to research from market intelligence company
ABI Research, the number of WiMAX subscribers in the
region will increase eightfold from 500,000 in 2009 to
approximately 4.5 million at the end of 2015.
Market Outlook
Most Latin American telecoms markets are expected to
show strong growth in 2011. The wireless services markets
The Rise of Mobile Broadband in Latin America
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Market Trends & Outlook
throughout the region are particularly expected to grow
robustly, thanks to the accelerating deployment of high-
speed internet access networks, the implementation of
mobile broadband along with packages targeted at low-
income and higher-income consumers. All these factors are
likely to drive the regional equipment market. Meanwhile,
mobile data revenues in the region are projected to grow
rapidly, due largely to the acceleration in deployment
of advanced technologies, an increasingly competitive
market, and growing consumer demand for mobile data
services driven by popular data-optimized devices such as
Apple’s iPhone.
According to the ITU, the mobile penetration rate in Latin
America is well ahead of the world average, reaching 93%
in mid-2010 compared to a global rate of around 73%.
Given that mobile growth is slowing in Latin America and
that there is intense competition over bundled services,
the MVNO market should grow further, with many fixed-
line operators opting for an MVNO model to add mobile
services to their current service portfolio of telephony,
internet and in some cases pay TV.
Nevertheless, the high cost of logistics and advertising and
customer acquisition costs will limit the number of players
entering the market. As a result, the Brazilian telecoms
regulator ANATEL plans to launch new MVNO regulations
this year, in order to attract more foreign operators into the
market. The Mexican telecoms regulator COFETEL is also
planning to work on a new rule to bring more competition
to the industry, including the auction of wireless spectrums
early next year. Looking forward, competition looks set to
intensify as additional 3G spectrums are released and more
MVNOs enter the market. Rural coverage will remain a
major focus over the near term, while wireless technologies
are likely to remain a popular choice for encouraging the
continued expansion of telecoms services into remote
areas. Broadband growth will be from investment in both
fixed and wireless technologies, allowing remote towns
and cities to get online.
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Country ProfileArgentina
Argentina’s telecommunications industry remained strong
in 2009, with two of its top telecoms companies recording
year-on-year increases in revenues fueled by improving
confidence in the employment market. According to
INDEC, Argentina has the largest mobile market in the
region with many mobile users signed up for multiple
mobile accounts. Its mobile telephony market has saw
steady growth of 25.5% over the past two years, with 50.4
million mobile lines in service and a penetration rate of
120.6% at the end of 2009. Altogether, wireless telephony
traffic reached 4.74 billion calls in December 2009,
representing an increase of 24.7% compared to the same
months in 2008, according to INDEC.
Nevertheless, the number of fixed-line telephone subscribers
showed tepid growth by just 0.2% in 2009, from 9.74
million in 2008 to 9.76 million in 2009, according to data
from INDEC. The number of public phones nationwide
dropped 8.5% year-on-year to reach 142,800 in 2009.
This was because the Government fixed the telephone
rate after a sharp devaluation of the Argentine currency.
Many telecoms companies aggressively moved into
internet access and mobile phone services where prices
are unregulated by the Government. INDEC data shows
the average annual rate of mobile broadband enjoyed the
highest growth rate of 24% in 2009, followed by mobile
telephony.
Leading Companies
Telefónica de Argentina
Spanish-owned Telefónica de Argentina is the largest
mobile operator in terms of revenue in Argentina. It
provides broadband, local and long distance telephone
services nationwide. In the first half of 2010, the company
generated revenues of !1.44 billion (US$1.96 billion), up
8.2% over the same period in 2009. This was mainly due
to higher sales from mobile and fixed-line sectors, which
grew 17.4% to !920 million (US$1.25 billion) and 10.5%
Sector Overview
Table 4: Key Telecoms Statistics, 2007 — 2009
Category 2007 2008 2009
Fixed Line
Total Subscribers 9,430,000 9,740,000 9,760,000
Penetration Rate (%) 24.0 24.5 24.3
Annual Growth (%) -0.3 3.4 0.2
Mobile Telephony
Total Subscribers 38,560,000 43,700,000 48,400,000
Penetration Rate (%) 98.0 110.0 120.6
Annual Growth (%) 28.0 13.0 11.0
Internet
Total Users 16,000,000 20,000,000 23,000,000
Penetration Rate (%) 40.7 50.3 57.3
Annual Growth (%) 23.0 25.0 15.0
Broadband
Total Subscribers 2,560,000 3,470,000 4,300,000
Penetration Rate (%) 6.5 8.7 10.7
Annual Growth (%) 61.0 35.0 24.0
Source: National Institute of Statistics & Census
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Country Profile - Argentina
to !566 million (US$770.06 million), respectively, in the
first half of 2010. As such, with strong growth in wireless
accesses, the sharp rise in fixed broadband customers and
stable fixed-line telephony accesses, the company reported
a total of 22.4 million accesses at the end of June, up 6.8%
over the same period the previous year.
Telecom Argentina SA (BUE: TECO2)
Buenos Aires-based Telecom Argentina SA is one of the
leading telecommunications companies in the country,
offering voice, data transmission, internet, telephone
services and other wireless telecommunication services.
In the first quarter of 2010, it saw its consolidated net
revenues amount to ARS$3.25 billion (US$820.19 million)
in the first quarter ended March 31, a 15% increase from
the corresponding period of 2009. This was due primarily
to higher mobile service revenues, with further demand
for smartphones, new applications and social networks
services. Telecom Argentina SA saw its net income rise
by 17% from ARS$341.13 million (US$86.09 million) in
the same period of 2009 to ARS$411 million (US$103.72
million), due to a bigger subscriber base and strong growth
in mobile services. Nevertheless, administrative and selling
expenses for the quarter were up nearly 15% from the same
period of last year to ARS$2.49 million (US$0.63 million)
as a result of inflationary effects on the cost structure and
greater expenses related to competition in mobile and
internet businesses.
Market Outlook
There should be further growth in the number of mobile
telephony subscriptions for the remainder of this
year. Wireless broadband access services will become
increasingly popular over the next 12 months due to a
shortage of fixed broadband accesses outside urban areas,
the expansion of 3G networks and the freeze on fixed-line
telephony rates. Argentine telecoms operators estimate that
broadband business may outstrip the income of their fixed-
line services, with internet business forecast to grow by
15% this year. However, the Government shut down Grupo
Clarin SA’s (BUE: GCLA) internet service — Fibertel
SA — on August 19 after the company was accused of
operating illegally in the telecoms and broadband industry.
Industry experts estimate that the elimination of Fibertel
will start the virtual monopolies on broadband service and
choking off competing internet service providers.
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Country ProfileBrazil
Brazil remained the largest telecommunication market
in Latin America in terms of the number of subscribers
in 2009, due to the country’s growing fixed-line and
mobile telephony base. The country had 227.1 million
subscribers in 2009, a 12.5% increase in 12 months,
according to ANATEL. The number of mobile subscribers
in Brazil rose from 174 million to 185 million between
January and June 2010, accounting for 90.6% of the total
population. However, Brazil had only 41.7 million fixed-
line subscribers, a 1.3% increase over the previous year,
with demand for mobile telephony overtaking that for
fixed-line. According to ANATEL, Brazil was the world’s
third fastest growing market for wireless users, after China
and India, attracting both domestic and international firms
to invest in the wireless segment.
Industry Size and Value
As of December 31, 2009, the Brazilian telecoms market,
including fixed and mobile phone segments, had four
major players. They were Oi, also known as Tele Norte
Leste Participações (BVSPA: TNL3), Vivo Participações
SA (BVSPA: VIVO3), Telecomunicacoes de Sao Paulo
SA (BVSPA: TLPP) and TIM Participações SA (BVSPA:
TCSL4). A booming mobile phone market and growth
in fixed-phone and broadband segments helped Brazil’s
largest mobile network operator, Oi to expand its client
base from 59.72 million in the previous year to 62.6 million
in the second quarter of 2010. TIM Participações SA also
announced its mobile subscriber base grew 17.4% year-
on-year to 44.4 million lines in June this year. With the
country’s economic recovery underway and the spending
power of Brazilian consumers on the rise, demand should
remain strong for telecom services over the next 12 months,
particularly broadband and mobile telephony segments.
Leading Companies
Tele Norte Leste Participações SA
(BVSPA: TNLP3, TNLP4)
Tele Norte Leste Participações SA (TNL) is the largest
telecoms operator in Brazil, offering services in the fixed
and mobile segments, data transmission, broadband
internet access, internet provider and other services. As
of December 2009, its wireless segment had about 36.11
million users while its traditional fixed-line telephone
service had more than 21 million subscribers.
During the second quarter, TNL saw its consolidated gross
revenue rise by 1.3% from the previous corresponding
period of 2009 to R$7.39 billion (US$4.35 billion), driven
by the rapid expansion of mobile broadband services. Its
consolidated EBITDA reached R$2.67 billion (US$1.57
billion) in the second quarter, with a 9.2% increase from the
previous year. The increase followed higher profitability
from customers in its mobile segment, better operating
performances and cost reduction initiatives in the process
of integrating management. TNL posted net earnings of
R$444 million (US$261.48 million) in the second quarter
of 2010, from a net loss of R$146 million (US$85.98
million) in the previous year.
Vivo Participações SA (BVSPA: VIVO3)
Vivo Participações SA (Vivo) is the joint venture of the
wireless operations owned by Portugal Telecom and Spain’s
Telefónic with a market share of around 30% in Brazil.
Vivo provides mobile telecommunication services, cellular
phone data transmission, mobile internet services, voice
and ancillary services and wireless application protocol
services. In the second quarter of 2010, Vivo saw its total
revenue grow 9.9% from the previous corresponding
period of 2009 to R$4.4 billion (US$2.59 billion), thanks
to a higher number of mobile internet users. Vivo’s wireless
data service revenues grew by 10.7% over the previous
corresponding period of 2009 to R$4.13 billion (US$2.43
billion) in the second quarter of 2010. Its EBITDA for the
second quarter also rose, by 10.6%, from the same quarter
of the previous year to R$1.34 billion (US$0.79 billion).
However, the company recorded higher total operating
costs from R$3.6 billion (US$2.12 billion) in the previous
corresponding period of 2009 to R$3.9 billion (US$2.30
billion) in the second quarter due to a jump in advertising
expenses, third party services as well as an increase in
expenses arising from higher service revenues.
Market Outlook
Brazil’s telecommunications market is expected to grow
this year, with wireless services remaining the main driver
of industry growth. The Brazilian Government’s R$11
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Country Profile - Brazil
billion (US$6.48 billion) in broadband funding will also
boost the market. The Government is also planning to
distribute free mobile handsets to low-income groups to
boost mobile penetration levels, while it’s plan auction
off frequencies for WiMAX and 3G services should also
provide a boost to the market. The plan not only will
reach 30 million fixed broadband accesses and 60 million
mobile broadband potential subscribers, but should
shake up telecoms operators and drive them to improve
customer services. Nevertheless, a shortage of fixed-line
infrastructure and expensive broadband prices may inhibit
the growth of broadband to some degree.
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Country ProfileChile
The Chilean telecommunications market remained one
of the most technologically advanced in Latin America
over the last year. According to SUBTEL, it was the first
country in the region to roll out services such as mobile
WiMAX, IPTV, wireless TVoIP, triple play, EDGE, and
mobile voice-to-text. As of December 31, 2009, Chile had
become the first country in Latin America and the fifth in
the world after Sweden, Norway, Japan, and the US, to test
Long Term Evolution (LTE) technology.
After the Chilean Government approved the introduction
of mobile number portability and enabled new players to
focus solely on rolling out services, the sector experienced
aggressive competition with affordable and attractive
pricing packages that include flat-rate or bundled cellular
services. The demand for wireless mobile broadband
connections was strong over the last year. A 2009 survey
by SUBTEL found that Chile had 15.74 million mobile
subscribers in March 2010, with a household penetration
rate of 92.5%, up significantly from 87.8% in the same
period of 2009. The number of 3G mobile users grew more
than threefold from 190,825 subscribers in the same period
of 2009 to 894,682 in March of 2010.
Leading Companies
Movistar Chile
Movistar Chile, formerly known as Telefónica Chile SA, is
a subsidiary of Spanish broadband and telecommunications
provider Telefónica SA (NYSE: TEF). It is the largest
mobile operator in Chile engaged in data transmission,
broadband, WiFi, public telephones, terminal equipment
sales, leasing and other value-added services. In fiscal 2009,
Movistar Chile posted a net profit of CLP$43.5 billion
(US$89.83 million) in 2009, a 9.3% drop from CLP$48
billion (US$99.12 million) in 2008. Its total revenues also
fell by 5% from the prior-year levels to CLP$711 billion
(US$1.47 billion) in 2009, thanks to a drop in the fixed
mobile interconnection charges introduced in January
2009. With a 4% increase in broadband revenues and a
9% increase in broadband subscribers to 774,656 in 2009,
Movistar Chile estimates that market share of fixed-lines
in service will decline over the next five years to reach
approximately 40.8% in 2014. The company allocated
US$600 million in both cellular and fixed networks sectors
to build faster fiber-optic broadband networks nationwide.
Empresa Nacional de Telecomunicaciones SA
(BSAN: ENTEL)
With a 39% share of the mobile market in Chile, Empresa
Nacional de Telecomunicaciones SA is the second largest
mobile operator in the country. The company also provides
wireline services such as data networks, local telephony,
internet access, long distance, IT services network rentals
and wholesale traffic services. In 2009, Entel’s customer
base grew by 8% from year earlier levels to 6,457,335
subscribers due to the reduction in access charges, the roll
out of new mobile broadband access solutions and other
value-added services such as mobile internet and email
access. ENTEL posted a 26% jump in EBITDA from
CLP$71.04 billion (US$146.70 million) in 2008 to CLP$96
billion (US$198.24 million) in 2009. Its total revenue also
rose by 7% from year earlier levels to CLP$285 billion
(US$589.53 million) in 2009, driven largely by demand
for Apple’s iPhone 3GS and other smartphones.
Market Outlook
The Chilean telecoms sector is set to see growth in the
mobile and broadband markets for the next two years, with
a highly developed infrastructure, growing incomes and a
well-functioning financial market. Subtel plans to launch
an auction for spectrum in the 2.6GHz band intended for
4G services at the end of this year, to be awarded mid-2011.
This will not only coincide with the introduction of number
portability, but also boost competition by strengthening
other smaller network operators’ positions against top
players in the market.
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The Mexican telecommunications industry enjoyed healthy
growth of 12.9% during the first quarter of 2010, according
to COFETEL. In the first quarter of 2010, COFETEL data
shows the total amount of fixed-lines dropped 5.4% during
the first quarter of 2010 to 19.34 million after low-cost
access to mobile telephony allowed lower income groups
to boost their use of mobile phones. The total number of
mobile telephone users was up 17.7% year-on-year to 85.3
million in the first quarter.
With the expansion of new services and attractive
promotional plans, the TV industry also saw growth.
According to COFETEL, the number of cable TV subscribers
grew by 5.8% year-on-year to 5.15 million users in the
first quarter of 2010. The satellite TV segment registered
a 78.9% surge in the number of subscribers, making it the
fastest growing segment in the telecoms industry during
the first quarter of 2010. Microwave TV (MMDS), on the
other hand registered its worst performance ever, down
35.8% from previous-year levels to 439,000 users in the
first quarter of 2010 due to the popularity of satellite TV
channel options.
Nevertheless, a lack of competition in telecoms held
back growth to some extent. America Movil SAB de CV
dominated Mexico’s telecoms industry, with a 72% market
share as of February 2010, while its subsidiary Telefonos de
Mexico SAB de CV, known as Telmex (BMV: TELMEX),
controlled about 80% of the fixed-line market. In an attempt
to end the monopoly over the country’s telecom market
the Government in May 2010 started a tender process to
auction off wireless airwaves. The auction will include
90 megahertz of spectrum in the 1.7 gigahertz band and
30 megahertz in the 1.9 gigahertz band, airwaves suitable
for third-generation wireless services such as high-speed
internet access.
Leading Companies
América Móvil SAB de CV (BMV: AMX)
América Móvil SAB de CV is the largest mobile network
operator in Latin America in terms of revenues. With most
Latin American economies expanding throughout the
second quarter of 2010, América Móvil saw its consolidated
revenues jump by 11.9% from the previous corresponding
period of 2009 to MEX$100.9 billion (US$8.01 billion)
in the second quarter of 2010 due to strong growth in
wireless data service revenue. The share of data in service
revenues continued to climb in the second quarter, up
10.8% from MEX$80.14 billion (US$6.36 billion) in the
second quarter of 2009 to MEX$88.77 billion (US$7.04
billion). The quarter’s EBITDA also rose, by 9.4% from
year earlier levels to MEX$42 billion US$3.33 billion).
The company added 4.9 million wireless subscribers in
the second quarter — 30.7% more than in the same period
of last year. Nevertheless, its second quarter net profit fell
17.9% to MEX$18.7 million (US$1.48 million) due to
depreciation costs.
Telefonos de Mexico SAB de CV (BMV: TELMEX)
Telefonos de Mexico SAB de CV, known as Telmex, is
a Mexican-based telecoms operator that has nearly 80%
share of Mexico’s fixed-line market. The company’s
service coverage comprises the operation of local and
long distance networks. In the second quarter 2010, the
company saw its net revenues fall 4.6% from MEX$27.09
billion (US$2.15 billion) in the second quarter of 2009 to
MEX$28.4 billion (US$2.25 billion) due to lower average
realized selling prices. The company posted a 37.5% drop
in its second quarter net profit from MEX$2.25 billion
(US$178.53 million) in the same period of last year to
MEX$3.6 billion (US$285.65 million) after it continued to
lose clients to wireless operators and other competitors. As
a result, Telmex proposed building its internet business to
make up for a decline in its fixed-line and long-distance
telephone revenues.
Market Outlook
The Mexican telecommunications industry is expected
to grow throughout the rest of 2010. The auctioning of
access to the national fiber network and additional mobile
spectrums is expected to boost the market and competition,
which should help pull down prices for consumers. The
move may also facilitate the entry of new competition in
the industry, with the expansion of new services. Some
Country ProfileMexico
Sector Overview
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Country Profile - Mexico
industry experts forecast broadband will remain the driver
of growth for most fixed services providers. Fixed-line
customers will likely migrate to wireless alternatives as
they begin to rely on mobile only communication access,
in part spurred by their need to reduce household costs.
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After Peru opened its telecommunications market to private
players in the early 1990s, the Peruvian telecommunications
sector has seen tremendous growth, with the rapid
expansion of telephony and mobile telephony services.
According to the MTC, the total fixed-line subscriber
base increased by 3.57% from 2.88 million subscribers in
2008 to 2.98 million in 2009. The total number of wireless
mobile subscribers also rose by 12.07% from year earlier
levels to 23.48 million in 2009, according to the MTC.
Nevertheless, the average telephone density in Peru
remained the lowest in Latin America, with only 10.2
lines per 100 inhabitants in 2009 due to expensive calling
rates. The local telephony market is mainly dominated by
Telefónica del Perú SAA (Telefonica) with a 97% market
share of the Peruvian fixed-line market, followed by
Movistar, which is also owned by Spanish-based telecoms
giant Telefónica SA.
The Peruvian Government opened up its market to
attract more mobile operators to improve competition in
the country. In an attempt to maintain its market share,
Peru’s largest telecommunications company Telefónica
del Perú announced early this year it would invest US$1.5
billion between 2010 and 2013 to develop a core fiber
optic communications network to improve the speed and
coverage of broadband internet nationwide.
Leading Companies
Telefónica Del Perú SAA
Telefónica del Perú SAA (Telefonica) is a subsidiary of the
Spanish telecommunication service provider Telefonica
SA and offers various services including fixed and mobile
telephony services, domestic and international long-
distance calls, public telephony, internet access, facsimile
transmission services, electronic voice messaging and
cable television services. In the first quarter of 2010, the
company saw its total revenues drop 3.8% from the same
period of last year to S/.938 million (US$336.3 million),
due to lower revenues in local telephony, long distance
and interconnection services. Local telephony and long
distance revenues fell 6.8% and 12.8% from the previous
corresponding period of 2009 to S/.311 million (US$111.49
million) and S/.66 million (US$23.67 million) in the first
quarter of 2010, respectively. This was due largely to a
decline in fix-lined demand, lower use of pre-paid cards
and the shift of fixed-line minutes to the mobile network.
As such, its net income declined 20.2% from the same
period of last year to S/.155 million (US$55.57 million).
Nextel Del Perú SA
Nextel Del Peru SA is one of the subsidiaries of Boston-
based mobile operator NII Holdings Inc (NESDAQ:
NIHD). Nextel del Peru offers a fully integrated wireless
communications tool nationwide with a digital two-way
radio feature, digital telephone interconnection, text and
numeric paging and wireless internet access. In the first
half of 2010, the company saw its net revenue increase
13.55% from US$149.2 million in the first half of 2009
to US$268.4 million as the results of improving growth
trend in the wireless business and stabilizing growth in
wireline business continued to drive the company’s sales
upward. The company added 60,400 net subscribers to
its network, bringing its subscriber base to 965,900 in the
first half of the year, a 29.1% increase from the first half
of 2009. Nevertheless, the company suffered a net loss
of US$22.8 million in the first half of 2010, from a net
profit of US$400,000 in the first half of 2009 due to pricing
pressure on mobile services, lower handset sales and a rise
in expenditure.
Market Outlook
With intensifying competition in the telecommunications
sector, MTC forecasts broadband prices in Peru could fall
in 2011. The Peruvian Government announced in February
it would invest S/.260 million (US$93.2 million) via the
Telecommunications Investment Fund (Fitel) over the next
five years to expand coverage in Peru’s Andean highlands.
The installation of telephone lines in isolated villages
may help reduce agricultural costs and increase farmers’
income. FITEL announced in August that some US$400
million would be allocated to finance the deployment of a
fiber optic transport network in areas that are not currently
covered by private operators. This should help boost the
Peruvian telecoms sector for several years to come.
Country ProfilePeru
Sector Overview
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Currency Conversion Table
Source: Federal Reserve Bank of New York
Note: Base currency is US Dollar (US$)
Currency exchange rates as of September 30, 2010
Currency Unit Units per US$ US$ per unit
US Dollar (US$) 1 1
Argentine Peso (ARS$) 3.9625 0.25237
Brazilian Real (R$) 1.6980 0.58893
Chilean Peso (CLP$) 484.250 0.002065
Mexican Peso (MEX$) 12.6029 0.07935
Peruvian Nuevos Sole (S/.) 2.78950 0.358487
EMU Euro (!) 0.735005 1.36054
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The Scope Of This Report
This report examines the telecommunications sectors in Latin America, with special focus on Argentina, Brazil, Chile,
Mexico and Peru. The report aims to give a general picture of the current environment as well as global and regional affairs
that influence the development of the various segments of the industry, using available data. As part of these industries, a
number of industry segments are examined, namely: voice and data, wireless services and equipment makers.
Research analysts draw on a range of credible industry and company data sources as well as news and information services
to research and analyze the current trading environment, industry landscape and market trends and outlook for a particular
sector. Primary sources are used, unless otherwise indicated, and include company data, e.g. annual reports and company
financial results: macroeconomic and trade data; data information from global and country regulatory, industry and trade
bodies; government data; and reports; and reports from industry organizations and private research organizations.
The following SIC codes are relevant to the industry. For the services side: 4812 (Radiotelephone Communications); 4813
(Telephone Communications, excl. Radio); 4822 (Telegraph and Other Communications) and 4899 (Communications
Services). For the manufacturing segment: 3661 (Telephone and Telegraph Apparatus); 3663 (Radio and TV
Communications Equipment) and; 3669 (Communications Equipment).
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Key References
Global and Regional
Analysys Mason
Analysys Mason is an adviser on telecoms, technology and media.
http://www.analysysmason.com
The Economic Commission for Latin America and the Caribbean (ECLAC)
Established in 1948, the ECLAC aims to contribute to the economic development of Latin America, coordinate efforts,
and reinforce economic relationships among countries. Headquartered in Santiago, Chile, it is one of five regional
commissions of the United Nations.
http://www.eclac.org
International Telecommunication Union (ITU)
ITU is an agency of the United Nations and regulates information and communication technology issues.
http://itu.int/
New York Stock Exchange (NYSE)
The NYSE is a stock exchange based in New York City. It is the largest stock exchange in the world by dollar volume.
http://www.nyse.com
Organisation for Economic Cooperation Development (OECD)
The OECD is a group of 30 member countries that share a commitment to democratic government and the market economy.
The OECD plays a prominent role in fostering good governance in the public service and in corporate activity.
http://www.oecd.org
Argentina
Buenos Aires Stock Exchange (BCBA)
Established in 1854, it is the principal stock exchange in Argentina.
http://www.cei.gov.ar
Fibertel (FIBERTEL)
Fibertel is an Argentine internet service provider.
http://www.fibertel.com.ar/
National Institute of Statistics and Census (INDEC)
This bureau is responsible for the coordination and supervision of all public statistical activities in Argentina.
http://www.indec.gov.ar
Brazil
National Agency of Telecommunication (ANATEL)
Anatel is the Brazilian telecommunications regulator and promotes the development of telecommunications in the
country.
http://www.anatel.gov/br/
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Industry Report - Telecommunications - October 2010
23
The São Paulo Stock Exchange (BOVESPA)
BOVESPA is the only stock trade center in Brazil and Latin America’s largest stock exchange.
http://bovespa.com.br
The Brazilian Institute of Geography and Statistics (IBGE)
Brazil’s Census Bureau provides information and data about the country’s economy, geography and population.
http://www.ibge.gov.br
Chile
Ministry of Telecommunications (SUBTEL)
Subtel is a unit of the Ministry of Transport and Telecommunications and helps promote the development of the
telecommunication sector in Chile.
http://www.subtel.cl/
Mexico
Federal Telecommunications Commission (COFETEL)
Mexico’s telecoms regulator is an independent administrative body operating under the country’s transport and
communications ministry.
Instituto Nacional de Estadística Geografía e Informática (INEGI)
The National Institute of Statistics, Geography and Information is a unit of the Secretariat of Property and Public Credit,
and provides statistical and information on the country’s demographics, pollution and the economy.
http://www.inegi.gob.mx/
Peru
Ministry of Transport and Communications (MTC)
The ministry is responsible for administering the country’s transport and communications services.
http://www.mtc.gob.pe/
Supervisory Board for Private Investment in Telecommunications (OSIPTEL)
OSIPTEL is responsible for the development and modernization of telecommunication services in Peru.
http://osiptel.gob.pe/
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Industry Report - Telecommunications - October 2010
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Notes to Comparative Data
- All figures are in United States dollars.
- All figures are as reported by the company.
- N/A = Data Not Available.
- N/L = Not Listed.
- Companies ranked by total revenue for the full year most recently reported.
Definitions
- Total Revenue = All revenues, including net sales, operating revenues, interest income, royalties, excise taxes etc.
- EBITDA = Earnings before interest, taxes, depreciation and amortization.
- EPS Cont Operations = Earnings Per Share as reported by company excluding extraordinary items.
- Total Current Assets = All assets expected to be realized within the next year, includes cash, accounts receivable and inventories.
- Long Term Debt = Debt due to be paid at a date more than one year in the future.
- Return on Equity = The company’s earnings divided by its equity (book value).
- Profit Margin = The company’s net income as a percent of revenues.
Comparative Company Data | LATIN AMERICA
Company Country Ticker Exchange Primary SIC Other SICs
America Movil SAB de CV Mexico AMX BMV 4812 4813
Tele Norte Leste Participaco Brazil TNL3 BVSPA 4813 6719
Vivo Participacoes SA Brazil VIVO3 BVSPA 4812 6719
Telefonos de Mexico SAB de CV Mexico TELMEX BMV 4813 4812
Telecomunicacoes de Sao Paulo Brazil TLPP BVSPA 4813 6719
TIM Participacoes SA Brazil TCSL3, TCSL4 BVSPA 4812 6719
Telmex Internacional SAB de CV Mexico TELINT BMV 4813 4899 4841
Brasil Telecom SA Brazil BRTP3, BRTP4 BVSPA 4813
Telecom Argentina SA Argentina TECO2 BUE 4813 4812
Empresa Nacional de Telecomunicaciones SA Chile ENTEL BSAN 4813 4899
Company Total Revenue - FYE - 1 Total Revenue - FYE - 2 Total Revenue - FYE - 3 EBITDA - FYE - 1 EBITDA - FYE - 2 EBITDA - FYE - 3
America Movil SAB de CV $30,149,963,646 $24,946,291,677 $28,567,005,921 N/A N/A N/A
Tele Norte Leste Participaco $17,128,690,937 $8,036,028,119 $9,864,796,634 $2,843,221,681 $2,027,021,183 $3,408,134,642
Vivo Participacoes SA $9,379,872,017 $6,635,069,113 $7,008,411,781 $2,712,011,013 $1,666,751,837 $1,486,207,013
Telefonos de Mexico SAB de CV $9,097,458,090 $8,956,810,157 $11,989,356,458 N/A N/A N/A
Telecomunicacoes de Sao Paulo $9,054,614,909 $6,853,521,177 $8,262,306,872 $3,248,928,778 $2,692,382,952 $3,388,256,942
TIM Participacoes SA $7,512,717,448 $5,638,934,030 $7,003,523,142 $1,606,888,006 $1,082,754,853 $1,435,519,776
Telmex Internacional SAB de CV $7,068,665,453 $5,485,345,048 $6,212,551,142 $2,046,523,711 $1,161,989,201 $1,700,222,519
Brasil Telecom SA $6,235,920,027 $4,967,266,450 $6,292,217,672 $245,537,414 $1,563,576,631 $1,979,695,933
Telecom Argentina SA $3,205,978,821 $3,052,419,749 $2,879,930,895 N/A N/A N/A
Empresa Nacional de Telecomunicaciones SA $1,649,532,990 $1,975,030,263 $1,633,715,764 N/A N/A N/A
Company Net Income - FYE - 1 Net Income - FYE - 2 Net Income - FYE - 3 EPS - FYE - 1 EPS - FYE - 2 EPS - FYE - 3
America Movil SAB de CV $5,881,473,499 $4,299,621,157 $5,381,630,208 $0.18 $0.13 $0.15
Tele Norte Leste Participaco -$249,928,357 $494,960,314 $1,300,420,757 -$0.65 $1.30 $3.41
Vivo Participacoes SA $491,536,852 $167,138,319 -$56,005,610 $1.23 $0.45 -$0.04
Telefonos de Mexico SAB de CV $1,563,521,272 $1,456,189,672 $3,305,717,534 $0.17 $0.15 $0.33
Telecomunicacoes de Sao Paulo $1,245,613,699 $1,037,945,933 $1,325,643,759 $2.46 $2.05 $2.62
TIM Participacoes SA $123,183,153 $77,268,709 $38,318,093 $0.05 $0.03 $0.02
Telmex Internacional SAB de CV $730,460,268 $406,390,215 $643,044,913 $0.04 $0.02 $0.03
Brasil Telecom SA -$655,023,818 $441,696,751 $448,836,466 -$1.11 $0.81 $0.82
Telecom Argentina SA $368,427,960 $276,524,828 $280,566,334 $0.37 $0.28 $0.29
Empresa Nacional de Telecomunicaciones SA $237,342,493 $286,719,470 $202,239,637 $0.00 $0.00 $0.00
CompanyTotal Current Assets -
FYE - 1Total Current Assets -
FYE - 2Total Current Assets -
FYE - 3Long-Term Debt -
FYE - 1Long-Term Debt -
FYE - 2Long-Term Debt -
FYE - 3
America Movil SAB de CV $8,257,079,794 $8,190,399,654 $7,397,047,768 $7,771,491,573 $8,426,342,393 $7,774,790,736
Tele Norte Leste Participaco $10,538,836,815 $7,639,287,832 $7,138,378,682 $12,247,635,975 $6,986,060,312 $4,138,008,415
Vivo Participacoes SA $3,911,125,426 $3,828,973,961 $3,831,455,259 $2,465,611,460 $2,136,512,495 $1,347,629,173
Telefonos de Mexico SAB de CV $3,959,516,301 $3,761,428,993 $2,843,343,623 $6,348,002,007 $6,074,810,658 $7,259,558,014
Telecomunicacoes de Sao Paulo $4,040,284,503 $2,784,299,742 $2,932,782,609 $1,004,529,710 $1,379,949,356 $1,404,223,843
TIM Participacoes SA $3,878,774,035 $2,502,617,569 $2,966,513,885 $1,572,138,219 $886,345,250 $745,019,355
Telmex Internacional SAB de CV $2,916,704,188 $2,507,702,470 $3,539,245,697 $1,627,795,425 $786,276,823 $1,033,212,219
Brasil Telecom SA $3,252,439,813 $2,619,541,435 $2,592,426,367 $2,047,925,572 $1,712,716,237 N/A
Telecom Argentina SA $771,732,019 $748,142,095 $756,640,429 $21,502,557 $205,739,076 $547,167,827
Empresa Nacional de Telecomunicaciones SA $621,715,793 $688,228,660 $781,822,633 $650,435,631 $772,396,856 $776,134,655
Company Return on Equity (Most Recent Yr) Profit Margin (Most Recent Yr) Date FYE - 1 Date FYE - 2 Date FYE - 3
America Movil SAB de CV 43.46 19.51 31-Dec-2009 31-Dec-2008 31-Dec-2007
Tele Norte Leste Participaco -5.45 -1.46 31-Dec-2009 31-Dec-2008 31-Dec-2007
Vivo Participacoes SA 8.41 5.24 31-Dec-2009 31-Dec-2008 31-Dec-2007
Telefonos de Mexico SAB de CV 53.41 17.19 31-Dec-2009 31-Dec-2008 31-Dec-2007
Telecomunicacoes de Sao Paulo 21.61 13.76 31-Dec-2009 31-Dec-2008 31-Dec-2007
TIM Participacoes SA 2.58 1.64 31-Dec-2009 31-Dec-2008 31-Dec-2007
Telmex Internacional SAB de CV 9.61 10.33 31-Dec-2009 31-Dec-2008 31-Dec-2007
Brasil Telecom SA -10.30 -10.50 31-Dec-2009 31-Dec-2008 31-Dec-2007
Telecom Argentina SA 25.85 11.49 31-Dec-2009 31-Dec-2008 31-Dec-2007
Empresa Nacional de Telecomunicaciones SA 21.05 14.39 31-Dec-2008 31-Dec-2007 31-Dec-2006
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