16 Oct 2008

Prospects for MVNOs in Latin American markets

A Cellular News story this week focused on the prospect of more competitive market conditions in Peru. Proinversión, the country's agency for private investment promotion is apparently planning to auction spectrum for the cities of Lima and Callao and make further spectrum available nationwide. As far as I can make out, this will open the way for a third GSM mobile operator. Currently, Peruvians are offered a choice between Claro (backed by Mexico's America Movil) and Movistar Peru, part of Telefonica's extensive Latin America footprint. These two operators currently have 39.22% and 57.31% of the country's mobile subscriptions, according to the Informa Telecoms & Media WCIS database. The remaining 3.47% are owned by Nextel Peru, an iDEN operator owned by NII Holdings of the USA. Whenever I visit Argentina or Brazil, I can't help noticing that almost every taxi I take is driven by a subscriber of the local Nextel-branded operator. The drivers routinely use the Push-to-talk over Cellular functionality of their handsets to keep in touch with their colleagues. It is my understanding that the various Nextel iDEN operators around Latin America focus their efforts on this and other business applications rather than attempting to compete aggressively for consumer business. I daresay, therefore, that in the Peruvian market, the local Nextel operator would be least seriously affected by the entry of a new GSM player.

While calling contacts around Central Asia and the Caspian region this week (in preparation for our Eurasia Com conference), we have been asking for views on how much more the various markets are likely to become. We keep hearing opinions about the 'optimum' number of mobile operators for any given market. I wonder, therefore, if a third GSM operator in Peru would take the number of competitors up to or beyond the 'optimum' level. I suppose it depends on who you ask.

One opinion, reported in the Cellular News piece, comes from José F. Otero, President of Signals Telecom Consulting and the author of a report on the Peruvian market. Otero notes that "any new mobile operator making its entrance into the Peruvian market will be faced with a variety of difficulties. The most important among these are an estimated 70% mobile telephony penetration rate (by the end of 2008) and the low level of personal income of a large part of the local population. First of all, a potential new operator not only would have to compete against well known brand names like Claro, Movistar and Nextel. It would also have to deploy a network in a rural areas having irregular topography that would increase infrastructure costs in regions having very low levels of disposable income. This means it would take longer to achieve a positive return on the investments made.”

In the article, there is speculation about "a new competitor like the Brazilian operator Oi" potentally looking at entering the Peruvian mobile marketplace via "an MVNO type plan"

When studying the markets across Latin America and attempting to keep track of all the various service providers, the absence of MVNOs has stood out for me. At our recent Americas Com conference in Rio de Janeiro, I heard conflicting view about when/if MVNOs would enter the Brazilian market. Some delegates seemed to feel that the country's regulator, ANATEL, was some way from enabling prospective virtual service providers to compete for business with Brazil's MNOs. However, one high-level executive from one of the operators told me he felt that MVNOs would be making their market debut in Brazil "quite soon."

A spot of Googling this morning revealed that Sixbell Nekotec Solutions, a "a leading Latin American corporation developing value added software and service systems and system integration" has ambitions around entering the Brazilian market as an MVNO targetting low income subscribers.

In the context of this uncertainty in, I was interested to see someone from Claro Brasil (America Movil) asking about the impact of MVNOs on Latin American markets to members of the Americas Com LinkedIn group. The most interesting answer so far comes from a Regulatory Policy official at the Mexican regulator COFETEL, who writes: "There is no specific ruling and/or regulation in Mexico for MVNOs. As a matter of fact, if you are already a carrier that has a license to offer services, you only need a confirmation from the authority to resale unused capacity of other carriers, as reselling for licensees is permitted by the Law. In the case of Maxcom (which is a licensed carrier) they resale unused capacity of Telefonica Movistar. In the case of parties wanting to resale services and that do not have a license, they need to follow a procedure to obtain a permit for reselling. There is a specific ruling for ILD resellers issued in 2004, but the current policy in Cofetel is that permits for any service will be granted if the applicants comply with the law and specific regulations."

My sense is that at the next Americas Com conference (Rio de Janeiro, May 2009), more time will be spent discussing MVNOs - both on stage and offline in the networking sessions. We are feeling bullish here about the prospects for a strong event, having strengthened the team working on the research and speaker acquisition parts of the project. Much of that activity will now be run from our sister company in Sao Paolo. I will be welcoming their team leader here in London next week and ensuring that our Brazilian colleagues have everything they need to make Americas Com the must-attend discussion and networking forum for telco execs from all over Latin America in 2009 and beyond.

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