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.

14 Oct 2008

Untangling the mysteries of Kyrgyzstan

It seems I was a tad hasty yesterday when getting a little excited at the prospect of having found a new GSM operator in Kyrgyzstan. A Eurasia Com project research respondent had told us about a "new entrant" named "Nur Telecom". A few hours later, I caught up with a colleague whose role here is to watch CIS markets much more closely than I am able to throughout the year. Gemma Bunting, one of our Senior Research Analysts, reminded me of the perils of tracking the Kyrgyz market, notably the matter of how difficult it is for the casual observer to be 100% sure of which operators are owned by which investors.

Over the last couple of years, Gemma and I have spoken on a number of occasions about the curious case of BiTel, which continues to lead the Kyrgyz mobile market, despite losing market share to later entrant MegaCom. Ownership wrangles around BiTel have been hitting the headlines at our Global Mobile Daily and Mobile Communications Europe services for nearly the past three years.

In Dec 2005 we reported that Russian operator Mobile TeleSystems (MTS) had announced the acquisition of a 51% stake in Bitel for US$150 million. Late the same month, we picked up the story of BiTEl HQ being seized by police and having its services cut off. This appeared to be due to a dispute over which organisation had been the legal owner of the 51% sold to MTS. A Russian company, Rezervspetmet was alleging that it owned the 51%. MTS had bought their stake in BiTel from a group known as Alliance Capital. My understanding is that Rezervspetmet eventually prevailed, forcing MTS to write off the investment. By the Spring of 2007 we were reporting that MTS was to be sued for around US$170 million in relation to the failed acquisition in Kyrgyzstan.

By May 2008 we were picking up stories suggesting that Altimo might have been behind the successful attempt to prevent MTS gaining control of BiTel. Altimo is a Russian telecoms investment company which owns significant stakes in both of MTS's major rivals in the mobile space in the Russian Federation and across the CIS. Altimo owns 44% of Vimpelcom and 25.1% of MegaFon. If these allegations don't add up to a sufficiently tangled tale for your taste, I invite you to compare the names and logos of Russia's MegaFon and Kyrgyzstan's MegaCom:

The choice of colours is pretty close. Coincidence? Apparently not. In March last year, we reported that MegaCom's management had descided not to reveal the identity of its backers. However, in the same edition of Mobile Communications Europe, it was noted that MegaFon had admitted that it was "supporting MegaCom in developing its network". "According to MegaCom's [then] General Director, Oleg Primak," ran the story, "whoever is backing MegaCom has already invested US$25 million (€19.1 million) in the development of the network".
By April 2008 the magazine of the American Chamber of Commerce in Kyrgzystan was running an interview with the new MegaCom General Director, a Mr Andrey Silich, a former MegaFon employee. I've heard a number of people refer to Megacom as a MegaFon company/subsidiary.
I can't verify whether that it is really the case, but all of the above is certainly evidence of a strong link. Whatever the true story, it's another case of the Kyrgyzstan market being a bit harder than average to track for us and other industry watchers. Back, then, to the matter of mysterious 'Nur Telecom' (or Nurtelecom?). Gemma pointed out to me that by May of this year, Global Mobile Daily was reporting that BiTel had "changed its name to Nurtelecom and plans to apply for a new license to operate services this year". If that's true, it certainly begs the question of why the BiTel website is still live now. Confused? Me too. When I was trying to figure all of this out yesterday, I asked for help via the Eurasia Com LinkedIn group. The only response? A group member saying he'd heard rumours of Virgin Mobile starting up in Kyrgyzstan. My initial response to that is extremely sceptical. That said, it does seem like this is one market full of surprises.
I hope to learn more by encouraging the country's various players to have a presence at our Eurasia Com conference in Istanbul in the Spring. We'll keep you posted on that.

13 Oct 2008

Discovering new mobile market entrants in Central Asia

As we speak to contacts across the Caspian Sea and Central Asia regions, we see that the competitive landscape in a number of these markets continues to change. A friendly contact in Kyrgyzstan flagged up the imminent market entry of a new GSM player, 'Nur Telecom'. We have also become aware of a CDMA operator which appears to have gone to market with services since we last gave our database of the region's companies a major update: a company named Sotel, using the Nexi brand appears to have built CDMA mobile and WLL networks and services. Finally, a look at the CDMA Development Group website reveals that another WLL player named 'Global Telecom' seems to be getting ready to go to market.

Meanwhile, a research respondent in Tajikistan alerted us of the presence of what he described as a "small company which is offering broadand services over the country's only WiMAX network".

We are digging out information of this sort on a daily basis as we work to create to make the 5th annual version of our regional conference yet more valuable than previous iterations.

12 Oct 2008

Eurasia Com 2009: welcome aboad, our first confirmed speaker

We would not ordinarily be confirming speakers for a March/April conference quite as early as this. With Eurasia Com 2009 scheduled for the last day of March and first day of April, my current focus is on catching up with the latest developments in Turkey, the event's host country and in the numerous former Soviet Republics of the Caspian and Central Asia regions, from where we draw a good number of our delegates. We are digesting all that is going on across these markets as well as asking the region's telco executives what our conference must feature in terms of participants, discussion themes and format in order to worthy of their expenditure on travel and time out of the office.

However, of the people I've spoken to thus far as part of this process, one stands out as an especially helpful and insightful research respondent. Cenk Soyak is the General Manager of MVNO/MVNE Effortel's presence in Turkey. Having earlier got the sense from other Turkish research respondents that the country's mobile sector's three hottest topics were MNP, the long-delayed arrival of 3G services and the business case for MVNOs, I was naturally keen to catch up with someone right at the centre of the discussions around the last of these. Cenk keeps a blog (in Turkish) to track what's going on in Turkey's MVNO space and was kind enough to provide an English language summary of many of the themes covered. As well as offering invaluable guidance on this topic, and on other developments in Turkey, I knew right away that Cenk would be an authoritative and lively conference speaker. I am therefore delighted to announce here that he has agreed to join the panel of speakers we will be building for our Eurasia Com conference.

My Russian-speaking colleague currently conducting research covering CIS markets has also had some really useful conversations, many with CxO-level people within a diverse range of telcos - from MNOs to state-owned incumbent wireline carriers. A number of these respondents have indicated a willingness to join the speaker panel in Istanbul, so I anticipate positive developments soon. If your organisation is serious about doing business with the telcos of this part of the world, I am confident we can save you a lot of time and money by putting you among the group we plan to assemble in Turkey in the Spring.