How (hard) will financial turmoil hit Latin American telecoms markets?

I am currently advising Sao Paolo-based colleagues about the topics which should form the basis of the conference agenda at this year's Americas Com event in Rio de Janeiro, which will take place 30 June & 1 July. It was therefore timely for me that two of the blogs linked from this one have (quite) recently taken up the theme of how far Latin America's telecoms markets will be affected by the economic crisis currently gripping us all.

The first of these commentators is Australia-based Paul Budde, who helped me with a project last year and whom I finally had the great pleasure of meeting here in London after much correspondence and many friendly phone conferences at some very unusual times of night. It became clear during our conversations, and from what I was told by contacts at telcos in Australia, New Zealand and the Pacific islands, that Paul is well-known figure on the telecoms scene in that part of the world. Paul moved mountains to arrange the presence of key people from several countries' telecoms/IT ministries at an industry gathering he chaired for me in Sydney. The feedback about his role in making this a really productive meeting was incredibly positive and Paul knows I remain in his debt. My only regret was that other priorities made it impossible for me to attend the event myself.

Closer to home, our very own Tammy Parker has thoughts on the same questions. Tammy is a Principal Analyst within Informa Telecoms & Media, where she manages the Mobile Americas Intelligence Centre, which provides thought leadership, news analysis, key metrics, forecasts and more regarding operators, service providers, vendors and trends involved in shaping the mobile communications industry across North America, Central and South America, and the Caribbean.

Better late than never, this week I stumbled upon Paul's blog entry of October 13th 2008, in which he discusses how the region's telcos are expected to fare in the near future.

Paul notes that in mid-September 2008, several Latin American governments were claiming that the US financial predicament would have no impact on Latin America, because after its recession of 2001-2003, the region had taken sufficiently strong economic and fiscal measures to avert the reoccurrence of such a crisis. He goes on to observe that this confidence quickly proved to be misplaced, given that in the first week of October, stock markets from Sao Paulo to Mexico City took a hit and national currencies slumped against the US dollar. According to Paul, following the stock exchange panic, the region’s heads of government drastically revised their position, expressing alarm at a situation that could devastate the economies of Latin America, which have been reaping for the past few years the rewards of high global demand for commodities. Paul does not believe the picture is entirely black, noting that the major Latin American economies have built up solid national reserves and that in its World Economic Outlook published in early October 2008, the IMF revised downward its previous forecasts for global economic growth. The revision, says Paul, is not too dire for Latin America, although the IMF warns that all forecasts are subject to change and that the outlook is highly uncertain.

Turning his attention to our sector, Paul believes that "to date, telecom companies appear to have dodged the worst of the crisis. For example, on 6 October, only two out of the 35 stocks listed on Mexico’s IPC managed to close higher, and they were both telecom stocks: Telmex rose 1.5%, while Carso Global Telecom gained 3.1%."

These companies are both controlled by Mexican billionaire Carlos Slim. In the mobile segment, Paul observes, "his other major investment, pan-regional mobile giant América Móvil, pared its losses to finish 1% down, a far smaller loss than that experienced by most other companies.

Paul goes on to look back at the region's recession for 2001-2003, wondering how far the the lessons of that period might be applied to the current crisis. Paul notes that "at that time, the sector that suffered the most was cable television, while mobile telephony only slumped slightly. The fixed line market came to a halt and never recovered, as countries joined the global mobile substitution trend. The broadband market, still in its infancy, experienced a delay in growth that is still evident today, in that Latin American broadband penetration is lower than would be expected given the region’s other economic indicators."

Paul's view is that if the present financial crisis deepens, the telecom services worst affected are likely to be those that provide entertainment, such as pay TV, digital media, and non-corporate mobile data services. Paul is quite bullish about mobile telephony, stating that it has become such an essential facility that it is likely to continue growing, though at a reduced rate.

Tammy's view, as expressed in a November blog entry, is that "slowing growth... will logically affect mobile operators in the region", and she notes that "Merrill Lynch recently predicted that mobile subscription growth in Latin America would remain steady in coming months but said mobile ARPUs could fall on average 6% in local currency in 2009." According to Tammy, the firm said it does not see Latin American operators cutting OPEX or CAPEX because of funding needs. I draw encouragement from this last point. A big feature of our events is the business of matchmaking between operators and vendors. I will naturally be encouraging our sales guys to flag up this relatively positive sentiment about operators' technology spending.

Paul Budde feels that broadband development will be more than ever dependant on government and regulatory efforts, and hopes that "the lessons learned from the disaster of unfettered speculation may lead to a more methodical and far-sighted approach to telecom investment, with a view to public wellbeing such as E-health, E-education, E-government, and other social services."

With this in mind, we will be working harder than ever to encourage the region's regulators and relevant government departments to weigh into the discussions at Americas Com in 2009.

MNP remains a hot topic across a number of regions

Late last month, I received the notes put together by the Sao Paolo-based research team who have been busily preparing for this year's Americas Com event (30 June & 1 July, Rio de Janeiro). My Brazilian colleagues have been asking which hot topics should form the basis of the conference agenda, directing their questions to managers and strategists from telcos across Latin America.

One suggestion from respondents is that we include a round table session on the practicalities of implementing Mobile Number Portability (MNP). MNP was officially launched in Mexico in July last year, following a number of delays. In Honduras, the national telecoms regulator Conatel launched a public consultation on MNP in September, initially allowing operators Tigo, Claro, Hondutel and new entrant Digicel to consider proposals and offer comments. As of September 2008, Conatel had not yet made public a timetable for MNP. In the region's largest market, Brazil, the regulatory agency required the country's MNOs to go live with MNP by September 1 2008.

The roundtable suggestion seems to be a good one - we could have the optimum mix of participants with recent experience of MNP and others with a pressing need to anticipate the business and technical challenges.

Meanwhile, MNP appears to be causing some degree of controversy in India. Yesterday's Global Mobile Daily had news of the country's Department of Telecommunications (DoT) planning to begin accepting bids from applicants hoping to act as MNP clearing houses by mid-January. Bids are due to be opened on February 5th, according to local reports. The GMD piece goes on to say that "the DoT still faces key questions before it introduces MNP, most notably whether CDMA
operators will be able to automatically transfer their subscribers across to GSM services, a move strongly opposed by GSM players who say that CDMA players will transfer subs en masse to try and secure additional GSM spectrum."

I imagine that one CDMA player that could seek to gain from this alleged wheeze would be Reliance, which has finally launched its GSM services in the blue-chip market of Mumbai and has launched into the market with an aggressively priced plan offering subs free airtime worth NR10 S$0.21) per day for the first 90 days of a new subscribers' contract after an initial charge of just INR25. Reliance is offering new GSM subs local call rates of INR0.01 per minute and STD call ates of INR1.50 per minute with subs able to top up their accounts with prepaid packs offering NR10 to INR500 of value once they have used their daily free allowance. In addition, Reliance SM subs will get free unlimited talk time on the company's GSM and CDMA networks between 2200 and 0600 throughout Mumbai, Goa and Maharashtra. Reliance says it will be announcing additional prepaid tariff plans over the next three months.

In case you're surprised by the amount of detail in the above paragraph, I should admit to having grabbed most of it from the same edition of Global Mobile Daily. I won't pretend suddenly to have become an expert on the Indian mobile scene. That said, I did enjoy a (too) short stint in charge of our India & South Asia event and it was with regret that I ceded the territory to a colleague as part of a reorganisation in the Com World Series team last year. It was an exciting part of the world in which to make contacts and do business and I maintain an interest in developments there. For other readers who can say the same, I do recommend attending this year's India & South Asia Com, held once again in Mumbai - 12-13 May are the dates for your diary.

Paltel services hit by military action in Gaza

In my final post of 2008, I praised the determined spirit of the many telecoms people I've met from markets notable for political turmoil and other major challenges. I noted how we at the Com World Series had experienced late changes of venue and dates for events in Kenya and India, the former as a result of unrest, the latter due to the terrorist attacks on Mumbai.

It would therefore be refreshing to enter the new year without reading about how the telecoms sector is coping in some trouble spot. Alas, today's newsletter from TelecomPaper comes with word of how "Paltel Group, the provider of fixed and mobile telecommunications in the Palestinian territories, has warned that Gaza could be disconnected from the outside world as a result of the Israeli air strikes and ground assault in Gaza." The report says that currently, 90% percent of the mobile service network is down, in addition to a 'huge' number of fixed lines, either due to direct damage or because of the loss of electricity.

A timely take on mobile social networking

At Informa Telecoms & Media, my task of producing telecoms sector discussion/networking events is made much easier by being able to seek the input of our own industry analysts and by my having a wealth of ITM report products and subscription research services at my fingertips. Prior to joining Informa, I worked for companies who created useful and profitable conferences without the benefit of having such resources in-house. Frankly, this meant I had to beg and borrow information and insights in order to get my job done (I won't admit to stealing). During that time, I found some analysts to be particularly insightful.

One such was Dean Bubley, whose blog is linked from this one. The motto of Dean's mobile sector advisory business is "don't assume" and he asserts that "the technology industry - and its customers and investors - have accepted too readily nebulous, unsubstantiated and unchallenged predictions of self-appointed 'experts' and pundits." Dean's blog entries are written in just this spirit. Most recently, he has turned his attention to mobile social networking.

This was very timely for me, given that I spent a large chunk of yesterday working on a presentation on exactly this subject. This will be delivered on January 15th at the next Mobile Monday Istanbul meeting, at which I was invited to speak by the local organiser, Natali Yeşilbahar. While I am considering quoting Dean's comments to spice things up a little, most of my slides are drawn from the Informa Telecoms & Media 'Mobile Social Networking: Communities and Content on the Move'.

While I am delighted to be sharing some of our thoughts on this area, I was also motivated to travel to Turkey for the meeting by the prospect of being able to drum up local support for our Eurasia Com event, which will take place in the same city 31 March & 1 April. The Eurasia Com speaker panel is drawn from all over the Caspian region and Central Asia, with most of the former Soviet republics well represented. I have a great team in place to ensure that good numbers of delegates from these markets also attend, but I am keen to make sure we do not neglect the matter of marketing the event very actively to telcos in its host country. Hence my keenness to spend some time in Istanbul this month. I am looking forward to this first overseas trip of 2009. I'd better finish my presentation this weekend...

Russia's MTS brand to expand beyond CIS footprint

The new year finds me fully focused on preparations for our Russia/CIS Com event in Moscow (2-3 June 2009). Having conducted primary research in December, we will now be concentrating on making sure that the region's major telcos are represented at a high level at this year's gathering. While doing this, I naturally find my eye drawn to stories from Russia when reviewing the various telecoms news sources.

One such, from Cellular News, concerns the planned entry of Russia's MTS brand (mobile market leader with 33.85% of subs according to WCIS) into India. The Cellular News piece notes that "Shyam Telelink, which is controlled by Russia's Sistema has announced plans to use the brand-name of the Russian mobile network operator, MTS in the Indian market. MTS is itself 52.8% majority-owned by Sistema."

The piece continues: "Sistema guaranteed US$520 million of the total US$630 million that Shyam Telelink paid for obtaining its operating licenses. The company recently used a call-option to increase its shareholding in India's Shyam Telelink from 51% to 72% - just shy of the 74% which is permitted under Indian laws."

With this in mind, we will look to encourage Mr Oleg Raspopov, Director of the MTS Foreign Subsidiaries Business Unit to attend our India & South Asia Com event inMumbai in May. Mr Raspopov is already confirmed as a speaker at the event which covers the markets in his home country's most obvious and immediate sphere of influence, the former Soviet republics of Central Asia and the Caspian region. So I look foward to meeting him at Eurasia Com 2009, March 31 & April 1 in Istanbul.