M2M to fuel mobile data growth in Latin America
August 16, 2016
Latin American carriers are betting on mobile data growth opportunities to offset a drop in voice and interconnection revenues, according to market watcher Frost & Sullivan. Strong growth is expected from data services through mobile broadband, M2M and value-added services.
The expansion of 3G and 4G network coverage, improving quality of service, proliferation of smart devices and migration of prepaid customers to hybrid plans are fuelling opportunities for mobile service providers in Latin America. Carriers are striving to increase the average revenue per line (ARPL) by attracting more customers to post-paid plans in a market where prepaid plans account for 74.2% of the 546.8 million lines in service.
Frost & Sullivan estimates that through the initial migration of prepaid users to more affordable hybrid plans for voice and data services, post-paid connections will grow from 25.8% in 2015 to 31.0% in 2021.
The research says the market is set for strong growth despite an 18.7% drop in 2015 revenues from the previous year, mainly due to highly fluctuating exchange rates, as most markets registered some growth in local currency. The market earned revenues of $58.32bn in 2015, with the number of lines decelerating by three per cent to touch 546.8 million due to carriers' stricter churn policies. This led to the disconnection of unused, low-value lines.
With the growing popularity of data services reviving the market, revenues are expected to reach $76.85bn in 2021, at a compound annual growth rate of 4.7%.
"Postpaid lines are also being stimulated by M2M and device subsidies, as many users wish to switch from a feature phone to a smartphone," said Frost & Sullivan analyst Georgia Jordan. "The prepaid segment is also expected to reduce further due to regulatory mobile termination rate (MTR) cuts, which in due course will translate to reduced price difference between on-net and off-net calls and elimination of the need for multiple SIM cards."
Carriers look to offset the loss in interconnection revenue, generated by MTR cuts, with strong growth in data services such as mobile broadband, M2M and value-added services, which currently represent 37.3% of the total mobile services revenue, and are expected to reach to 57.3% in 2021.
Meanwhile, the lack of competition in rural areas and market concentration in some countries are pegging back market growth to some extent. Governments are addressing this challenge through the implementation of mobile number portability (MNP) and the regulation of mobile virtual network operators (MVNOs).
"Government initiatives such as MNP and MVNO regulations have experienced varying levels of success in each country," said Jordan. "Following these announcements, several MVNOs, including Virgin Mobile and Chilean retailer Falabella, have launched services or announced plans to operate in several countries in the region."