Ring Back Tones: New Model for Latin America?

Latin America operators are following a VAS trend that exploded first in Asia and shortly thereafter in Europe: Ring Back Tones.

With the introduction of "tu musica de espera" Movistar Chile is leading the way. Pricing follows the same scheme as other regions, with a flat monthly fee and a per download fee (http://www.movistar.cl/servicios/interactivo/?id=190):

  • Download - $990 Chilean Pesos (approximately US$1.70)
  • Monthly fee - $500 Chilean Pesos (approximately US$0.85)

This pricing scheme has several challenges including reacing the prepaid market which in Latin America countries is usually 80% of total subscriber base. The monthly fee is inconsistent with the prepaid business model (pay as you go). While downloads can dramatically increase ARPU, if kept at a global average of US$1.50 will limit the size of the market. One option that can be explored, is to get rid of the monthly fee and base the business case entirely on dowlonads. This gives the user the flexiblity of downloading as much content as he can afford while at the same time keeping the same scheme prevalent in prepaid transactions (no fixed fees). This model has already been succesfully used by some operators in Europe.

About the market - Chile has one of the highest mobile telephony penetration rates in Latin America: around 60% in early 2005. Mobile subscribers outnumber fixed-line connections by about 7:3. Chile’s mobile industry is one of the most competitive in Latin America, but the number of mobile companies decreased from four to three in January 2005, with the merger of Telefónica Móvil de Chile and BellSouth Chile. The merged company was renamed Movistar Chile in April 2005, leapfrogging Entel to become the mobile market leader. América Móvil entered the Chilean mobile market in August 2005, with the acquisition of Smartcom. The shape of the mobile market is set to change yet again, with the forthcoming auction for spectrum which Movistar has been asked to return within 18 months from its merger. Source: http://www.budde.com.au/Reports/Contents/Chile-Mobile-Market-Overview-and-Statistics-1907.html

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