Five top predictions for the Latin American Mobile Market in 2009

"Profits are an opinion, cash is a fact."


For my first post of the year, I will share my thoughts on what to expect for 2009, based on the economic outlook, industry trends and user behavior. So without further ado, here are my top five predictions for 2009 for the Latin America Mobile market:

• Growth will continue but at a slower rate than previously expected: Mr. José María Álvarez Pallete, General Manager of Telefónica Latinoamérica, stated last year that the region will continue to grow in subscribers and revenues, but given the economic crisis, it will be at a slower growth rate than previously expected.


• The 2008 economic downturn will very likely be the main factor affecting operator decisions. Mobile operators will be watching CAPEX spending closely and will be looking for ways to reduce OPEX spending in every way possible. They will be more interested in Value Added Services that can be deployed to the mass market, across a broad range of devices and that can be offered to both postpaid and prepaid subscribers. A compelling business case with a strong ROI will be the key factor to approve new VAS deployments. Marc Beuls, President and CEO of Millicom, stated last year at the Telecoms Conference in Barcelona that Millicom's CAPEX for 2009 will be “substantially lower” than in 2008 and that they will maintain their strict requirements for expected ROI on new investments. It is expected that the other two giants in the region, Telefonica Movistar and America Movil, will take similar actions.


• ARPU will continue to decline due to the economic downturn and because of increased penetration in lower income segments. The downward trend can be expected from emerging markets but subscriber usage (see chart) will no doubt be affected by the economic metldown.


• Voice will continue to be the greatest cash generator in every region by 2013, including Latin America. Operators will focus on offering voice services as cost-effectively as possible. Call completion and the regulatory environment continue to be a challenge but also an opportunity for operators to increase network productivity and revenues, leveraging existing infrastructure.


• The big three in the region, America Movil, Millicom and Telefonica Movistar will continue to align operations and leverage their presence in the region. All of them now require that new Value Added Services be approved at a corporate level. This is not bureucracy but rather an alignment of their service offering and VAS Management and Operations. It has been a big challenge but America Movil, Telefonica Movistar and Millicom have worked hard to align their operations and are beginning to see results. We recently wrote about the successful launch of the iPhone by America Movil, made possible by the effectiveness of its corporate VAS team and regional VAS and Operations Managers; this is something that just three years ago might have been very difficult, if not impossible, to achieve in just three months as they did, launching successfully in July 2008.

In summary, I expect 2009 to be a difficult year for operators, who will be caught in the middle of an economic downturn in a region that is still growing but with a steadily declining ARPU that will no doubt be affected by the economic meltdown. Vendors will feel the pressure as operators will have limited CAPEX and will continue to enforce strict requirements for new investments. In addition, vendors will face increased pressure from the big three, as they continue to leverage their presence in the region and stronger negotiating position.

The environment, however, presents opportunities for operators to evaluate their VAS strategy and align their service plans and offering to subscribers' needs and wants. In my next posts, I will focus on these opportunities and what it means for VAS vendors.