America Movil and Nokia partner to bring LBS to Latin America

With voice ARPU steadily declining and mobile penetration reaching 100% in major markets, operators in Latin America continue to explore different options for revenue generation services that will allow investments in 3G infrastructure to be recuperated.

3G technologies were widely deployed in Latin America during 2007 and 2008, but wireless Internet and data services are still in its infancy in the region; data represents on average less than 15% of total ARPU and SMS bring in most of data ARPU.

In Latin America, LBS is not new but we had not seen any major breakthroughs until last week, when America Movil and Nokia announced a partnership to bring Nokia Maps Navigation to consumers in Latin America (America Movil and Nokia Help Mobile Users in Latin America Navigate Their World, Feb 18, 2009).

The other major announcement came a few days before the press release from America Movil. Ericsson announced a partnership with Networks in Motion to offer customers turn-by-turn directions branded for each carrier (The Wall Street Journal, Feb. 13, 2009).

Why is this relevant for Latin America?

Ericsson and NIM's press release included an important piece of information: "If it's all done through the device, with built-in mapping software, then the operator is cut out of the deal," said Charles Golvin, a telecom analyst with Forrester Research. "This could be an effective strategy, since Ericsson and NIM are enabling carriers to get a piece of the action."

There are very few examples of VAS deployments in the region where operators have been able to successfully engage with third parties and grow the pie. Typically new services tend to follow a business model that may work for infrastructure but as the complexity of the service increases, with mobile based applications and content providers, for example, the issue of revenue share always comes up. Technology issues can always be resolved but the main challenges are usually in the commercial agreement. In particular for content delivery, the issue is critical as this may impede fully leveraging the experience of the operator in marketing services in the region with the product knowledge and experience of the provider.

This can result in either leaving everything to the operator, who does not have the marketing knowledge to effectively push the new services, or a lopsided deal where the technology and/or content vendor is able to use the operator's network but without major involvmenet and marketing budget from the operator. It appears from Golvin's statement that these issues have been addressed through NIM's and Ericsson's partnership.

In addition, America Movi's press release is very significant. In the past, other major announcements such as the introduction of 3G and the distribution of Apple's iPhone in the region have effectively influenced the market from both the demand side (subscribers) and the supply side (operators and technology vendors). This may very well be the year for LBS in Latin America.

In a year of economic uncertainty and declining ARPU, Location Based Services represent an opportunity for new revenue generation for operators in Latin America. With a solid infrastructure to support these services and an attractive business model that effectively allows all parties, including application providers infrastructure vendors and ,operators to get a fair share, LBS could very well be on its way to fulfill its potential as one of the next top revenue generation services for the region.