Communication Wholesale Business in Latin America

Ten years after the launch of Virgin Mobile in the U.K. as the first mobile virtual network operator (MVNO), the world has seen the rise and fall of many virtual operators across mature markets.

For more than a decade, virtual operators and licensed communication service providers (CSPs) have sought to find equilibrium and innovative business cases that result in mutual collaborations. The MVNOs that have found success were able to provide their licensed partners with real benefits, operating with focus and offering differentiation in the market.

The consolidation of MVNOs across mature markets confirms that CSPs recognize their potential for generating new subscriber growth. Virtual operators have truly transformed the dynamics of the communications industry.

The current trend in Latin America is as different as the market itself. SIM-only, prepaid MVNO offerings showed clear value and newness in traditionally postpaid markets in Europe and the U.S. In Latin America, prepaid is the norm, making up 82 percent of all mobile subscribers. Therefore, licensed CSPs need to develop alternative strategies to operate in this emerging, highly competitive marketplace.

The average mobile penetration in the region is above 78 percent with Argentina (118 percent), Venezuela (99 percent), Chile (94 percent), Colombia (88 percent), Brazil (80 percent) and Mexico (71 percent) all rapidly climbing toward market saturation. Together, these six countries account for 80 percent of the total mobile subscriptions in Latin America, therefore having a large impact on the entire market.

A forecast by Yankee Group predicts a compound annual growth rate for unique mobile users in Latin America of 5 percent between 2008 and 2013. Initially this appears to be a good growth pace, especially in difficult economic conditions. However, the number is dramatically lower than the 29 percent registered in the previous five-year period.

This scenario brings additional challenges to the operators as they are forced to explore new ways of generating revenue. With a smaller unserved market, segmented offerings for specific market niches come into play for those who want to stay ahead of competition.

As the market matures, the industry will see that to achieve maximum efficiency, the value chain must be shared to allow new players to operate in areas where they are either highly specialized or have proven competitive advantages.

Today, operators in Latin America offer a broad service portfolio but may soon face difficulties in tackling niche markets effectively not only due to economic and operational restrictions. Major operators have developed effective strategies in reaching mass markets and therefore it becomes difficult to then target smaller market segments.