Renato PasquiniFrost & Sullivan identified seven key Telecom trends for Latin America in 2014. The first four are related to network expansion, as Telcos are making efforts to increase the coverage of Fiber-to-the-home (FTTH), Long Term Evolution (LTE), Carrier Wi-Fi and Ka-Band Satellites.
Other key trends for 2014 are Telco initiatives to develop new business models for customers and enterprises and generate new revenue streams. Frost & Sullivan identified three main focus areas in terms of services and applications for operators in 2014: Non-linear Pay TV services, Machine-to-Machine (M2M) services and Mobile Payment services.
In recent years we have observed Telcos’ efforts to go beyond connectivity and provide interactive services (using their own network) as well as over-the-top services. However, they are still faced with the challenge to increase the coverage and quality of broadband networks, and this is likely to concentrate more than 80% of Telcos’ CAPEX in 2014.
Consumers will begin to adopt mobile wallets for uses other than paying at point-of-sale
Mobile payment will become an alternative to peer-to-peer transactions and paying bills in cash and on-site, as well as payments at point-of-sale (POS) terminals. This is especially true for the lower-income population.
The provision of financial services to the unbanked population, including peer-to-peer micro transactions, in a secure and convenient way for a population that uses cash frequently and/or pays bills in person, is an opportunity for carriers and other market players to increase revenues.
In Brazil, Frost & Sullivan predicts mobile payment registered users to grow 87.5% in 2014, reaching 1.5 million users.
Ka band, now with commercial offers in LATAM, emerges as a true alternative for broadband
The launching of Hispasat’s Amazonas 3 satellite in February 2013 provided Latin America with its first Ka-band payload, with operators choosing to focus Ka-band broadband coverage on metropolitan areas as opposed to rural regions.
Frost & Sullivan forecasts that in 2014 satellite broadband connections (which do not include VSAT) will have in 2014 a still slow adoption in Latin America, as companies will face challenges to implement the commercial structure and technical staff to install the equipment. It is expected that connections will grow 7.8% in 2014, reaching 0.2 million connections. However, after 2015, with new satellites and more players, the adoption is likely to increase and will emerge as a true alternative for broadband.
Non-linear pay TV services will become a relevant revenue stream
As smart devices grow to represent the majority of shipments, and broadband becomes widely available, the demand for Over-the-Top (OTT) services and non-linear Pay TV services increases to the highest level ever.
OTT service providers, such as Netflix, are the ones that most benefit from this trend currently. However, traditional Pay TV service providers are also expected to benefit, as video on demand (VoD), niche content subscriptions, pay-per-view (PPV), digital video recording (DVR) and other services increase adoption. Telcos also look to include OTT applications in their set-top boxes, through revenue share agreements.
This will increase the demand for Content Delivery Network (CDN) services in Latin America, provided by companies such as Akamai and Level 3, whose revenues are expected to grow 17.4% in 2014, pushed by video streaming and on demand applications.
In Brazil, Frost & Sullivan predicts that revenues for Pay TV service providers not related to linear subscriptions will grow from 19.1% in 2012 to 24.9% in 2014.
The World Cup will drive Telco investments in Wi-Fi
Since the beginning of 2012, carrier Wi-Fi deployment in Brazil has grown nearly tenfold, reaching close to 500,000 hotspots in the fourth quarter of 2013. In other Latin American markets, Wi-Fi roll-out has been slower, but is also a trend among both governments and Telcos.
Brazil’s rapid growth was led by community hotspots. The business model, which looks to leverage telcos’ existing broadband customers to expand their Wi-Fi footprint at a lower cost, is a growing trend globally.
For 2014, Wi-Fi hotspot growth is expected to accelerate as Telcos prepare to boost coverage in World Cup cities and other carriers begin deploying homespots of their own.
In Brazil, Frost & Sullivan expects hotspots to reach approximately 1.0 million in 2014, pushed by the growth of community hotspots, which will represent 98.2% of total hotspots.
Consumer migration to fiber networks to accelerate as carriers reduce prices
Latin America had more than 40 FTTH projects by 2012, with 5.2 million homes passed, according to IDATE. In 2014, it is expected that more projects will be developed by regional competitors, competing with Incumbents.
In addition, as FTTH is decreasing the cost to deploy (resulting in price decline for end-users also), and is likely to become the main ultra-broadband alternative for Incumbents and other large competitors.
Prices are still relatively high, but competition and bundling are expected to erode them in the short term, making at least entry-level plans accessible for more people (>=20Mbps).
As a result, Frost & Sullivan predicts that FTTH will grow 40.0% in 2014 in terms of subscribers, reaching 1.4 million. The main markets are Mexico and Brazil, respectively, with Mexico leading due to the competition of 3 large Telecom Groups with FTTH with competitive prices.
Service providers will race to position themselves in M2M services
Telefónica and America Móvil, market leaders in Latin America, will see the emergence of global competitors, such as Vodafone and Verizon, as well as specialized niche providers.
To differentiate services and not limit themselves to mere connectivity providers, carriers look to cloud services to enhance user experience with real time management, lifecycle management, reports and alarms.
Another trend is a focus on specific verticals to become the pioneer/leader in practices such as m-health, transportation, security, utilities and financial services.
Frost & Sullivan forecasts that mobile M2M connections in Latin America will reach 16.0 million in 2014, a growth of 24.0% over 2013. Main verticals are still fleet management/tracking and POS, but we are likely to see in 2014 the growth of security, healthcare, utilities and manufacturing as important verticals.
LTE will gain relevance in the Latin American mobile market
During 2012 and 2013, some of Latin America’s largest carriers launched high speed LTE mobile broadband networks, and in 2014, we expect to see 4G services gain track in Latin America’s largest economies, as more devices become available at cheaper prices.
LTE is also expected to drive regulatory discussions as many countries are planning to auction the coveted 700 MHz spectrum frequency, considered more appropriate for 4G services due to its wide range and improved indoor coverage. Currently, most Latin American countries operate LTE networks on higher and less efficient frequencies.
Frost & Sullivan predicts that lines in service will grow from 2.0 million in 2013 to 7.9 million in 2014, being Brazil the most representative country contributing for this growth.
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