Archive for March, 2013

Mexico’s telecom reform gains cross-party political support

Sunday, March 31st, 2013

Recent developments among Mexico’s legislators suggest that significant structural reforms to the telecom market look promising, though much horse trading still needs to be done.  Pushing these reforms through the next political hurdles is crucial to meet citizens’ expectations in the 21st century, and for the country to build the infrastructure to compete in a global economy.

An analysis of the measures by Adriana Labardini Inzunza of the Centre for Consumer Research (http://www.alconsumidor.org/) shows how the bill will tackle these issues in several ways. Firstly – and in common with developments in Europe – it aims to establish broadband as a universal service. It will also strengthen regulatory powers to break up monopoly interests, tackle the long-standing law which prevents foreign investors from owning more than 49% of a Mexican corporation, and so encourage the market entry of new players. It will open up and develop the market for local loop unbundling (thereby encouraging competition in the broadband sector).  It would also establish a range of rules regarding must-carry provisions for TV broadcasters, and set up two new TV national networks. Finally, the state would take a leading role in the provision of broadband by entering the market as a provider of wholesale services.

These are encouraging moves, not least because they represent an unequivocal acknowledgment that Mexico’s telecom market remains drastically uncompetitive despite the process of privatisation and deregulation having begun in 1989.

The moves promise a new impetus in the market. Growth in the telecoms market has long outpaced broader economic growth, driven primarily by the mobile and broadband sectors. Although growth slowed in the wake of the global financial difficulties after 2008, it has since recovered and remains strong compared to many other global markets, particularly those in Europe. According to the Index of Telecommunications Sector Production (ITEL), developed by the regulator Cofetel, the telecoms sector is growing at 10% to 11% annually, and may have reached 12% for 2012 on the back of the increase in the number of subscriptions to satellite TV, and the growth in international long distance and mobile traffic (itself related to regulatory measures which substantially reduced interconnection rates).

If all goes well among legislators, the Mexican consumer can look forward to the type of major overhaul to the telecom landscape which many other countries also took long to achieve, and so reap the benefit of improved services and lower prices.

Henry Lancaster
Senior Analyst

For more information see the report Mexico – Key Statistics, Telecoms Market and Regulatory Overview

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Digital Economy, Media and Banking in South Africa

Thursday, March 28th, 2013

With its relatively well-developed and diverse infrastructure, South Africa is taking a regional lead role in the convergence of telecommunication and information technologies with the media and entertainment sector, promising reductions in telecommunication costs and better availability of information and services. Digital media and social media have reached a level of development that is fostering an associated advertising and marketing industry. The FIFA World Cup held in the country in 2010 has boosted these developments.

The legalisation of VoIP Internet telephony in 2005 marked the beginning of a fundamental change in the country’s telecoms landscape. Billions of dollars are being invested into IP-based next-generation networks that are capable of delivering converged services more efficiently. Telecom carriers and ISPs are moving into delivering audio and video content over their networks, while in turn the traditional electronic media carriers have discovered the potential of their infrastructure for telecommunications service delivery. Triple play offerings are available that combine voice, data and IPTV services.

2011 and 2012 were characterised by further improvements of national and international fibre optic infrastructure which has led to better bandwidth availability and lower broadband prices.

While South Africa lags behind other countries on the continent in the development of e-government, e-health and e-learning applications, it is a regional leader in the areas of online retail, electronic banking, mobile banking, social media and cloud computing.

See:- South Africa – Digital Economy, Media and Banking

 

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MNOs look to Eastern European markets for investment opportunities

Wednesday, March 27th, 2013

The saturated mobile voice market in Western European countries has in recent years encouraged established mobile network operators (MNOs) to seek opportunities in Eastern European markets. This trend is expected to develop further in coming years as MNOs continue to face revenue pressure from regulatory measures and intense domestic competition.

In the decade following the fall of communism the mobile markets in Eastern bloc countries were far less mature than their western counterparts, with poorly developed networks and technologies, and with consumers less savvy with mobile services and their potential as drivers for socio-economic development. This attracted a small number of regional players to invest in Eastern markets, particularly those which already operated in bordering Western countries. Investment has since widened, and Western MNOs, through robust M&A activity, are now in many cases the dominant mobile player. In addition, most MNOs have expanded into the fixed-line markets, developing quad-play services including broadband and IPTV in a bid to reduce customer churn and exploit revenue opportunities from different telecom sectors.

Through such investments and through EC-mandated regulatory measures – in place for a number of years as Eastern and Central European countries have joined the EU, or have become accession-pending – these markets are maturing rapidly. Indeed many of them enjoy higher mobile penetration rates than neighbouring Western countries. In part this is a legacy of poorly maintained and antiquated fixed-line infrastructure which encouraged consumers to adopt mobile telecoms as a substitution and alternative for fixed-telephony. However, in recent years the efforts of a number of MNOs such as TeliaSonera and Telenor, both being at the forefront of data technologies such as Evolved HSPA (HSPA+) and Long-term Evolution (LTE), has meant that markets such as those in the Baltics have developed more mature 4G infrastructure than most others in the region. As such they have become testing grounds for a number of emerging mobile data-based services, including m-commerce and m-payments platforms.

While mobile communications and broadband are driving Europe’s overall telecom sector, there remains a need for further investment in networks and spectrum to address consumer need for bandwidth. Spectrum being finite, other solutions such as micro sites will be required to meet future traffic on networks, even with up to 80% being offloaded onto fixed-line networks. This has resulted in greater pressure for operators to speed up network upgrades as operators and consumers alike focus on mobile data services and the ability of networks to support them. In coming years, subscriber growth, which was for long concentrated in the 3G sector, will morph to the 4G platform, placing further pressure on networks.

The economic climate is also likely to encourage MNOs in these emerging markets share infrastructure, a play which has been favoured by regulators as they make their own national broadband commitments heavily reliant on mobile networks to provide broadband coverage in rural areas.

For detailed information, table of contents and pricing see:

Europe Emerging Markets – Mobile Operators and Investment Strategies

 

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Brazil ramps up its telecom services ahead of the 2014 FIFA World Cup

Wednesday, March 27th, 2013

Economic climate

For Brazil, 2012 was a disappointing year, with GDP growth well below expectations. The sluggish result has been blamed on the unfavourable global environment. The only sector that grew in 2012 was services; industrial and agricultural activities both shrank. Investments in 2012 were down 3.6% – and yet, paradoxically, domestic consumption rose by 3.1%, buoyed by a general sense of optimism. To revive the economy, President Dilma Rousseff adopted a series of measures to help spur much needed investment.

Investment opportunities

With the upcoming 2014 FIFA World Cup and 2016 Olympic Games being held in Brazil, operators are rushing to roll out new technology such as LTE and FttH networks. The Brazilian government has issued a law offering tax breaks for new telecom investments in networks that support access to fixed or mobile broadband. Companies wishing to secure the tax breaks must submit their network projects to the Communications Ministry by 30 June 2013.

Competition

The asymmetric measures introduced by the General Competition Plan in November 2012 are a significant step in the Brazilian telecom environment. The regulation of network unbundling and controlled wholesale prices should pave the way for a more competitive broadband market. The General Competition Plan requires operators with Significant Market Power (SMP) to share their networks and infrastructure with small or new service providers, at reference prices approved by Anatel.

Fixed/mobile consolidation

Fixed/mobile consolidation is reshaping Brazil’s telecom industry. Telefónica operates through Telefônica Brasil, which has integrated its fixed-line and mobile services under the brand name Vivo, previously only used for its mobile business. The América Móvil group in Brazil comprises long-distance incumbent Embratel, mobile operator Claro, and cable TV provider Net Serviços. The group has started to integrate its fixed and mobile services under the brand name Claro – which likewise was previously used solely for mobile services. Oi offers all fixed line and mobile services under the Oi brand name.

Fixed-line market

Brazil’s fixed-line teledensity is slightly higher than average for South America, and the number of fixed lines continues to grow – but ever so slowly; teledensity has gone up by only one percentage point in six years. The two regional incumbents Oi and Vivo control 43% and 24% respectively of the country’s fixed lines in service, but they mostly keep to their own regions of operations despite the lifting of geographical restrictions. While their basic telephony services have been losing customers, the Claro/Embratel/Net group and GVT have been steadily increasing their local market share (respectively to 22% and 8%). GVT is the country’s most successful alternative network provider, offering fixed-line services only.

Mobile market

Brazil is home to more than one third of all mobile users in Latin America and the Caribbean. Mobile penetration is upward of 132% and still growing. Thanks to the rules attached to the 3G licences auctioned in December 2007, which required operators to extend services to all towns and municipalities with no mobile coverage, Brazil managed to achieve mobile coverage of all its 5,565 municipalities in December 2012. Four companies dominate the country’s mobile telecom market: Vivo, Claro, Oi, and Telecom Italia’s TIM Brasil. Together, these four operators control 97% of the country’s mobile subscriber base. Vivo is the leader, TIM Brasil and Claro compete neck-and-neck for second place, and Oi is fourth.

Broadband market

In preparation for the FIFA World Cup and Olympic Games, substantial investments and regulatory reforms are being implemented to boost Brazil’s broadband development – such as the General Competition Plan and the National Broadband Plan. Also, the Atlantic Cable System (ACSea), when completed, should substantially increase bandwidth and reduce broadband prices. Oi is Brazil’s leading broadband network operator, closely followed by Net; Vivo is in third place, and GVT is fourth. Oi and Vivo, which use mainly ADSL technology, have been losing market share to Net and GVT, which offer faster connections – the first over HFC cable, and the second over a NGN network with a Fibre-to-the-Cabinet architecture.

Broadcasting

Since 1996, Brazil’s pay TV market has experienced sustained growth, not even slowing down during the global credit crunch of 2008/09. Although Brazil has the largest number of pay TV subscribers in Latin America, its pay TV penetration lags behind other major countries such as Argentina, Chile, Venezuela, Mexico, and Colombia. There is therefore ample room for growth, and investors have been eager to gain a foothold in the market, especially since the pay TV law of 2011 removed restrictions on foreign investment and on telcos being able to provide pay TV services.

Market highlights:

  • To tackle the problem of insufficient bandwidth, the Brazilian government has entrusted state-owned Telebrás with the construction of a new submarine cable network – the Atlantic Cable System (ACSea) – linking Brazil with the USA, Europe, Africa, and several Latin American countries. The ACSea submarine cable will increase bandwidth and reduce broadband prices for all of Latin America.
  • Brazil’s incipient MVNO market has attracted a great deal of interest from national and international investors. The most significant MVNO operator with plans to enter Brazil is Virgin Mobile, but its service launch, scheduled for the second half of 2013, may be delayed due to bureaucratic complications and difficulties in reaching MVNO agreements with mobile network operators.
  • Vivo, Claro, TIM Brasil, and Oi have won 4G licences and are deploying LTE networks. The government is keen for Brazil to have LTE services available for the FIFA World Cup. Claro was the first of the mobile operators to launch commercial LTE services, in December 2012.
  • Smartphone penetration in Brazil is slightly lower than the estimated world average, but sales are expected to soar in 2013, partly thanks to a tax break introduced by the government at the start of the year, which should help lower the average selling price of smartphone handsets.
  • In preparation for the World Cup, Hispasat has launched Amazonas-3, a satellite equipped with 33 Ku-band and 19 C-band transponders, as well as nine Ka-band spot beams. Amazonas-3 has been built to transport higher capacity telecom data than any other satellite in the region.
  • Although GVT has garnered an excellent reputation and has been performing extremely well financially and operationally, its parent company Vivendi has been trying to sell it – and GVT’s future will depend on the outcome of the sale – if it materialises.

BuddeComm’s yearly update of Brazil – Telecoms, Mobile, Broadband, and Forecasts provides a comprehensive overview of the trends and developments in the telecommunications market of Brazil, including the regulator’s statistics, company data, and other industry indicators to end-2012, as well as estimates for 2013 and expected market developments in the coming years.

For detailed information, table of contents and pricing see: Brazil – Telecoms Mobile Broadband and Forecasts

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France Telecom-Orange pursuing opportunities outside flagging Europe

Tuesday, March 26th, 2013

For Orange, the European markets are increasingly a drain on the Group’s overall performance. Poor revenue from the region, particularly in markets such as Poland and Romania, contributed to a fall in profits for 2012 which approached 80%, year-on-year.

To address this situation the company has – at least since 2005 – looked to Africa and the Middle East as the potential source of new revenue. These regions are providing stable or growing revenue, and though insufficient to offset declines in Europe they have certainly become the focus of new efforts to resuscitate the company’s fortunes.

Orange now operates in some 21 countries in these regions, as well as others in the Far East. Recent deals to expand its interests in minority holdings – used to secure a foothold in promising markets – include Telekom Kenya (Orange Kenya) in which Orange now has a 60% stake. This revealed the thrust of Orange’s ambitions, given that in its earlier explorations for new markets it tended to stay within francophone countries. Its interest in anglophone markets once included Uganda, where it had a controlling stake in Orange Uganda before selling its wireless network in the country in early 2012 as part of a strategy to reduce operating costs and increase liquidity.

Orange also has an interest in the Iraqi mobile operator Korek Telecom, the third largest MNO in terms of subscribers, which is expanding from its core market in the Kurdistan region into the rest of the country: Korek Telecom now has national coverage, with approval to set up a 3G network as well if it can secure additional spectrum or improve its existing holdings. Orange has the option to increase its stake in the holding company (set up with the Kuwaiti firm Agility) to 53%. These moves represent ongoing steps in Orange’s policy of expanding outside Europe and of doubling revenues in Africa and the Middle East by 2015.

These steps are also indicated by the recent setting up of the subsidiary Orange Horizons to develop projects which exploit likely opportunities in telecoms markets in which Orange has only a small or no presence. This has thus far attracted it to South Africa, while other targeted markets include Algeria, Libya and Ethiopia. By the end of the year the company hopes to have set up shop in the mobile sectors of Benin, Togo, Burkina Faso and Mauritania.

Though in themselves small, collectively these markets have considerable potential, particularly so since the mobile sector will remain the main growth area in coming years.

Henry Lancaster,
Senior Analyst, Europe

For more information on these developments, see the report France – Key Statistics, Telecom Market and Regulatory Overviews

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