Archive for April, 2013

Argentina’s mobile revenues are two thirds of the total and growing

Tuesday, April 30th, 2013

Economic climate

For Argentina, 2012 was a disappointing year, with GDP growth well below market forecasts. The outlook remains uncertain; economists’ projections vary between 1.8% and 4.6% GDP growth for 2013. Inflation remains a serious problem. Other macroeconomic, legal, and regulatory challenges include nationalisation risks, tight import controls, and restrictions on currency exchange.

Telecom revenues

Telecom revenues are expected to reach more than US$17 billion in 2013. Mobile revenues account for more than two thirds of total telecom revenues, and this proportion continues to rise at the expense of fixed-line sales. Considering both mobile and fixed-line revenues, Spain’s Telefónica/Movistar and Italy’s Telecom Argentina are the largest telecom operators, with consolidated revenues of US$4.92 billion and US$4.87 billion respectively in 2012. Mexico’s Claro is in third place, with US$3.22 billion, and Argentina’s Grupo Clarín occupies a distant fourth place, with US$1.68 billion.

Competition

The country’s regulatory framework encourages competition and supports smaller telecom players. Argentina has adopted a single licence system (Licencia Única), which telecom companies must obtain regardless of the services they wish to provide. When operators apply for a licence, they must list which services they wish to offer, but can at any time register for additional ones. However, broadband competition is weak, and the wholesale market is poorly regulated.

Fixed-line market

Argentina’s teledensity is the fourth highest in South America after Uruguay, Chile, and Brazil – having been overtaken by the latter in 2012. As in other countries, fixed-to-mobile substitution has adversely affected the Argentinean fixed-line market. In fact, since peaking at 24.5% in 2005, the country’s teledensity has shrunk by 2.5 percentage points.

Fixed-line operators

The local fixed-line market is made up of the following: the incumbents Telecom Argentina (Telecom) and Telefónica de Argentina (TASA); some 400 small telecom operators, mostly cooperatives; a number of cable TV companies that offer fixed telephony over their networks as part of triple play bundles. TASA and Telecom own respectively 52% and 45% of the country’s fixed lines in service. Unlike other countries where triple play has helped boost the flagging fixed-line sector, the only company that could have made a difference – Grupo Clarín – has not been allowed to offer telephony services.

Broadband market

In terms of broadband penetration, Argentina ranks third in Latin America after Uruguay and Chile. But economic and political difficulties have had a negative impact on investments, and the high broadband penetration figures hide a less glowing picture: in terms of mean download speed, Argentina ranks 11th in Latin America.

Broadband players

The two fixed-line incumbents Telefónica de Argentina and Telecom Argentina dominate the ADSL market, offering similar services and together controlling about 68% of all broadband in the country. The only meaningful competition is cable modem, offered by Grupo Clarín, but political interference has put the company at risk.

National broadband plan

A national connectivity plan, dubbed ‘Argentina Conectada’, involves the deployment of broadband services and free-to-air digital TV to underserved parts of the country. The plan, launched by the government in October 2010, is to be implemented over five years. State-owned satellite company Arsat is responsible for the project.

Pay TV market

Argentina’s pay television market is the most mature in Latin America. In fact, Argentina is a world leader in terms of pay TV penetration, with about two homes out of three subscribing to pay TV services. Pay TV households are evenly distributed, with penetration in the major cities only slightly higher than in the rest of the country.

Pay TV companies

Grupo Clarín’s Cablevisión is the country’s leading pay TV operator with about 36% of the market; DirecTV is the second largest player, with a 20% share; Supercanal, Telecentro, and Red Intercable have approximately 6% to 7% each; the remaining 25% of the market is shared among small local companies and cooperatives.

Mobile market

Argentina is one of the most dynamic mobile markets and the third largest in Latin America, after Brazil and Mexico. Mobile penetration looks set to reach approximately 147% by end-2013, with the number of subscribers increasing by 3% annually. Many Argentineans own multiple SIM cards, some having different phones for work and personal calls, some having a phone for each mobile company to take advantage of special offers, and some requiring an additional SIM card for mobile broadband.

Mobile operators

Three mobile companies compete neck-and-neck, each one controlling about one third of the country’s mobile market. América Móvil’s Claro is the market leader, followed by Telecom Personal (the mobile unit of Telecom Argentina, controlled by Telecom Italia). Telefónica’s Movistar is in third place. Nextel has but a small 3% market share, and Fecosur, an association of fixed-line telecom cooperatives, offers Mobile Virtual Network Operator (MVNO) services branded Nuestro.

Smartphones

Argentina’s smartphone penetration is well above the estimated world average; at end-2012, about 24% of Argentineans owned a smartphone, compared with an estimated 15% world penetration. In 2013, Argentina’s smartphone market is expected to outperform all other markets in the region.

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

For detailed information, table of contents and pricing see:

Argentina – Telecoms, Mobile, Broadband and Forecasts

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Can we afford not to have a fibre optic infrastructure?

Monday, April 29th, 2013

Fibre-based infrastructure requires vision and recognition of the fact that many of today’s social, economic and sustainability problems can only be solved with the assistance of ICT. In many situations the capacity, robustness, security and quality necessary for this calls for fibre optic infrastructures. This need will increase dramatically over the next 5 to 10 years as industries and whole sectors (healthcare, energy, media, retail) carry out the process of transforming themselves in order to much better address the challenges ahead.

Most discussions regarding the need for fibre optic infrastructure take place from the wrong perspective – based on how fast people need the internet to be when they download their emails, web information, games and movies. Fibre optic technology has very little to do with this – ultimately all of that ‘residential’ traffic will account for less than 50% of all the traffic that will eventually flow over fibre optic networks.

The real reason this type of network is needed relates to the social and economic needs of our societies, and there are many clear examples that indicate that we are running out of steam trying to solve some of our fundamental problems in traditional ways.

For instance, at this moment discussions are taking place in every single developed country in the world about the fact that the cost of healthcare is unsustainable. These costs will grow – over the next 20 years – to 40%-50% of total government budgets – clearly impossible. So we face a dilemma. Do we lower the standard of healthcare services, at the same time making them more costly for the end-user?

If we want to maintain our current lifestyle the only solution is to make the healthcare system more effective, efficient and productive. And this can only be done with the help of ICT. To make it more productive, health needs to be brought to the people rather than the other way around, as is the case at present. Similar examples apply to the education system, the energy systems and the management of cities and countries in general. We need to create smart cities, smart businesses and smart countries, with high-speed infrastructure, smart grids, intelligent buildings, etc.

In order to manage our societies and economies better we need to have much better information about what is happening within all of the individual ecosystems, and in particular information about how these different systems interact. Currently they all operate within silos and there is little or no cooperation or coordination between them.  ICT can be the bridge to bring them together; to collect data from them and process it in real time. Information can then be fed back to those who are managing the systems, and those who operate within them, such as doctors, teachers, business people, bureaucrats, politicians – and, of course, to you and me.

Some of these data interactions are already happening around smartphones, social media, traffic and crowd control and weather information. This is only the start of what is known as the Internet of Things (IoT) or machine-to-machine communication (M2M).

ICT cannot solve world hunger, but without ICT world hunger cannot be solved, and this applies to all the important social and economic problems that societies around the world are now facing.

None of this can be done overnight; it requires massive transformations of industries and sectors. There is no instant business model available that will supply an immediate return on the investment that is needed to create these smart systems. All of these investments need to be looked at over a period of 10, 20 years and even longer. No private business will take such a business risk. To make it happen government leadership and government policies are needed.

This is also the message from the UN Broadband Commission for Digital Development, and it applies to countries all over the world. More than 120 countries worldwide have now developed broadband policies, recognising that such infrastructure is critical to their development. The challenge now is to put these policies into practice/implement these policies, and at a time when government leadership around the world as at an all-time low.

Ultimately all of these developments will require national fibre optic networks. There simply is no other technology that can handle the capacity of data and applications that will be needed to run the cities and countries from today onwards. This infrastructure needs to be robust. It has to have enormous capacity. It needs to be secure and to be able to protect privacy. There is simply no other infrastructure technology that is up to that job.

So those business and government leaders who are in charge of looking towards the future do have an obligation to ask themselves, based on the above, whether we can afford not to have a fibre optic network

Paul Budde

See also:

Australia – National Broadband Network – Infrastructure Analysis

Australia – National Broadband Network – Digital Economy

Australia – National Broadband Network – Cost Benefit Issues

Australia – E-Health, E-Education, E-Government

Australia – National Broadband Network – Smart Grids

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Denmark – Government increases national upload speed to 30Mb/s by 2020

Saturday, April 27th, 2013

Telecom market overview

Denmark’s competitive telecom sector has benefited from government efforts to develop national FttH services, with the aim of providing widely available 1Gb/s services by 2020. Overall telecoms sector revenue continues to fall, with lower revenue from landline and mobile telephony in recent years partly offset by a slight growth in data communications and broadband. Revenue decline, exacerbated by the poor economic climate, has also affected investment among telcos, which has fallen steadily since 2009. To secure future revenue stream telcos’ investment strategies are focussed on expanding their mobile and fibre-based networks, and securing spectrum when made available.

Broadband market

Denmark has one of the highest broadband penetration rates in the world, helped by excellent DSL and cable infrastructure and the growing availability of fibre networks. The government has also long promoted broadband as a crucial economic driver. A 2013 study by the Enterprise Agency emphasised the escalating demand for greater network speeds, and to this end the government has targeted national 30Mb/s upload access, complementing the existing provision of 100Mb/s download speeds by 2020.

Key telecom parameters – 2010; 2013

Sector

2010

2013 (e)

Subscribers by sector (million):
Fixed broadband subscribers 2.15 2.49
Mobile broadband (dedicated cards) 0.79 0.98
Mobile phone 7.72 9.25
Fixed-line telephony 1.79 1.35
Penetration by sector:
Broadband 38% 48%
Mobile 136% 147%
Fixed-line 32% 25%

(Source: BuddeComm)

Market Highlights

  • Licensees for recently auctioned spectrum the 800MHz band must provide mobile broadband services of at least 10Mb/s. Coverage obligations must to be fulfilled by 2015.
  • The cable sector is dominated by TDC’s YouSee and Stofa, which have both invested in DOCSIS3.0 technology to help retain customers in areas where FttH is being rolled out. Stofa in late 2012 was sold by Ratos to an energy company.
  • The government continues to facilitate municipal access to fibre infrastructure as part of a process to provide a 50Mb/s service by 2013 and to prepare the groundwork for 1Gb/s services by 2020. In addition, a 30Mb/s upload speed has been mandated nationally. Denmark is expected to have among the more concentrated FttH networks in Europe within the next decade.

BuddeComm’s half-yearly publication, Denmark – Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in one of Europe’s smaller and more advanced countries. The report includes the regulator’s market data for H1 2012, telcos’ financial and operating data to Q4 2012, and market developments to April 2013.

For detailed information, table of contents and pricing see: Denmark – Telecoms, IP Networks, Digital Media and Forecasts

 

 

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Will LTE steal the broadband revolution?

Friday, April 26th, 2013

There is no doubt that LTE is going to take a prime position in broadband developments. With competitively priced services, innovative smartphones and an increasing range of very innovative apps this market is set to continue to boom. So how will all this impact the overall broadband market?

First of all, this is not an ‘us or them’ issue between fixed and mobile broadband. As a matter of fact the companies that are rolling out LTE are increasingly dependent on deep fibre rollouts as they need to handle massive amounts of data, to which the mobile infrastructure technology is not well-suited. So the quicker they can offload their mobile traffic onto a fixed network the better. As we have said before, one of the key drivers of fibre deployment will be the growth in mobile broadband.

A similar situation will occur in the home. More and more, people are using their mobile devices rather than PCs and laptops; and more people within the home are using more and different mobile devices, so this will significantly increase the need for capacity within the home. The reality of mobile broadband is that 60%-80% of capacity usage of smartphone and tablet use is in the home, and these devices are all connected to the fixed network through the WiFi modem. People are becoming accustomed to the quality of the LTE network, so they will want a similar quality of service over the fixed network; and over the next 3-5 years the current network will start to run out of steam. And, with at least one-third of all fixed broadband connections being of such an inferior quality, these households are already facing these quality problems now.

So, while access to the internet and broadband is moving quickly towards smartphones and tablets as the preferred access devices, at the same time the majority of broadband capacity required through these devices will still need to be provided by the fixed network.

While the capacity of the mobile network is greatly improved by LTE – as well as by the upcoming extra capacity through new spectrum allocation – the physics of mobile technology is such that it will be impossible to handle all the traffic of these mobile devices over the mobile network.

Obviously the mobile operators are not sitting still. They are improving their network infrastructure in order to capture as much of the traffic as possible, and increasingly they are looking at WiFi technologies as another alternative to off-load traffic and/or add extra access points for users in high traffic areas such as shopping centres, entertainment venues, transport stations, etc. But again these WiFi access points need to be connected to the fixed network, and in the case of WiFi access points you virtually need fibre-to-the premise/business to be it of any use.

So, while LTE will greatly increase the use of broadband and broadband applications, this will at the same time put increased pressure on the fixed network.

On the end-user side of the fixed broadband market – we don’t have the same dynamics as in the mobile market. Few, if any, fixed network devices capture the users’ attention in the way the new smartphones do. Also, there is a clear lack of exciting fixed broadband applications. Entertainment is largely captured by content providers who want to protect their existing business models, and applications in healthcare, education, energy, etc are going to take a long time to reach maturity and mass market penetration levels. So all attention is clearly on mobile and this is creating a skewed perspective on what is needed overall to ensure that these mobile developments can be used to their full potential.

The developments in mobile and LTE will generally stimulate the need for better fixed networks, but at the same time there will be a significant group of users who – at this point in time – do not have high capacity requirements, and for whom a $30 or $40 monthly mobile connection will cater for all their comms needs. This group will actually lead to stagnation, and even a decline, in fixed broadband connections. We already see this happening in the Hong Kong market. The situation will only be exacerbated if LTE becomes available in areas that have very poor fixed broadband coverage. BuddeComm estimates that up to 25% of users could simply abandon their unsatisfactory fixed broadband connection in favour of LTE. Most will eventually re-connect in 3-5 years’ time, but only when important applications are becoming available over the fixed network.

These short-term developments could be interpreted by some who don’t have a good understanding of the total picture as an indication that fixed broadband is not needed, and this could potentially undermine the build-out of the fixed broadband networks that are so desperately needed for the longer-term social and economic developments in the country.

If we look at the very latest smartphone devices (eg GalaxyS4) we see an increase in what is called machine-to-machine (M2M) or Internet of Things (IoT) applications, often linked to location-based services (LBS). What happens behind the scenes of these applications is that they gather data often from a variety of sources and process that information in real time, giving users interesting services in relation to healthcare, sport achievement, calorie intake, weather transport and traffic information and so on.

It is these M2M and IoT applications that are finally going to stimulate the sort of killer apps that are needed to drag some of the lagging sectors into the digital age – such as healthcare, education, utilities, government and business, who are at present trying to limit the impact of the digital economy, rather than embracing it. This, in turn, will start stimulating the sort of applications that require the capacity, robustness and security that can only be delivered by fibre optic networks.

All of this will come together in 5 to 10 years’ time when the requirements from the mobile-based developments, the rapid growth of M2M applications, and the somewhat slower growth from the requirements following the industry and sector transformations, combined, make the need for a fibre-based infrastructure essential for the economic development and social wellbeing of any developed economy.

What is required from business leaders and politicians is that they recognise this need and start planning for it from the earliest possible opportunity. Doing this on the run is not the ideal way to make infrastructure investments that will have to last for 25-50 years.

Paul Budde

See also:

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Africa’s largest telecom market with more than 110 million subscribers

Friday, April 26th, 2013

Nigeria is one of the biggest and fastest growing telecom markets in Africa, attracting huge amounts of foreign investment, and is yet standing at relatively low levels of market penetration. Far reaching liberalisation has led to hundreds of companies providing virtually all kinds of telecom and value-added services in an independently regulated market. After a decade of failed privatisation attempts, the incumbent national telco Nitel and its mobile arm M-Tel are currently in liquidation.

The West African country has overtaken South Africa to become the continent’s largest mobile market with now more than 110 million subscribers, and yet market penetration stands at only around 70% in early 2013. Subscriber growth accelerated again in 2012, driven by lower prices and a growing demand for mobile broadband services. The rapid growth has led to problems with network congestion and quality of service, prompting the regulatory authority NCC to impose fines and sanctions. Every year the network operators are investing billions of US$ into additional base stations and fibre optic transmission to support the ever increasing demand for bandwidth.

Much of the remaining addressable market is in the country’s rural areas where network rollouts and operations are expensive. This in combination with declining ARPU levels is forcing the networks to streamline their operations and to develop new revenue streams from services such as third generation (3G) mobile broadband, mobile payments/banking, and others. Major infrastructure sharing and outsourcing deals have been concluded. Several LTE networks are being rolled out, but commercial launches have been hindered by delays with frequency spectrum allocations.

Nigeria is also the most competitive fixed-line market in Africa, featuring a second national operator (SNO, Globacom) and over 80 other companies licensed to provide fixed telephony services. The alternative carriers combined now provide over 85% of all fixed connections, the majority of which has been implemented using wireless technologies. This in combination with a unified licensing regime gives the network operators the opportunity to also enter the lucrative mobile market and has helped them to secure hundreds of millions of US$ in investments from local and foreign investors. However, fixed-wireless connections have declined in the past few years in favour of mobile services. This has prompted mergers and acquisitions (M&A) in the sector, which is likely to continue in the coming years.

The arrival of a second international submarine fibre-optic cable (Glo-1) in 2009 and a third and fourth in 2010 and 2012 (Main-One and WACS) has broken the monopoly of Nitel’s notorious SAT-3/WASC cable and is revolutionising the country’s underdeveloped Internet and broadband sector by reducing the cost of international bandwidth by up to 90%. Additional submarine cables are scheduled to go online in 2013 and 2014. Significant consolidation has occurred among Internet service providers (ISPs) as new powerful players from the fixed-wireless and mobile sector have entered this market with 3G mobile and advanced wireless broadband services such as WiMAX. The Internet Protocol (IP)-based next generation networks currently being rolled out are enabling converged voice, data/Internet and video services, VoIP is already carrying the bulk of Nigeria’s international voice traffic. Applications such as e-commerce, online banking and e-payments, e-health, e-learning and e-government are rapidly evolving.

Although the market is one of the most competitive in Africa, the industry regulator is tightening price caps and mandating further reductions of interconnect rates. Following years of delays, mobile number portability (MNP) was finally introduced in 2013, promising to make the market even more competitive.

Market highlights:

  • The largest mobile market and the most competitive fixed-line market in the region;
  • Billions of US$ in investments per year, tens of thousands of new base stations to be built;
  • Major network infrastructure sharing and outsourcing deals;
  • Mergers and acquisitions (M&A) among smaller operators;
  • National telco Nitel/M-Tel in liquidation;
  • Regulator cracks down on poor quality of service;
  • New price caps and lower interconnection rates;
  • Number portability finally introduced;
  • Efforts to promote infrastructure sharing;
  • Spectrum auctions;
  • Several LTE networks preparing to launch;
  • Alternative carriers provide 85% of fixed connections;
  • New fixed-wireless licences planned in 2013;
  • National fibre backbone rollouts continue;
  • More bandwidth from new international submarine fibre optic cables;
  • Consolidation in the ISP sector;
  • Explosive growth of mobile broadband subscriptions;
  • Rapidly evolving digital media and digital economy.

Estimated market penetration rates in Nigeria’s telecoms sector – end 2013

Market

Penetration rate

Mobile 77%
Internet 47%
Fixed 0.2%

(Source: BuddeComm based on various sources)

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

 

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