As mobile markets mature in Latin America, operators look to address rural areas cost effectively

In recent years, mobile operators across Latin America have enjoyed addressing markets hungry for their services. Mobile penetration in the Americas, excluding the USA and Canada, stood at 69.35% as of March 2008, according to World Cellular Information Service. Growth has been strong...

The penetration rate stood at 56.86% a year earlier, and at just 45.81% a year before that. However, for most operators, much of this growth will have come from addressing urban areas with the highest levels of solvent demand. There are now a number of reasons why the region's mobile carriers need to turn their attention to potential subscribers in the rural areas that have been harder to address up to now.

One such driver is the imposition of Mobile Number Portability across a number of the region's markets. Operators can expect to see high levels of churn resulting from this development and, if the experience of service providers in other world regions is replicated here, an expensively waged battle to identify and keep the most profitable subscribers here may ensue. This battle could be at its fiercest in the most mature metropolitan markets where savvy consumers could look for the best deal on offer.

However, working harder to offer services to under-served areas and population segments may not be entirely a matter of choice for operators. InBrazil,Latin America's most competitive wireless market, regulators auctioned 3G spectrum in the 1900MHz band in December. All of the country's existing operators, except iDEN company NII Holdings, won spectrum at what analysts considered fair prices, but they are required to roll out extensive networks to address the disparity in telecoms coverage between urban and rural areas.

Much of the value of the overall telecoms sector in this region has been in mobile networks and services for some years. On average mobile subscribers out number fixed line subscribers by at least three to one. Given the concentration of fixed lines in urban population centres, the ratio in rural and remote areas is much higher. However, mobile operators should not take it for granted that they will come first in the race to offer connectivity toLatin America's rural areas.

In spring 2008 Joe Willcox, of Informa's Com World Series contacted a number of fixed-line operators in the region. He found that the state and co-op owned telcos inParaguay,BoliviaandVenezuelaare keen to address the needs of people beyond the major population centres and are turning to fixed-wireless and satellite based solutions to extend their coverage.

For example, Hugo Sosa Ortiz, Commercial Director of  Paraguay's state-owned telco COPACO told Willcox about his company's approach to offering basic services in small communities. COPACO has acquired licences which allow it to use GSM equipment to offer fixed-wireless telephony in less densely populated regions of the country.

InBolivia, telecommunications services are dominated by Empresa Nacional de Telecomunicaciones (Entel), which claimed 90.28% market share at March 2008. Entel’s strength, however, lies in the Bolivian capitalLa Pazand it is challenged by a number of regionally based cooperatives. These include, inLa Pazitself, COTEL (Cooperativa de Telefonos AutomaticosLa Paz). COTEL has recently upgraded its network infrastructure inLa Pazand aims to expand services to include IP telephony, data transmission and on-demand video services later. COTEL has announced that it is aiming to increase its internet subscriber base by at least 25% this year.

Outside the Bolivian capital a number of regionally based co-operatives such as Comteco inCochabambaand COTAS inSanta Cruzare increasingly competing directly with mobile network operators to provide services which are affordable for rural and remote communities.

Earlier this year COTAS, which claims to beBolivia's second-largest telecommunication operator, announced that it had deployed a SkyEdge broadbandVSATsatellite network, supplied by Gilat Satellite Networks. The deployment has enabled COTAS to fulfill a Universal Service Obligation (USO), meeting the requirements of rural communities.  VSAT sites are now being set up in schools, small businesses and public call offices throughoutBolivia, and will provide voice telephony and high-speed Internet.

Bringing the cost of rural and remote communications services down to a level affordable to a mass market is vital if the growth of telecom services is to continue. For the past 10 years wireless operators have taken the initiative. But there are now increasing signs that fixed wire providers are taking up wireless technologies in order to compete head on.

About Americas Com: Informa Telecoms & Media's Americas Com aims to address many of the themes discussed in this article. Taking place in Rio de Janeiro in September 2008, Americas Com replaces GSM Americas and will have a wider scope, reaching out to all fixed, mobile and integrated carriers in Latin America.

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