The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.
Latin America’s mobile telephone market is performing strongly, with mobile subscriptions having overtaken fixed lines as the preferred method of communication. In 2009, mobile subscriptions penetration totalled 88.2% of the population.
The mobile telephone industry has benefited from generally opening up to competition while geographical difficulties in laying fixed line infrastructure have encouraged a move to mobiles.
Latin America’s mobile telephone industry has a high degree of market penetration. Mobile subscriptions totalled 88.2% of the region’s population in 2009, compared to 55.2% in Asia Pacific, 90.4% in North America and 50.6% in the Middle East and Africa;
The mobile telephone market has been able to dominate the fixed line market owing to geographical hurdles to fixed line expansion and cheap deals for mobiles and mobile Internet. In 2009, fixed line penetration comprised only 18.6% of the total population;
The largest mobile telephone markets in Latin America are Brazil, Mexico and Argentina, with mobile subscriptions numbering 169.7 million, 83.3 million and 49.1 million respectively in 2009. The Caribbean has high levels of mobile phone penetration, reflecting above average regional incomes and high tourist numbers;
The mobile phone market has strong growth potential in 2010-2012, reflecting reviving economic growth and improving income levels, as well as deals targeted to attract low-income consumers. Expanding the mobile market will benefit consumers and the business environment by offering on-the-move telephone and Internet access, while potentially boosting telecommunications profits.
Mobile telephone market structure
Mobile telephone subscriptions in Latin America grew by an impressive 26.0% annually on average between 2000 and 2009. Markets experiencing particularly high growth include Cuba, Honduras and Ecuador, with average annual growth of 58.3%, 52.4% and 44.2% respectively where growth has been from a lower base;
Growth has slowed since the early 2000s. This reflects the stabilisation of the market rather than a major downturn, with the early 2000s marking the point where mobiles first began to make inroads into the regional market;
In 2009, Brazil was the largest mobile telephone market in Latin America, with subscriptions totalling 169.7 million, reflecting the country’s large and growing population;
Mexico and Argentina also have large markets, of 83.3 million subscriptions and 49.1 million subscriptions respectively in 2009, reflecting higher levels of income and socio-economic development;
In Latin America, mobile telephone penetration was highest in El Salvador in 2009, with 1,228 mobile subscriptions per 1,000 people, compared to 1,217 and 876.0 per 1,000 in Argentina and Brazil respectively. Both El Salvador and Guatemala have high levels of mobile penetration, reflecting their liberalised and competitive telephone markets. Moreover, the cost of a pay-as-you-go telephone is often cheaper than installing a fixed line (which can be expensive owing to infrastructural difficulties);
Caribbean countries have particularly high levels of mobile penetration, with Antigua having 1,648 mobile subscriptions per 1,000 people in 2009 and Jamaica and the Bahamas having 1,060 per 1,000 and 1,107 per 1,000 respectively. As well as a competitive market, tourists may also buy pay-as-you-go subscriptions, inflating subscription rates.
Latin America’s fixed line telephones and mobile telephone subscriptions: 2009
Per 1,000 people
Source: Euromonitor International from International Telecommunications Union/World Bank/trade sources/national statistics.
Fixed line vs. mobile
The fixed line market grew by an average of 2.5% per year in Latin America between 2004 and 2009, well below growth rates for mobile subscriptions (23.7% average per year);
The fixed line market declined in Colombia and Jamaica over this period, by 2.5% and 6.3% per year respectively, reflecting sharp mobile usage growth. As other countries increase mobile telephone penetration, fixed lines may decline as mobiles become the dominant form of telecommunications;
In some areas, fixed lines are limited due to geographical constraints on infrastructure expansion, for example in the remote Andean or rainforest regions. It may be impossible or too expensive to expand fixed line infrastructure into these areas;
Fixed line markets tend to be less competitive, partly owing to the legacy of pre-liberalisation state-owned or dominant companies. As a relatively new sector, the mobile telecoms market is generally more competitive, driving down prices for consumers;
The launch of 3G and mobile broadband services from approximately 2007-2008 has increased demand for mobile subscriptions. Mobile broadband is particularly desirable in areas with no or limited access to cable internet services. Moving to mobiles offers consumers the benefits of on-the-move communications and advantageous introductory deals. Greater access to communications also helps to narrow regional divides;
Companies benefit from securing new customers and revenue streams. Mobile telephones have quickly become viewed as essential goods rather than luxury items. Extensive mobile networks also improve the business environment by ensuring reliable and relatively cheap communications for businesses, while they can facilitate trade and boost productivity levels, increasing business profits.
Fixed line services will retain a market share, with many consumers choosing to have both where possible. This is particularly the case in urban areas with good infrastructure, where fixed line costs can challenge mobile services.
Latin America’s mobile market has significant room for expansion:
Although Brazil’s mobile market is the largest in the region, rates of mobile phone penetration are relatively low, with 876.0 subscriptions per 1,000 people in 2009. This presents market opportunities, especially among the lower income population who may not yet be able to afford mobile access;
Latin America’s growing population provides further opportunities for expansion. Its population is forecast to grow by an average 0.9% per year between 2010 and 2020, the highest rate of any region except the Middle East/Africa and Australasia;
Levels of disposable income are also set to rise. Total annual disposable income in the region is forecast to grow by an average of 1.1% annually in real terms (fixed 2009 exchange rates) between 2009 and 2020;
Potential hindrances to mobile phone market growth include nationalisation of the telecommunications sector, with Venezuela, Bolivia and Ecuador having increased state control of the industry. The Mexican market remains dominated by America Movil (a Carlos Slim company), leaving it highly uncompetitive, although other companies are legally permitted to enter the sector;
Telecom prices in Latin America remain higher than those in most advanced economies, reflecting the lingering effects of uncompetitive markets, particularly those in which state-owned companies remain dominant.
Offering sim-only deals is a way to attract lower income consumers, who may be able to buy or borrow a cheaper handset. Consumers may choose to own several pay-as-you go sim cards, allowing them to switch between providers according to changes in calling rates. In Mexico, for example, households in deciles 1-3 (the poorest 30% of households) accounted for 8.5% of total household annual disposable income in 2009. (Deciles are calculated by ranking all of the households in a country by disposable income level. The ranking is then split into 10 equal sized groups. Decile 1 refers to the lowest earning 10%, through to Decile 10, which refers to the highest earning 10% of households);
Pay-per-second billing is also being targeted at low-income consumers, making it cheaper for them to subscribe and attracting those who might not previously have had a phone;
Mobile broadband is a particularly fast-growing market, with packages targeted at low-income rural subscribers (who may not have landline internet access) and higher-income consumers (as a luxury good);
For most countries, rates of PC ownership grew below rates of mobile phone ownership between 2004 and 2009. For example, in Brazil, possession of PCs in households grew by 8.1% per year on average between 2004 and 2009, compared to average annual possession of mobile phone growth of 13.8%;
Internet usage is set to take off from 2010, with broadband internet subscriptions generally growing by higher rates than mobile subscriptions between 2004 and 2009, as growth is from a lower base in a less developed market. The increase of mobile telephone penetration rates will help consumers access the Internet in difficult to reach areas where there is no cable coverage.
Latin America’s mobile telephone market is to maintain growth in 2010-2012, as the regional economy recovers:
Latin America’s GDP is forecast to grow by 3.6% annually in 2010, after contracting by 1.9% in 2009, amid the global economic downturn. This rebound will be driven by reviving demand from the USA, as well as rising global prices for the region’s key commodity exports;
Latin American real GDP growth and mobile subscriptions growth: 2004-2010
Annual growth (%)
Source: Euromonitor International from IMF/International Financial Statistics/World Economic Outlook/UN/national statistics/International Telecommunications Union/trade sources.
Mobile subscriptions are forecast to grow by 8.2% annually in 2010, slightly below the 10.9% registered in 2009 but still strong growth. This is part of the stabilisation of the market;
Mobile subscriptions in Latin America will reach 1,170 subscriptions per 1,000 people by 2020, representing total levels of penetration. However, as with penetration rates in some Caribbean countries, this does not mean that all consumers will have mobiles but that most will, and some will have two or more;
By 2020, the largest mobile markets in Latin America will be Brazil, with 259.0 million subscriptions, Mexico with 135.4 million and Colombia with 61.1 million.
Telephone companies are likely to continue targeting specific consumer demographics, with low-income and mobile broadband users being areas for expansion. 3G is also likely to continue growing, albeit more slowly, owing to its higher cost. Initial market expansion is likely to be greater in the region’s wealthier markets, such as Argentina, Chile and Mexico.