 | Issue: | Latin America IV 1998 |
| Article no.: | 8 | |
| Topic: | Latin America is Hot | |
| Author: | Lena Wittbjer | |
| Title: | Director | |
| Organisation: | Corporate Communications & Strategic Development MACH S.A., Belgium | |
| PDF size: | 36KB |
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Article abstract
Latin America is well on its way to becoming one of the world’s hottest emerging markets. There is a tremendous growth in demand for mobile telephony, with cross market roaming as one of the most frequently requested mobile services. However, competing/conflicting technologies, licensing practices and the lack of satisfactory clearing arrangements have all played a hand in limiting roamer calls. As a world leader, MACH is committed to global clearing with a local presence, and aims to works with operators around the world to develop clearing solutions.
Full Article
Despite current concerns about Brazil’s economy, and the potential for fallout in the rest of the region, Latin America is well on its way to becoming one of the world’s hottest emerging markets. Growing confidence in its potential as a consumer market, as well as a base for manufacturing, has generated double-digit growth in trade and investment in many countries throughout the region. While the US has long been the leader in both arenas, European Union (EU) countries like Germany, Italy, France, Spain and Britain are now leading the way, scrambling to catch up. All of which is good news for the mobile telephony market. Spectacular Growth The Latin American telecommunications sector, which has enjoyed spectacular growth and sizeable foreign investment over the last several years, shows no signs of cooling off. The potential for growth is enormous. Severe under-penetration of landline and public phone service throughout the region, combined with an expanding middle class and rising per-capita incomes, is expected to push mobile telephony revenues close to the US$20 billion mark by the turn of the century. Total penetration today hovers at about 2.5%; by the year 2002 it is estimated to reach a level of 5% while the overall population grows at a rate of 10%. This translates into an annual subscriber growth rate of 25%, which will triple 1996 subscriber levels. Foreign Investment With numbers like that, it is no surprise that foreign investors are making a significant splash as they jockey for position and market share. Mergers, acquisitions, buyouts, Initial Public Offerings (IPOs) and bond issues are proliferating as the market rationalises and consolidates. US companies such as BellSouth, AT&T, Motorola, GTE and Bell Atlantic have invested heavily in the region but many non-US companies have also decided to participate in the fray. Millicom International Cellular, part of the Swedish Kinnevik conglomerate, has operations in Paraguay, Bolivia, Colombia, El Salvador, Honduras and Guatemala; Spanish Telefonica Internacional is operating in Argentina, Chile, Brazil, Peru and was recently awarded a license in El Salvador; Stet Italia operates in Argentina, Bolivia, Chile and Brazil. Almost all foreign investors have local partners but keep a hand in day to day operations. Pent Up Demand for Roaming As this formerly regulated market continues to privatise and grow, cross-market roaming has become one of the most frequently requested mobile services. Despite this demand, seamless automatic roaming remains on the wish list for most Latin American subscribers. Competing/conflicting technologies, the region’s licensing practices and the lack of satisfactory clearing arrangements have all played a hand in limiting roamer calls. Roaming takes place each time a subscriber uses a mobile phone outside the home market. For roaming to occur, both the phones and the networks must be technologically compatible and the network operators must have entered into a legal agreement establishing terms for subscriber billing and revenue sharing. While most Latin American operators have negotiated such agreements with each other, and with operators in the US and Canada, roaming is a complex procedure for the average subscriber. In order to roam, the subscriber must first obtain a specially allocated number, notify the home network in advance of when, and in which markets, roaming will take place, and provide a credit card number as guarantee of payment. In most cases, the subscriber will not be able to use his or her home mobile number while roaming and will more than likely have to rent a phone in the visited network. Technological incompatibility is the primary culprit. Technology Barriers Analogue, a first-generation radio technology, came into use in 1981 and today provides mobile services to more than 75 million subscribers worldwide. Though low in cost and widely available, analogue technology – which includes the Nordic Mobile Telephone (NMT), Total Access Communication System (TACS), Extended Total Access Communication System (ETACS) and Advanced Mobile Phone Service (AMPS) standards – has distinct drawbacks: It’s narrow bandwidth cannot support high-end services and conversations cannot be protected from eavesdropping. In 1992, the industry turned to digital technology to support the demand for more services and greater capacity. Digital technology standards include Digital Advanced Mobile Phone Service (D-AMPS), Code Division Multiple Access (CDMA), Time Division Multiple Access (TDMA) and Global system for Mobile Communications (GSM). GSM has emerged as the dominant world standard with 120 million subscribers in 128 countries and territories; though bandwidth frequencies differ (900, 1800, 1900), the underlying architecture is compatible. Unfortunately, most of these technologies still cannot easily ‘talk’ to one another. Technology Solutions The mobile industry is working hard inventing solutions to this fundamental incompatibility. Telephone manufacturers are manufacturing phones that are able to overcome some of the above mentioned technological differences. Dual mode phones have been able to bridge the digital/analogue divide between D-AMPS and AMPS, the dominant technology standards in Latin America. Ericsson and Bosch have both introduced dual band ‘world’ phones that give one-phone access to GSM 900 and 1900 networks. Other phones support a GSM 900 and 1800 crossover and tri-band phones are expected to hit the market in the near future. Network operators are also making headway. The D-AMPS standard, which supports both dual-band and dual-mode roaming, can also make and receive calls in some GSM networks thanks to a GSM/North American Cellular Network (NACN) gateway. BellSouth is developing a Pan-American Roaming Consortium (PARC) to support automatic roaming between IS 41 operators from Canada to Argentina; IS 41 is the signalling and procedures standard that has been adopted by all South and North American cellular networks. Satellite services are hoping to fill the remaining gaps by providing global coverage as a complement to cellular service. Iridium LLC, one of the first satellite operators to go live, is signing up Latin American cellular roaming partners and service providers in Argentina, Chile, Uruguay, Brazil, Peru, Bolivia, Paraguay, Ecuador, Venezuela, Colombia, Guatemala, Mexico and the Caribbean Islands. Data Clearing Data clearing in Latin America, however, lags behind these technological advances. Most Latin American operators still conduct data clearing on a bilateral basis, operator to operator. This inefficient, costly practice puts a high administrative burden on individual network operators and reduces the prospect of seamless, automatic roaming throughout the region. Furthermore, since there is no central point for overview analysis, operator-to-operator clearing carries an increased risk of fraud and of delays in clearing since each operator must cope with the multiplicity of network formats and procedures currently in use. In contrast, most operators in Europe, Asia Pacific, Africa and the Middle East have outsourced their data clearing requirements to specialised clearing houses. In addition to clearing roamer call data, clearing houses also provide financial clearing and settlement, fraud detection, tax reconciliation and roaming administration services. More Roaming to Come There is a compelling need to improve current data clearing practices in view of the expected growth in Latin American mobile telephony. The bigger the subscriber base, the greater the demand for roaming, the greater the volume of roamer call data and, not coincidentally, the greater the revenue. With large domestic areas split into separate licensing regions, the demand for roaming is intense. Six countries – Brazil, Mexico, Argentina, Venezuela, Columbia and Chile – are home to almost 90% of current Latin American subscribers. Magnet markets, such as Mexico City, Sao Paulo and Buenos Aries, also present a huge potential for roaming as does the Mexican border market, where roaming already generates as much as 25% of network revenues. Calling Party Pays (CPP) and Prepaid services are two other market forces feeding subscriber growth. CPP is a major issue in Latin America. Most operators want to offer it but have been hindered by regulatory restrictions. But wherever CPP has been implemented, a dramatic growth in subscribers followed. Argentina, for example, quadrupled the number of subscribers in just 18 months after introducing this service. Prepaid services are also increasing subscriber rates. Most countries offer this service and prepaid penetration is growing at a fast rate; the popular ‘phone in a box’ – a phone packaged with a loaded prepaid card for immediate use – is flying off the shelf at prices in the US$50 to US$120 range. For all their popularity, however, pre-paids still have a major barrier to overcome: their inability to support seamless roaming. However, this will soon change. With intelligent network technology already offering real-time, pre-call control and vendors starting to deliver GSM CAMEL compliant functionality, prepaid roaming is expected by many to become the next hot ticket item in mobile telephony. More Efficient Clearing Needed Worldwide, approximately 250 million GSM roamer calls are made every month and this number is expected to increase by 50% in the coming year. With roamer volumes such as these, the need for specialised clearing houses is evident. As it stands, clearing houses already process about 90-95% of the total GSM roamer volume leaving network operators free to concentrate their resources on core business activities. Multinational Automated Clearing House (MACH), which began clearing for the mobile industry in 1993, today clears about 180 million GSM roamer calls every month, 72% of the world’s total. The company, with offices in the US, Luxembourg, India, Singapore and Argentina, is committed to global clearing with a local presence. MACH works with operators around the world to develop clearing solutions that are targeted to specific market needs and to prevailing technological standards. Conclusion MACH’s worldwide services include TAP and CIBER data clearing, fully integrated financial services, fraud detection, the negotiation and administration of roaming agreements and staff training. The ISO 900 I-certified company has been selected by the GSM MoU Association to deliver training under the Association’s Regional Seminar Initiative.
