|Issue:||Latin America III 2001|
|Topic:||Mobile Business -A New Dimension of Life for Latin America|
|Organisation:||Information and Communication Mobile Group, Siemens AG|
The basis of mobile business is the convergence of technologies. Voice, text, images and data no longer require different networks but flow through uniform systems. Mobile systems will be the leading form of Internet access in Latin America, which has more cellphones than computers. People are living and working in new ways that require mobile access to our offices, our leisure activities and our homes. Mobile work and mobile play are major trends that will increasingly influence our daily activities.
Globalism and mobility are the driving factors in business life today-above all in ‘business to business’. Companies, employees and customers no longer act in rigidly defined structures of time and space; instead they are more flexible than ever. An order issued via the Internet is clarified via mobile phone and confirmed by e-mail. It practically doesn’t matter anymore where the orderer happens to be at any given moment. Information itself is also becoming more mobile -data intended for users are available to them just about everywhere. The basis of mobile business is the convergence of technologies. Voice, text, images and data no longer require different networks but flow through uniform systems. By exploiting the advantages of the Internet Protocol (IP), users become mobile and can conduct business practically anywhere in the world. Mobile business means secure communication at any time, any place, via all networks, with any end-device, in any situation, and utilising all relevant information. The basic technologies are mobile telephony, e-commerce, and the Next Generation Internet. In 1999 the mobile telephony market in Latin America had the highest growth rate in the world: in 1995 only 3.5 million people in the region had a mobile phone, but in 1999-according to a study by Deloitte Touche Tohmatsu-this figure climbed to over 39 million. And the trend is continuing. According to a study of the Yankee Group, an above average growth rate of 58.6 per cent was achieved in the year 2000. Thus the mobile telephony penetration rate grew from an average of ten per cent at the end of 1999 to 15.6 per cent at the end of the year 2000. Even if these growth rates slow down somewhat in the coming years, the Yankee Group still expects an average annual growth of 17.9 per cent for the region as a whole by the year 2006. That would mean increasing the number of subscribers from 60 million at the end of 2000 to 164 million by New Year 2006. Even today, in Chile, Paraguay and Venezuela, there are more mobile telephony connections than fixed network connections. At the end of the year 2000, Mexico had 14.6 million mobile telephony customers, surpassing the country’s 12.3 million fixed network connections. It is expected that the number of mobile telephony customers will rise to 35 million by the year 2006. It is becoming increasingly clear that Global System for Mobile Communications technology (GSM) is succeeding in establishing itself as an open, non-proprietory mobile telephony standard worldwide. In more than 170 countries around the world, over 564 million customers are already phoning with GSM (as of the end of July 2001). Fifty-five per cent of all mobile phone calls are routed via GSM networks, and more than 400 mobile networks around the world are using this technology. In Latin America 19 network providers in Argentina, Antigua and Barbuda, Bolivia, Brazil, Chile, Cuba, the Dominican Republic, El Salvador, Mexico, Paraguay, Peru, Surinam, and Venezuela have decided upon the world’s most successful mobile telephony standard. Presently-next to the USA-this region is the fastest growing market for GSM. In March 1998 Chile became the first country in Latin America to begin setting up GSM systems and invested great sums in the installation of the required infrastructure. As a result-under the leadership of Entel PCS-more than one million customers have already been acquired. Venezuela also installed its first GSM systems in 1998 and has since enjoyed a steady increase in user figures. Based on the rapid success of GSM in Latin America, the Global Mobile Suppliers Association (GSA)-the worldwide umbrella association for the GSM supplier industry-expects that many more providers in the region will soon opt for this standard as well. The opening of the Brazilian market for GSM technology, which was announced in June 2000, plays a key role. According to a prognosis of the market research firm Yankee Group. In that region alone, between the beaches of Copacabana and the rain forests of the Amazon, the number of mobile telephone users is expected to grow from its present 24 million (as of June 2001)-which is 14 per cent of the overall population-to 55.6 million customers in the year 2005. That would mean a penetration rate of about 24 per cent. In the fifth largest country in the world, in which fixed network connections are expensive and are not always available the wireless revolution represents a great leap forward. With its share of nearly one-third of all mobile telephone connections in Latin America, Brazil plays a leading role, and, in the course of deregulation, is developing into one of the most hotly contested markets in the world. This is already causing market researchers to outbid each other in their prognoses. For instance, IDC expects around 65 million mobile telephone customers in Brazil in the year 2005. Wireless communication will become the basic telephone service, especially for the middle class. However, before reaching European penetration rates of more than 50 per cent-in some countries even above 70 per cent-a number of challenges must be met successfully. As in the USA, a variety of competing standards and great regional differences hinder progress. Each country has its own regulatory and tax authority. Two dozen regional operators with different technologies share the market, which entails substantial complications, for example for roaming, and requires support for multiple transport protocols. All this, in turn, drives costs upward. More serious than these problems, however, are the crass differences in income in the country, which make it necessary for the network providers-if they want to reach a mass market-to offer affordable services. If 40 per cent of the population has to live on less than two dollars a day, there is not much money left over for telephoning. Today, many customers are using prepaid cards to enable them to manage the costs. According to an analysis by the Yankee Group, their number is increasing 60 to 80 per cent annually. The big question for the operators: will people use mobile phones enough to pay for today’s investments in the new mobile telephone infrastructure? Prepaid customers in Brazil-experience to date shows-bring only around US$10 in monthly sales. Thus, at acquisition costs of 200 to 300 dollars per user, it will take quite a number of years before the initial investments have been recouped. As in most of the countries of South America, Brazil has introduced a radical deregulation and privatisation of the formerly state-owned telecommunications sector. Five years ago Latin America was still one of the most closed and monopolistic mobile telephone markets in the world. As it opened up, some growth rates in the number of mobile telephone users rose over 100 per cent, at the same time that the overall average growth rate in the rest of the world was only about 10 per cent. For this reason, the Latin American market is also of extreme strategic importance. Brazil is currently the world’s ninth largest mobile telephony market. In the future it is expected to be one of the leading markets worldwide, along with the USA and China. Undoubtedly the country is also a trailblazer for new technologies in Latin America and a leading market for mobile services. With one-third of the total population of Latin America, Brazil generates 40 per cent of the purchasing power in the region. Telemar S.A.’s new mobile telephony network will be the first GSM 1800 network in Brazil. With more than 13 million fixed network customers, Telemar is the largest telecommunications company in Brazil. The total order volume for the construction of the Telemar mobile telephony network in northeastern Brazil, including six large cities and a total population of US$26 million is about US$256 million over the next two years. The start of service is planned for early 2002. In March 2000, the first successful GSM call in Brazil was made at the TELEXPO show in São Paulo. In the fourth quarter of 2001, dual-mode devices for GSM and TDMA will available. Such devices create the basis for smooth communication in countries with a heterogeneous network infrastructure. The move to GSM/GPRS provides customers with the advantages of the GSM standard, such as international roaming, flexibility and safety through SIM cards, etc., and later a smooth transition to the third generation of mobile telephony. GPRS is an ‘always online, always connected’ service. It requires a new billing model. It is a big step towards 3G, and this service will be available in Brazil at the start of the GSM activities. In our opinion, for the providers in Latin America too, it is not too early to be looking at the new generation of mobile communication. A number of Brazilian operators-in areas such as São Paulo and Rio-are already offering communications services quite successfully on the basis of WAP (Wireless Application Protocol). The most popular offering is for wireless online banking services, such as that introduced by the Banco Bradesco. WAP services are also being offered already in Chile, Columbia, Mexico, Argentina and Peru. However, as long as the billing of fees is minute-based, the intensive utilisation of the mobile Internet will be severely limited by the financial situation of the users. In this area the transition to GPRS-and later to Universal Mobile Telecommunications System (UMTS)-which can be achieved quite quickly, will result in a fundamental paradigm shift. GSM with GPRS, in our opinion, is the best basis for UMTS and the simplest and most seamless route toward a transition to 3G. These systems offer data transmission rates up to 200 times greater than today’s technology. In the future, wireless networks based on the WLAN standard, or on Home RF will supplement GSM and UMTS based mobile telephony in companies, in private households, and at certain ‘hot spots’, such as airports and train stations. Applications of mobile communication, mobile commerce, mobile entertainment or mobile banking should be very personalised, localised and easy to use. In the future, these mobile applications will be of decisive importance to the success of carriers, because they generate traffic, and thus sales and profits. The best example is the success of Short Message Service (SMS), especially among young people. Over 50 billion of these short messages have been sent worldwide during the first quarter of 2001-making it an important argument for the GSM standard. In Latin America a PC still costs considerably more than US$1,000, which is a true obstacle for the rapid growth of online user volumes. Currently, only 5 per cent of the people even have a computer. Mobile telephones are quite a bit cheaper, are already substantially more widespread, and also provide access to the Internet. The people in Latin America also want to be able to send and receive information anywhere, anyplace. According to a study by Jupiter Media Metrix, therefore, about 52 million Latin Americans will have mobile Internet access by the year 2005. It is expected that the number of stationary links in the network then will be only slightly higher, at 67 million. It has taken 120 years for the number of fixed network telephone connections worldwide to pass the one billion mark. In the mobile telephony sector- according to prognoses-this figure will be reached within 20 years. The reason? People are living and working in new ways, and this requires a new form of mobility. We experience that for ourselves every day. The link to our office, our leisure activities, our activities at home-our whole life is already being influenced by the megatrend ‘mobile business’. Conclusion But these are merely the harbingers of a new age: our children and grandchildren will work, shop and use their leisure time in a completely different way than we do. Each second-around the clock, seven days a week-somewhere in the world, five new GSM customers are registering with their network provider. In the near future, a great proportion of them will come from Latin America.