|Issue:||Latin America 2005|
|Topic:||The GSM evolution and mobile connectivity in Latin America|
|Title:||Director of Latin America and the Caribbean,|
Erasmo Rojas is the Director of Latin America and the Caribbean for 3G Americas and is responsible for providing information to mobile operators, manufacturers, regulators, telecommunications organizations and the media regarding the GSM family of technologies in Latin America and the Caribbean. Before joining 3G Americas, Mr Rojas worked at Ericsson as Director of Sales and Market Development for Wireless Systems, Director of Business Development for Latin America and Vice President of Wireless Systems, Colombia, in addition to various managerial roles. While at Ericsson, he launched mobile networks in Colombia and participated in the development of mobile services in twenty countries throughout the Latin region. Erasmos Rojas holds a BSEE in Electronics Engineering from the Distrital University in Bogotá, Colombia, a Master of Science in Telecommunications from the University of Colorado, in Boulder, and an MBA in International Management and Marketing from the Southern Methodist University in Dallas, Texas.
GSM technology now dominates the mobile market in Latin America and the Caribbean. The market has recently been concentrated in the hands of three major market players, all of whom tend towards greater GSM usage. Due to economies of scale and low priced handsets, GSM has grown strongly among the lower-income population. High-end models attract businesses and up-scale users. Given GSM’s cost reducing technology and growing spectral efficiency, its dominance in the region seems assured for many years to come.
GSM has emerged as the leading mobile technology in Latin America. The economies of scale of the GSM technology platform and its unique technical attributes help to foster its dominance as the market expands, especially through GSM’s adoption by low-income users. Only 32 per cent of the Latin America and Caribbean (CALA) region population of nearly 550 million are mobile subscribers, leaving the door open for significant mobile growth. Brazil alone added over one million new subscribers in a single month in 2005. Estimates of new mobile users in the region by 2009 range as high as 100 million. Such growth is far from guaranteed, though, given that the region’s per capita income is less than 10 per cent of the US average and income inequality is among the worst in the world. Mobile growth, then, depends largely on the ability of operators to lower their costs and reduce the price of service. A small number of GSM pioneers were already building GSM’s reputation in the region when Brazil designated the 1800 MHz band for PCS services in June 2001. New investors seized the opportunity to compete using GSM. GSM gained further momentum six months later, when major North and South American TDMA operators committed to overlaying their TDMA networks with GSM, and quickly opened the 850 MHz bands to GSM. GSM now serves customers in 17 of the region’s countries. The simultaneous liberalisation of the mobile market in the Caribbean provided a third stimulus for GSM expansion. Features, including on-demand international roaming, lower rates, a wide variety of terminals and innovative consumer and enterprise services helped push GSM growth. New GSM operators created massive customer bases virtually overnight. In Brazil, Telemar’s Oi signed up more than 1.4 million subscribers in its first six months of operation. Digicel introduced GSM to Jamaica and enrolled 100,000 customers in its first 100 days of business. Forty-three TDMA operators overlaid their networks with GSM. Cable & Wireless created a separate brand for its GSM segment (bMobile), and Mexico’s Telcel touted the advantages of GSM’s global connectivity to Mexican professionals. By 2004, GSM was gaining 57 per cent of all new subscribers in the region and consistently surpassing analysts’ projections. In the second quarter of 2004, GSM’s regional subscriber base overtook that of CDMA. In March 2005, total regional GSM subscribers surpassed TDMA subscribers, achieving a 39 per cent market share, versus 36 per cent for TDMA and 24 per cent for CDMA. By June 2005, the regional GSM family had mushroomed from just two million in 2000 to more than 89 million. Market consolidation and GSM growth GSM is also gaining momentum through the geographic and technological consolidation underway in the CALA mobile markets. The departure of Verizon Wireless from Argentina in July 2003, and Bellsouth’s sale of its 11 mobile properties in the region to Telefónica Móviles in March 2004 reduced the competitive field to three major players: America Móvil (AMX), Telecom Italia Mobile (TIM) and Telefónica Móviles (TEM), which now serve a combined 76 per cent of the market. AMX and TIM are now installing GSM overlays on TDMA and CDMA networks and adopting GSM for all new networks. More than 50 per cent of America Móvil’s subscribers and more than 73 per cent of TIM’s subscribers in Latin America now use GSM. Telefónica Móviles operates a mixture of GSM, TDMA and CDMA properties, but it committed to investing US$5 billion in GSM-based service, as part of its acquisition of Mexican CDMA provider Pegaso PCS, and it installed a GSM overlay on the former Bellsouth CDMA IX property in Colombia. Meeting market needs GSM’s appeal to a broad range of socio-economic segments helps operators to earn a return on their investment. The CALA region’s low, under US$20, ARPUs (average revenue per user) and a predominantly (more than 80 per cent) prepaid customer base force operators throughout the region to procure the lowest priced handsets to attract lower-income subscribers. Some operators have as many as three models priced at US$20. Phones with more functions can be had for as little as US$41. Low-cost GSM has attracted economic groups previously excluded from the mobile revolution and driven major increases in mobile adoption. Although mobile usage in Brazil’s upper income groups has remained stable recently, GSM acquired nearly 25 million customers by sharply increasing mobile usage among lower income groups. Mobile penetration in the low-income segment rose from 22 per cent in 2002 to 45 per cent in 2004, the ‘very low income’ group’s penetration rose from 10 per cent to 24 per cent and among the poor from 2 per cent to 8 per cent. GSM operators will be able to respond more readily to price pressure, because of advances in GSM handset design and network architecture. The Emerging Market Handset initiative of the GSM Association gives GSM operators in emerging markets the option of deploying attractive, high quality, ultra-low cost handsets with a wholesale factory cost below US$40 and a US$30 handset is in the works. More than 200 million people in the CALA region live below the poverty line, so these low cost devices will let GSM operators offer affordable connectivity to this massive group of customers. Advances in GSM network architecture permit lower capital and operational expenditures critical to sustaining profitability in lower APRU markets. GSM’s messaging technology facilitates customer self-care, and eliminates ‘scratch cards’ for prepaid account top-up. Using SMS or USSD signalling, customers make electronic micro-payments. This helps build ARPU and eliminates the cost of printed cards. Directional and high-output antennas, and tower-mounted base transceiver stations, increase GSM coverage and reduce costs. Advanced versions of GSM that offer data transmission will supplement falling voice revenues. With GPRS/EDGE-based services, operators can offer customers a multitude of innovative services. EDGE provides data throughput speeds of 100-130 Kbps and increases network voice capacity. Twenty-two operators in fourteen countries and territories in the region have announced commercial EDGE deployments. In addition to wireless Internet access for business customers, EDGE enables new value-added services, many web-based. A typical experience is that of a Comcel customer in Colombia who uses EDGE to access the Internet from a dredge working outside a Colombian port. In Chile, customers can select information offerings (including videos from a local television station), transactions (including games of chance, account payments and stock purchases from the local stock market) and interaction (through Multimedia Messaging Service (MMS) and chatting with up to five people simultaneously). EDGE is adding significantly to revenues from value added services. TIM’s Brazilian operations feature TIM TV, ringtones, Java games, video messaging, Blah chat and peer-to-peer messaging. The popularity of these services is helping TIM to surpass market leader Vivo and generate the highest ARPU in the market. America Móvil has also registered higher income with its EDGE-enabled networks and recent emphasis on value-added marketing. GSM evolution and the wireless future of the CALA region GSM economies of scale are strengthening GSM’s competitive position in both North America and Europe. GSM remains the only standard commercially available in all four bands used in the region – 850, 900, 1800 and 1900 MHz. Applications developed for European and North American markets can easily be adapted regionally and the growing number of regional GSM users is creating a critical market mass for local software developers. The result will be more, better and richer mobile GSM-based applications for the region’s enterprise and consumer markets. Regional operators will also benefit from enhancements that have made GSM’s spectral efficiencies second to none. GSM frequency reuse has already increased dramatically by the Adaptive Multirate Codec (AMR), frequency hopping, dynamic frequency channel allocation and other techniques. The addition of EDGE further increases spectral capacity to meet the needs of the region’s constantly growing voice market. Furthermore, new UMTS/HSDPA standards-based equipment will bring even higher data rates, lower the cost of conventional voice and preserve the traditional GSM-based international roaming. This will let GSM operators continue to compete profitably, even offer capacity-based marketing plans that give customers large buckets of minutes and even unlimited calling among user groups. The many advantages of the GSM-based evolution are solidifying the role of GSM as the primary technology for raising connectivity in the CALA region. This will widen GSM’s lead over other wireless technologies in region. The GSM portfolio of technologies – GPRS, EDGE and UMTS/HSDP – will be the de facto mobile standards in the CALA region for the foreseeable future.