PDF version of this report
You must have Adobe Acrobat reader to view, save, or print PDF files. The reader
is available for free
download.

Telecommunications in South America

Bruce Kramer

Copyright 2017, Faulkner Information Services. All Rights Reserved.

Docid: 00017977

Publication Date: 1708

Report Type: MARKET

Preview

The telecommunications market in South America is really two separate markets in many respects. The
southern-cone states, in general, have booming telecommunications sectors,
whereas the markets in the northern states have been suffering from economic
and political adversity. In addition, wireless is experiencing historic growth
in most countries, surpassing a 95 percent penetration rate in 13 of the
15 countries. Fixed-line services remain stagnant at best, although 3G and mobile
broadband services are gaining traction, with 4G services starting to take hold
and expected to drive market growth over the next several years.

Report Contents:

• Executive Summary
• Market Dynamics
• Market Leaders
• Regional Market Leaders
• Market Trends
• Strategic Planning Implications
• Web Links
• Related Reports

Executive Summary

[return to top of this report]

The vast territory of South America includes a wide diversity of economies and telecommunications
infrastructure, although much of the region is underdeveloped for political,
geographic, and economic reasons.

 

Although
the economic outlook is not promising overall, the region
does have some standouts. For instance, Panama, Peru, Bolivia, Paraguay, and
Colombia all have GDP expected to surpass 4.5 percent, with Panama reaching 7
percent or higher.

The region
continues to depend on foreign investment, particularly from European
communications firms. These investments have slowed in recent years – except for
wireless network expansion or market launches – as international companies have
sought to conserve capital and put money in their own infrastructure rollouts.
Privatization has also been an issue, with competition lagging in some
countries, but becoming surprisingly robust in some. Other countries, like Venezuela,
have reclaimed government control over the telecommunications industry, scaring
away much needed foreign investment in the region as a whole.

Nevertheless,
investment in mobile
telephony, fixed and mobile broadband, and pay TV as well as in broadband
projects is expected to be steady, especially in Brazil, which continues to be
the most heavily invested in across South America thanks to its favorable
regulatory environment.

Figure 1 is a map of South America.

Figure 1. South America

Source: http://www.h3dwallpapers.com/south-america-map-1842/

Market Dynamics

[return to top of this report]

Table 1 provides some high-level information about the countries in the region.
These statistics are the most recent data compiled by the Telecommunication
Development Bureau of the International Telecommunication Union.

Argentina

Argentina was one of the first countries in South America to deregulate its
telecommunications sector, with only a single license required for any type of
telecom service. In 1989, the government broke up its state-owned monopoly ENTEL
by splitting the company in two. This move created two regional monopolies:
Telecom Argentina (Telecom), which covered the northern part of the country, and
Telefonica de Argentina, which covered the southern part of the country and was
owned by Telefonica, the Spanish telecommunications giant. These two companies
also joined forces to operate Telintar, a long-distance monopoly. The monopolies
held by these companies ended in 1999, and all sectors of the Argentine market
now are open to competition. Telecom Argentina and Telefonica de Argentina are
still the dominant carriers in their respective operating regions for fixed-line
service; however, long-distance services are much more competitive. In fact, the
companies may be a little too dominant.

In 2016, President Macri announced plans to merge the
Federal ICT Authority (AFTIC) and the Federal Authority of Audiovisual
Communication Services (AFSCA) into a single regulatory agency called the
National Entity for Communications (ENACOM). This organization is tasked with
implementing a policy called the Digital Argentina Law that was passed in 2014
but never enacted. The biggest change in the new law is that it defines
all telecommunications services except mobile as a public service, which gives
the government the authority to regulate rates. The law also allows telecom
companies to offer pay television service.

This new law is having an impact on the market. In July 2017, Telecom
Argentina announced that it would merge with Cablevision Argentina.

The country’s network is 100 percent digital with fiber-optic cable reaching
40,000 km. There are about ten million fixed lines in place. All carriers
operating in Argentina are required to contribute one percent of their revenue
to help subsidize service to the elderly, the poor, schools, and libraries.
Argentina has the third highest fixed-line teledensity rate (at 23 percent) in
South America.

Wireless telephones have played a huge role in giving Argentina the strong
position it has in the region. The number of mobile phones first outnumbered
landlines in 2003, and now the wireless density rate is 151 percent. Four
companies provide service to Argentina’s 64 million mobile subscribers as of
2013: Claro, Movistar, Personal, and Nextel. The number of smartphones used by
Argentineans is growing quickly compared with other countries in the region and
across the globe. Claro, Movistar, and Personal all offer 4G service, while
Nextel uses older iDEN technology in its network. Movistar is testing the
possibility of expanding its 4G network by putting LTE transmitters on hot air
balloons.

According to the ITU, Argentina had 7.2 million broadband customers at the
end of 2016, which is 17 percent of the population. The subscriber base has
grown slowly because of the high rates for telephone connections and the lack of
security in handling credit card transactions online.

Overall, the telecommunications market in Argentina has experienced
tremendous peaks and valleys. Currently, the overall market is growing steadily
and is starting to see 4G wireless networks, Wi-Fiin city limits, and triple
play packages that combine broadband Internet access, television, and telephone
service. The broadband sector has the most potential as several companies are
offering at-home Internet broadband as well as mobile broadband. Most broadband
customers access services using a mobile telephone.

Bolivia

Wireless technologies have played a huge role in helping Bolivia deliver
basic telecommunications services to its population. While there are just
867,000 landline telephones there (a density rate of eight percent), there are
10.2 million wireless subscribers (a 91 percent density rate). The majority of
the country’s fixed lines are concentrated in metropolitan areas, and several
rural communities do not have access to basic service. The structure of
Bolivia’s fixed telecom market is unique in that local services are offered
through 15 telecom cooperatives. These are not-for-profit businesses that are
owned and operated by subscribers. They also offer long-distance, and several
offer broadband and pay TV services.

The wireless sector has been the one bright spot in Bolivia’s
telecommunications sector, but even that market is trailing its neighbors mostly
because of a poor network infrastructure and low quality of service. The three
providers are Entel, Tigo, and Viva. Competition is stiff between them, which
has kept prices down and helped subscriber rates grow quickly. All three
carriers offer 4G service, but customer still cannot port their number between
carriers.

Bolivia has one of the worst Internet sectors in the region because there is
a lack of infrastructure and the average citizen earns less than $3,000 a year.
Only three percent of the population has a high-speed Internet connection and
just 40 percent of the people are online. Although a number of ISPs exist in
Bolivia, ENTEL is the only ISP that offers service in all areas. ENTEL
introduced fiber-optic service in 2017 and expects its network to reach 250,000
homes by the end of 2017.

Brazil

Brazil is the largest country in South America in terms of geography,
population, and economy, with nearly as many inhabitants as the rest of the
countries in this region combined. Between hosting the 2014 World Cup and the
2016 Summer Olympics, the world spotlight was shining brightly on it.

The Brazilian government began privatizing the telecommunications market in
1998 when it restructured the state-owned monopoly, Telebras, into three local
service providers, one long distance carrier (Embratel), and eight regional
wireless carriers. The Brazilian government deregulated the local calling market
in 2002, and Embratel began offering local service in some major metropolitan
markets. That company is now owned by America Movil, one of the largest mobile
carriers in Latin America. The other main players in the market are Oi and
Telefonica.

Oi made major headlines in June 2016 when it made the largest bankruptcy
filing in the country’s history. The company owes almost $5 billion to
regulators and tax collectors, $5 billion to Brazilian banks, and over $10
billion to bondholders. The Brazilian government fears that Oi will liquidate
its assets and operations, so it has promised to block any attempt to sell
pieces of itself so Oi can reorganize itself and continue servicing customers.

Although little competition exists in the fixed-line market, Brazil’s
wireless industry is one of the largest and most competitive in South America.
Brazil has more than 244 million mobile users, with a mobile penetration rate of
119 percent. Seven companies provide wireless services in Brazil, but 99.5
percent of the market is held by Vivo, TIM, Claro, and Oi. All four of these
offer 4G service in some parts of the country, and TIM’s network covers 1,850
markets. Claro offers 4.5 services in Brasilla.

The other smaller carriers are Nextel, Algar Telecom, and Sercomtel.

Brazil's population is young and urban. Almost half the population is younger
than 30, making it a good market for ISPs. Most Internet subscribers live in
metropolitan areas since Brazil's geography and low population density have been
major obstacles for Internet service. Sixty-five percent of the country is
covered by tropical rainforest and parts of the terrain are mountainous, which
makes it difficult for companies to build out infrastructure. Additionally,
carriers are slow to build out infrastructure to remote parts of the country
because there are not enough potential customers living there.

At the end of 2016, 13 percent of the country had a broadband connection and
60 percent were online. Several factors are driving growth in the Internet
sector, including a wide array of Portuguese language content providers and a
Brazilian government project to extend Internet access to all citizens. DSL is
the most popular form of broadband access in Brazil, but cable is also
available. The government is particularly interested in broadband and has
created SCD (Communications Digital Service) licenses, generally aimed at
supplying broadband services to schools, to support it.

Chile

Chile’s telecommunications industry has been thriving with double-digit
growth rates since 2010. Chile ranks as one of the world’s top 20 countries to
serve as host and source for foreign direct investment.

Much like Bolivia, wireless technologies have played a huge role in the
teledensity growth. The fixed-line penetration rate is around 19 percent, which
has continued to drop for the past few years. At the same time, the wireless
teledensity has well surpassed one mobile line per capita, at almost 129
percent.

Chile was the first country in South America to liberalize its
telecommunications market, which has probably contributed to the country’s
advanced telecom industry. The Chilean government first opened the country’s
telecommunications industry to competition in 1978. Movistar (Telefonica Chile),
the former state-owned monopoly, is now majority owned by Telefonica and is
still the dominant player in the local calling market. The company has pledged
to invest $3.5 billion in its network and services in Chile and Peru between
2016 and 2020.

The second largest player in the local loop is VTR GlobalCom, which is the
largest cable company in the country. The two companies have a combined market
share of more than 85 percent. A third company called GTD is a smaller player in
the market as well.

The long-distance market is one of the most competitive in South America.
Movistar is the leading provider of domestic long-distance services, whereas
Entel Chile is the leading provider of international long-distance calling.

Chile has a healthy and competitive wireless market, with nearly 23.2 million
customers. The four carriers there are Movistar, Entel, Claro, and WOM. The
first three companies operate GSM networks and offer LTE service in some parts
of the country, while WOM is much smaller and used older iDEN technology until
it rolled out an LTE network. Movistar is also testing 4.5G service in parts of
the country.

In order to promote competition in the Chilean mobile sector, the government
passed a law that promotes MVNOs and infrastructure sharing between carriers,
and it banned carriers from selling locked phones.

PC and Internet penetration rates are some of the highest in the region. As
of 2016, 66 percent the population was online. Chile also has one of the highest
fixed broadband penetration rates in South America at 16 percent, largely in
part because of a broad range of offerings that include ADSL, cable, WiMAX, BPL,
and FttH. Cable companies, particularly VTR, have rolled out bundles of
broadband Internet, television, and telephone services that have helped boost
the penetration rate.

Colombia

The telecommunications industry in Colombia has a relatively modern
infrastructure, and the market is ranked in the middle of the pack compared with
the other countries in South America. Most local access lines are concentrated
in the three largest cities Bogota, Medellin, and Cali. A large disparity exists
between the teledensity within urban areas.

The Comision de Regulacion de Telecomunicaciones (CRT), the Colombian
regulatory agency, began opening the market to competition in 1998, but
liberalization has since progressed slowly because of several factors, including
an economic recession and a military conflict. In 2003, the Colombian government
made radical changes to the industry when it liquidated Empresa Nacional de
Telecomunicaciones, the former monopoly that was saddled with massive debt and
was embroiled in several labor protests, and created Colombia Telecom. In 2006,
the Colombian government started privatizing the industry by selling a
controlling stake in Colombia Telecom to Telefonica. In 2011, fixed line
providers ETB and Emcali were made available to private industry for
acquisition. A federal judge suspended any potential sale of ETB in July 2017
because the government did not follow proper procedures in processing a
transaction.

Overall, there are 7.1 million fixed lines in Colombia, for a penetration
rate of 14 percent, and there are more companies competing in the market here
than in most countries in South America. Those carriers are Movistar, ETB, EPM,
Emcali, and Claro. The long distance market is also open to competition and
competitors have 31 percent of the international calling market and four percent
of the domestic one.

There has been explosive growth in the wireless sector, and there are now
about 58.7 million mobile customers, for a wireless penetration rate of 117
percent. Claro, Movistar, Tigo, and Avantel are the four carriers, and all of
them offer 4G service through networks that reach about 50 percent of the
population. In 2017, Claro and Movistar were fined a combined $1.6 billion for
failing to meet some of the requirements of their operating licenses. Both
companies were required to turn over control of their wireless infrastructure to
the government by 2014 but did not comply.

Colombia has almost 5.9 million broadband customers, which is a 12 percent
density rate. High-speed services are mainly concentrated in Bogota,
Bucaramanga, and Popayan. Fifty eight percent of the country uses the Internet.
Movistar offers FTTH service in six markets.

Ecuador

Ecuador ranks near the bottom in terms of its key telecommunications
statistics. The fixed-line teledensity is just 15 percent, and any subsequent
development to the country’s infrastructure has been hampered by a lack of
competition and the extensive mountainous regions that make up the countryside.

Ecuador ‘s telecommunications needs were provided by three regional
monopolies until the Consejo Nacional de Telecomunicaciones (CONATEL), the
telecom regulator, opened the market to competition. The country now has seven
fixed-line operators, but state-owned CNT (formerly Telecsa/Alegro PCS) still
dominates the market.

Competition has been able to gain more of a foothold in the wireless
industry, where there are three carriers competing for the country’s 13.8
million wireless customers. Mobile teledensity has an overall penetration of 84
percent. However, it is common in Ecuador for those in the urban centers to have
multiple mobile subscriptions, separating work and personal mobile phones. The
three carriers are Claro, Movistar, and CNT. CNT was the only company with a 4G
license until the government issued ones to the other two carriers in February
2015. Movistar’s network now covers 11 cities.

Ecuador’s low Internet penetration rate has been increasing in the past few
years. Approximately 4954percent of the population uses the Internet, but only
10 percent of the country has a broadband subscription. The government is
attempting to make high-speed Internet access more available through its
National Broadband Plan.

Falkland Islands

The telecommunications market across all range of services in the Falkland
Islands is provided by Sure, which is owned by Cable & Wireless. It has been
servicing the islands since 1974 and provides fixed-line and wireless voice
services as well as dial-up and broadband Internet access. The company also
offers Wi-Fi services at several hot spots across the country. High-quality
satellite links provide clear and fast connection with the rest of the world.
The Falkland Islands has a landline density rate of 74 percent and a mobile rate
of 153 percent. Fifty three percent of the population has a broadband
connection, which is the highest in the region, and 88 percent of the people are
online.

French Guiana

French Guiana is managed as the overseas department of France with a
population of 250,000. Recent data regarding the country’s current
telecommunications market are hard to come by. The market is still a monopoly
held by France Telecom, which operates more than 47,000 local access lines in
the country. International long-distance calls are supported by an Intelsat
satellite earth station. More than half of the non-Communist world’s satellites
are launched by French Guiana, including recently satellites for the Indian
Space Research Organization and Japan’s Mitsubishi Electric Co., which were
launched in May 2011.

There are three wireless carriers in French Guiana: Orange, Digicel, and SFR.

Guyana

Guyana is one of the poorest countries in the Western Hemisphere; the average
citizen makes just $4,112 a year. It also has one of the lowest population
densities in South America with less than four people per square kilometer. The
poor economy and dispersed population have resulted in a poorly developed
telecommunications market; however, it is much better than expected based on the
country’s economic viability. The telecom sector has also been hampered by a
wave of vandalism and theft of copper lines for scrap. In July 2017, four
fiber-optic cables were cut across the country, knocking out landline and mobile
service to 20,000 people.

The fixed-line market has been privatized, but it remains a monopoly. In
1990, the Guyana government renamed the Guyana Telecommunications Corporation as
a new company called Guyana Telephone and Telegraph Company (GT&T). The
government sold an 80 percent stake in this company to Atlantic Tele-Network and
issued a 20-year monopoly on all fixed-line services. A bill was drafted to
formally open the sector to competition, but it was thwarted in the lead-up to
the 2011 elections.

GT&T invested $195 million into expanding and modernizing Guyana’s
infrastructure, and the company was able to increase the number of local access
lines. The fixed-line teledensity, however, is still just 19 percent, and the
company completes only about 65 percent of its calls. Recently, the government
sold its remaining 20 percent stake in GT&T to Datang Telecom Technology and
Industry Group, a Chinese state-owned company.

GT&T and Digicel Guyana are the country’s two mobile operators. Both
companies operate GSM/GPRS networks and 3G service was finally introduced in
2016. The mobile density rate is 66 percent, which is the lowest in the region.

Approximately 36 percent of the population were online as of 2016. The
country has a very low fixed broadband penetration rate of just eight percent;
however, GTT introduced fiber-optic Internet service in 2017.

Panama

Panama has a well-developed telecommunications network, but the sector falls
in the middle of the pack in terms of availability of service. Panama’s location
between North America and continental South America puts it in a position where
it believes it can serve as a communications hub. With this in mind, Panama is
connected to five submarine fiber-optic networks, more than any other country in
South America.

Panama’s telecommunications market was privatized in 1997 when the government
sold a 49 percent stake in National Institute of Telecommunications (INTEL) to
Cable & Wireless, which renamed the company Cable & Wireless Panama. This
company retained a monopoly on all fixed-line services until 2003. More than 20
companies lined up to rush into the Panamanian telecom market when it was
liberalized, but only a couple companies have followed through and launched
service. Several complaints were made from potential competitors that Cable &
Wireless was hampering interconnection testing on its network.

Even though there is some competition, Cable & Wireless Panama still owns
most local access lines, is slow to unbundle its local loop, and is criticized
frequently for taking too long to install lines for new customers. In 2009,
Cable & Wireless Panama entered the pay-TV market with comprehensive and TV
digital subscriptions services. The other major players in the fixed-line market
are TeleCarrier, Galaxy Communications (ClaroCom), Advanced Communications
Network, and Optynex Telecom. As of December 2016, the fixed line density was 16
percent and the mobile density was 172 percent.

Cable & Wireless and Movistar both have 20-year concessions to provide
service in Panama, and the Panama government issued operating licenses to Claro
and Digicel in 2008. LTE services were introduced in 2015.

Panama has a broadband penetration rate of 10 percent and 54 percent of the
country is online. In February 2010, Panama rolled out the first phase of its
Internet for All project, in which 628 Wi-Fi hotspots were deployed, reaching
2.3 million users across Panama.

Paraguay

Paraguay has the most poorly developed fixed-line infrastructure in South
America. Only five percent of the population has access to a landline telephone,
and most of the country’s infrastructure is concentrated in the capital city of
Asuncion. The country’s telecommunications needs still are provided by a
state-owned monopoly, making Paraguay one of the few countries in the region to
have a completely closed fixed-line telecom market. All local and long-distance
services are provided by Copaco, and the company has been accused of being very
inefficient when it comes to installing lines for new customers. New customers
may have to wait a year before getting service turned on. The Paraguay
government tried to privatize Copaco partially three times between 1996 and
2001, but it could not draw any interest. However, Copaco has announced plans to
invest US $20 million to launch triple-play services. In addition, mobile number
portability may be on the horizon.

Although Copaco has failed to make any real progress in updating the
country’s infrastructure, wireless technologies have helped boost the total
teledensity rates to respectable levels. There are 7.5 million mobile customers,
which is a 105 percent density rate. Currently four companies are providing
service in Paraguay: Tigo, Personal, Claro, and VOX. All four offer 4G service.

The country's poor infrastructure has hampered development in the Internet
sector, although there are more than a dozen ISPs offering services. As a
result, Paraguay has one of the lowest Internet penetration rates in South
America. Only three percent of the population have broadband connections and 51
percent are online.

Peru

Peru is among the lower tier countries in terms of overall teledensity in
South America. The fixed-line penetration rate is just ten percent and dropping.
Wireless technologies have traditionally lagged behind the rest of the region,
but recent investment and strong overall economic performance, coupled with
loosened industry regulations, have helped increase the wireless teledensity to
117 percent. In Peru, 90 percent of all lines in service are mobile lines. This
is largely a function of the mountainous geography that makes it difficult to
build out infrastructure, but the historically rigid regulatory landscape
favored the incumbent service providers until the recent changes.

Peru is also part of the Pan American fiber-optic cable system, which
stretches 7,500 km undersea to connect Panama, the United States, the U.S.
Virgin Islands, Chile, Colombia, Ecuador, Venezuela, Peru, and Aruba. The
government has made the expansion of the fixed-line infrastructure a major
priority, and although the country still trails the rest of the region, some
major advances have been made.

Peru’s telecommunications market is fully open to competition, but Telefonica
del Peru, operating under the Movistar brand name, is still the dominant player
in the local loop. The former monopoly still owns 98 percent of all local access
lines. Peru’s regulatory agency was successful in getting Telefonica del Peru to
reduce its fixed line rates by 30 percent, but it remains among the highest in
the region, especially considering the quality of service provided. However,
substantial competition exists in the long-distance market. Telefonica del Peru
is still a major player, but its revenues in the long-distance sector have been
eroded steadily by competition from companies like IDT, Americatel Peru, and
Telmex Peru. Peru enacted mobile number portability in 2011. It was viewed as
such a success that they launched fixed number portability in 2013.

The Peruvian wireless sector has been growing fast. Currently, Peru has
approximately 36.9 million wireless customers. Some consolidation has taken
place in the wireless sector, and there are now four carriers operating there:
Movistar, Claro, Entel, and Bitel.

Although Peru has a poor infrastructure, the country has a relatively high
Internet penetration rate, which is mostly a result of the relatively cheap and
pervasive Internet facilities called cabinas publicas. Approximately 41 percent
of the population is online and five percent have a broadband connection.

Suriname

Suriname has far more mobile connections than landline telephones because
many people living there have two mobile phones: one for work and one for
personal use.

The fixed-line market is a monopoly dominated by a state-owned operator
called Telesur. The market was a duopoly from 1998 to 2002, but the second
carrier, ICMS, folded amid interconnection issues with Telesur. The
Telecommunications Authority of Suriname (TAS), the country’s regulatory
authority, agreed to open the market to competition by granting telecom licenses
to Digicel and Intelsur in August 2006. This decision was made following a
recommendation by the World Trade Organization, of which Suriname has been a
member since 1994. About 16 percent of the population has a landline connection.

The mobile sector was liberalized a few years ago, and since then, mobile
subscribers have increased greatly There has been talk of opening up other areas
of the telecom industry as a result. Because of the competition in the wireless
sector, Suriname’s wireless penetration rate is growing rapidly. In December
2016, Suriname had an estimated 807,000 mobile cellular lines in use, which
translates to a 146 percent penetration. Telesur, Digicel, and UNIQA are the
country’s three mobile providers. Digicel announced plans to buy UNIQA in 2015.

Suriname has approximately 71,200 broadband subscribers, which is a 13
percent density rate. In addition, 45 percent of the country uses the Internet.
The Internet sector is open to competition, but Telesur is the dominant ISP and
charges substantially high rates based on the country’s overall economic
condition. Talk of the Suriname Guyana submarine cable system promises an
increase in broadband speed, but without competition, it is likely that
subscription prices will remain high.

Uruguay

Uruguay has a fairly advanced telecommunications market. By 1997, it was the
first country in South America to have a fully digital infrastructure, and it
ensured every town with at least 10,000 people was connected to a fiber-optic
backbone. Today, Uruguay has the highest fixed-line teledensity in South
America, with the exception of the Falkland Islands, at more than 32 percent.
Overall, about 1.1 million fixed lines were in use in Uruguay in December 2016.

Uruguay’s domestic and international long-distance market was opened to
competition in 2001, but the local calling sector is still a monopoly held by
Antel, the state-owned service provider. The government originally planned to
privatize Antel in 1993, but 75 percent of the citizens voted to reverse that
decision in a referendum. Antel has one of the best service reputations in South
America, and the people were afraid that a change in ownership would result in
service delays. The fixed-line market is healthy enough that the government will
most likely retain its stake in Antel for the near future.

Uruguay has more than 5.1 million wireless customers and has a wireless
teledensity of 149 percent, with three companies competing in this sector:
Antel, Movistar, and Claro. All three companies operate GSM/UMTS networks and
offer mobile broadband and 3G services. A program in 2013 was launched
nationally to roll out FttH and LTE networks to expand access and improved data
speeds.

The Internet sector is strong, with 921,000 broadband customers, which is
approximately 27 percent of the population. Low-speed Internet access has
traditionally been cheap. On the Internet front, Antel has had so much growth
that it has actually encouraged private ISPs to resell its capacity to meet
demand. Antel has a 94 percent share of the broadband market. Sixty five percent
of the population is online, which is one of the highest rates in the region.
Antel expects to have a nationwide fiber optic network available by 2022.

Venezuela

The Venezuelan telecommunications market is growing, despite enormous
inflation, an economic recession, and the government’s continued push toward
socialism. Venezuela has one of the highest teledensities in Latin America and,
like many countries in the region, mobile services have emerged as the most
popular form of communication. Wireless phones make up 80 percent of all
connections.

Venezuela’s political climate has created a level of uncertainty for the
telecom market. President Chavez decided to move his country more toward a
socialist state by nationalizing several industries, including the
telecommunications, oil, and electricity sectors. When Chavez announced these
plans, Verizon Communications had a pending deal to sell its 28.5 percent stake
in CANTV to a joint venture between Telmex and America Movil. The venture was
prepared to pay $21 per share, when Chavez swooped in and ordered the company to
accept a buyout of $17.85 per share. This type of activity, and a widening rift
with the United States, could hamper any potential international investors. 

President Maduro promised to continue investing in the country’s telecom
infrastructure, but there is speculation that CANTV will have little incentive
to invest in its market. The company has, however, moved forward with a program
that subsidizes basic telephone service for low-income people. The country’s
three mobile operators are also involved in a plan where they are jointly
building and operating wireless base stations in parts of the country where
there is no service.

According to the most recent data published by the ITU, Venezuela had 7.8
million local access lines at the end of 2016, which put the penetration rate at
24 percent. The country has a fiber-optic network connecting all major cities,
with submarine cable connections to Aruba, Chile, Colombia, Ecuador, Panama,
Peru, the United States, and the U.S. Virgin Islands. CANTV owns more than 98
percent of all the local access lines in the country as well as a fiber-optic
network that runs nearly 12,000 kilometers and connects the major cities.

The country also has 27.6 million wireless subscribers for a density of 80
percent. There are three carriers competing in the market: Movilnet, movistar,
and Digicel.

In December 2014, the government issued 4G licenses to CANTV, Mobilnet,
Movistar, and DirecTV, the satellite television company that is being acquired
by AT&T. DirecTV said it will initially just use the spectrum to provide mobile
broadband. All four of these new players have to meet service requirements as
conditions of their license. They were required to offer 4G service to the 20
most populated markets by the end of 2015, all state capitals by 2018, and 75
percent of the population by 2020. The country’s wireless carriers failed to
meet these requirements due to the economic crisis in Venezuela. CANTV, the
largest operator, finally switched on its 4G network in January 2017. Movilnet
expected to launch theirs in 2017.

The Internet sector has experienced strong recent growth. At the end of 2016,
there were 2.6 million Internet subscribers (eight percent density), although
there are still over 250,000 people using limited dialup connections.

Market Leaders

[return to top of this report]

South
America has a vast and diverse telecommunications infrastructure, with
significant foreign investment. Most countries now have privatized at least
partially their former state-owned monopolies, and competition exists
throughout the area. Table 2 shows the major companies within each country
of South America.

Regional Market
Leaders

[return to top of this report]

The South American economy went through a deep recession in the late 1990s
and early 2000s. The difficult economic conditions, and a general downturn in
the global telecommunications market at the same time, scared away investment in
the sector from some global players. Even though many of the fixed-line
incumbents are at least partially privatized, most major top-tier telecom
carriers are not playing in the South American market. The only major U.S.
company involved in the region was BellSouth, but that company has divested most
of its holdings to focus on its operations back home in the United States.

However, four very strong regional companies are operating in the wireless
division.

Telefonica. Telefonica is the incumbent telecom carrier of Spain and
one of the world’s leading providers of telecommunications services to
Spanish-speaking people. The company’s overall customer base was 274 million. It
is the leading fixed-line provider in Argentina, Brazil, Chile, Colombia, and
Peru. Its wireless division, Movistar, is the seventh-largest mobile carrier in
the world. In South America, it provides service in Argentina, Chile, Colombia,
Ecuador, Panama, Peru, Uruguay, and Venezuela. In Brazil, Telefonica operates
under the Vivo brand for mobile communications services.

America Movil (operating as Claro now throughout most of South
America). America Movil is another company with a very strong regional
presence. Owned by Mexican telecom giant Telmex, America Movil delivers mobile
service to approximately 284 million customers across the Americas, primarily in
Latin America and the Caribbean. The company has operations in 18 countries,
including Argentina, Brazil, Chile, Colombia, Ecuador, Panama, Paraguay, Peru,
and Uruguay.

Digicel. Digicel is a fast-growing company servicing Asia Pacific,
Central America, and the Caribbean basin. It provides service to 13 million
customers across its 31 markets, including 25 in the Americas and the Caribbean.
The company is commended for the best service based on the strong structure of
its network systems.

Tigo. Millcom’s Tigo offers mobile
communications services in 15 markets, including Paraguay, Bolivia, and
Colombia, to more than 57 million customers.

Market Trends

[return to top of this report]

Along with
further privatization and liberalization efforts, these countries are pursuing
growth opportunities in their data communications, e-commerce, and Internet
arenas as well as a continued rise in wireless communications, including more
advanced technology and better quality-of-service offerings. The wireless
sector has shown rapid growth levels as the number of mobile phones has
surpassed the amount of fixed lines in service in every South American country
because it is a lower cost method of extending service to remote areas and
because consumers can add service without the bureaucracy generally reserved
for implementing a fixed-line infrastructure. In fact, wireless phones account
for more than 80 percent of all telephones in every country except Guyana,
Venezuela, and the Falkland Islands, which has a very high fixed line
teledensity. Essentially, the wireless market in each country is closer to a
free-market economy than its fixed line predecessor.

Wireless Growth

The wireless
sector has proven to be the biggest opportunity for success in the South
American telecom sector. Wireless technologies have been a flexible and cost-effective
way for the countries in South America to bring service to the people, as many
of the countries have large rural areas, mountainous terrain, and
geographically diverse populations. Service plans in which the calling party
pays has excellent promise in several countries, including Brazil, Chile, Peru,
and Venezuela, and some of these countries are home to some of the highest
penetration rates in the region. Wireless penetration has surpassed 100 percent
in all but half a dozen South American countries, with Bolivia and Guyana the
only countries having a wireless teledensity below 90 percent. Nevertheless,
major disparities still exist across rural and urban customers in almost all
countries in South America. However, many individuals in urban areas have more
than one cellular phone.

In many
countries, companies and regulators have been setting the stage for 4G LTE
deployments. In fact, 3G/4G and mobile broadband services are expected to be an
area of considerable growth in this region over the next few years, replacing
fixed broadband subscriptions. However, in some parts of South America, too
much demand still exists for basic services for regulators to place any
emphasis on these network services.

Internet Growth

Although the
Internet revolution is certainly not a stranger to South America, this region
currently has one of the lowest penetration levels in the world at only around 41
percent. Key factors retarding growth are low purchasing power, unbalanced
income distribution, and a low computer literacy rate. Poor infrastructure
limits broadband access possibilities and inflates costs; although wireless
connections provide new possibilities, it will be some time before technology
and cost make this a viable option for data in this region.

Some
countries are having more difficulty than others. For instance, Argentina,
Chile, and Uruguay have relatively high Internet penetration rates. Brazil,
Colombia, and Venezuela provide the greatest potential for Internet growth, and
they already have begun seeing foreign investors flock to their markets.
Privatization and deregulation are the most significant factors enabling or
hindering Internet growth. Different levels of privatization and deregulation
in specific markets have different technological and regulatory impacts. For
markets that have neither privatization nor deregulation, the impact is
significant in the areas of technology development and the regulatory
environment. Where privatization takes place without liberalization, the impact
of the Internet is most profound in the area of technology development. The
development of regulatory frameworks to maximize growth in areas such as
economic commerce is very important, and the commonality of the Spanish
language across much of the regions also could stimulate cross-border
electronic trade and commerce.

The problem
of poor nationwide telecommunications infrastructure has stimulated many
telecom giants to react. For example, the development of broadband
infrastructure has forced operators with antiquated networks to install digital
switching platforms such as ATM technologies, fiber-optic backbones, and
digital access technologies such as ADSL and ISDN.

Cable modem
Internet access and ADSL are likely to grow quickly during the few years, along
with the gradual rollout of services like WiMAX. Advanced services have been
somewhat slower to develop than anticipated because of a mixture of global and
local conditions that include slower than expected global recovery, the
Argentine currency crisis, and political instability in several countries in
this area, such as in Venezuela where Hugo Chavez has been transforming his
country into a socialist nation.

Strategic Planning
Implications

[return to top of this report]

The
telecommunications markets in the countries that make up South America are
vastly different from one part of the region to the next. Southern South
America, for instance, with the exception of Paraguay, exceeds Central America
and most of the Caribbean in infrastructure and market environment. Meanwhile,
Northern South America has suffered from political and economic instability,
which has severely stagnated the telecommunications
industry here. Argentina, despite a series of fiscal crises, has recovered to
the point where it is the regional leader in overall teledensity and among the
highest in Internet penetration.

Overall,
ineffective regulatory agencies, government corruption, and unsure economic
outlooks are stalling growth in most of these countries as well as the overall
poor global telecommunications market. Some countries, however, have
experienced strong economic growth over the past 18 months. These growth
countries have also realized strong gains in the telecommunications sector
during this same time. Value-added services, such as Internet access, have been
especially slow to advance (although this is beginning to change), as the
region deals with poor literacy rates, low PC penetration, and a skepticism
about credit card use over the Internet. The introduction of advanced services,
therefore, has been very poor everywhere except Chile, Argentina, Brazil, and
Uruguay, which have embraced information services and established programs to
educate and encourage Internet and data services.

Cellular continues
to be the biggest growth sector in South America. Competition is typically the
most developed in this segment. Several foreign investors have ventured into
this arena throughout the region. Cellular is being used in lieu of fixed line
services in many areas, with mobile subscriptions vastly outnumbering fixed.
This phenomena is mainly a result of the willingness of regulatory bodies to
offer mobile licenses more freely, as they do not face local loop unbundling
and last mile issues that fixed-line operators face.

An upcoming
area for investment is broadband, which is typically ADSL, although cable is
important in some countries. ADSL is being rolled out mainly in metropolitan
areas, where it has been surprisingly quick to develop given overall infrastructure
problems.

Privatization,
liberalization, and regulatory reform are rejuvenating South America ‘s
telecommunication markets, with new investment initiatives in both the public
and private network markets. In South American countries, private investment
fuels the rapid adoption of leading-edge technologies. Intense competition is
driving demand for state-of-the-art features and capabilities, and it is
forcing the region’s operators to become more efficient and responsive to user
needs.

During the past
decade, most South American countries have privatized and are well on their way
to open competition. The major markets of Brazil, Argentina, Peru, and Chile
rapidly are becoming modern digital systems, with improving teledensities
as planned telecom expansion occurs. The government still largely controls the
basic telecom sectors in Colombia, Ecuador, Bolivia, Paraguay, and Uruguay,
however. Venezuela has reverted from private to government control of the
telecommunications sector as Hugo Chavez continues his assault on the free
market in his attempt to make Venezuela into a socialist state.

In many
cases, the plan to privatize has been built around selling a controlling stake
in the state-controlled telephone utilities to a strategic foreign investor,
which receives exclusive rights to voice services for a specified amount of
time (usually five years). After this period, the door is opened to full-scale
competition. Most countries, like Brazil and Argentina, have followed this path
in phases, limiting the number of operators. What has happened, however, is
that the push for Internet services has resulted in a telecommunications
environment that is quite different from what was expected when these countries
began selling off parts of their telephone utilities. The lines among voice,
video, and data; circuit and packet; and fixed and mobile services often have
become blurred, making it difficult to establish new regulations. As a result,
South American governments have been forced to promote the development of a
networked economy. Prior commitments to existing investors and legacy
regulatory frameworks also are making things difficult. As these governments
struggle to sort through these issues, they fall further behind in the
technology revolution.

To examine
these South American telecom markets more closely, however, it helps to divide
the region into two subregions, Southern South
America and Northern South America. The Southern area consists of Brazil,
Uruguay, Argentina, Chile, and Paraguay. Chile has the most competitive market,
followed by Uruguay, Brazil, Argentina, and then Paraguay. Argentina and Brazil
have struggled through severe economic problems, whereas Chile has continued to
embrace new technology and telecom developments. Brazil remains the powerhouse
of the region, however, with its large population and vast territory. Uruguay,
despite its monopoly provider, has been applauded for finding a solution that
works and has progressed this sector of its economy.
Paraguay, however, has had the least amount of progress and lags severely
behind these other countries.

The Northern
area consists of Colombia, Ecuador, the Falkland Islands, Bolivia, Peru,
Suriname, Venezuela, French Guiana, and Guyana. Overall, although some progress
has been made in the arena of telecommunications, it often has been stifled by
government upheaval and corruption as well as economic downturn. These
countries have been slow to privatize, if they have privatized at all, and
despite encouraging competition in some markets, very few competitors have made
an impact on market share. Wireless teledensity has continued to rise in the
face of these difficult conditions, however.

Web Links

[return to top of this report]

• CIA World Factbook: https://www.cia.gov/library/publications/the-world-factbook/
• International
  Telecommunication Union: http://www.itu.int/
• World Bank: http://www.worldbank.org/
• Regulatory Organizations
• Argentina: National Entity for Communications
  (ENACOM): http://www.enacom.gob.ar/
• Chile: SUBTEL: http://www.subtel.cl/
• Colombia: Comision de Regulacion
  de Telecomunicaciones – CRT: http://www.crcom.gov.co/
• Ecuador: Consejo Nacional
  de Telecomunicaciones (CONATEL): http://www.conatel.gob.ec/
• Paraguay: Conatel: http://www.conatel.gov.py/
• Uruguay: URSEC: http://www.ursec.gub.uy/
• Competitors
  by Country
• Argentina
• Claro: http://www.claro.com.ar/
• Movistar: http://www.movistar.com.ar/
• Telecom Argentina: http://www.telecom.com.ar/
• Telefonica de Argentina: http://www.telefonica.com.ar/
• Telecom Personal: http://www.telecompersonal.com.ar/
• Fecotel: http://www.fecoteldatos.com.ar/
• Bolivia
• Entel Movil: http://www.entel.bo/
• Nuevatel: http://www.nuevatel.com/
• Tigo: http://www.tigo.com.bo/
• Brazil
• Brasil Telecom: http://www.brasiltelecom.com.br/
• Claro: http://www.claro.com.br/
• Embratel: http://www.embratel.net.br/
• Oi: http://www.oi.com.br/
• Telefonica: http://www.telefonica.com.br/
• TIM Sul: http://www.tim.com.br/
• VIVO: http://www.vivo.com.br/
• Chile
• Claro: http://www.clarochile.cl/
• Entel: http://www.entel.cl/
• Nextel Chile: http://www.nextel.cl/
• Telefonica Chile: http://www.telefonicachile.cl/
• Colombia
• Avantel: http://www.avantel.co/
• Claro: http://www.claro.com.co/
• Telefonica: http://www.telefonica.co/
• Tigo: http://www.tigo.com.co/
• Ecuador:
• Claro: http://www.claro.com.ec/
• French
  Guiana:
• Orange Caribbean: http://www.orangecaraibe.com/
• Guyana
• Guyana Telephone and Telegraph Co Ltd: http://www.gtt.co.gy/
• Panama
• Cable & Wireless Panama SA: http://www.cwpanama.net/
• Telefonica Panama: http://www.telefonica.com.pa/
• Paraguay
• Compana Paraguaya de Comunicaciones (COPACO S.A.): http://www.copaco.com.py/
• Tigo: http://www.tigo.com.py/
• Peru
• Telefonica: http://www.telefonica.com.pe/
• Suriname
• Telecommunicatiebedrijf Suriname (TELESUR): http://www.telesur.sr/
• Uruguay
• ANTEL: http://www.antel.com.uy/
• Claro: Claro: http://www.claro.com.uy/
• Telefonica Moviles: http://www.telefonica.com.uy/
• Venezuela
• CANTV: http://www.cantv.com.ve/
• Movilnet: http://www.movilnet.com.ve/

About the Author

[return to top of this report]

Bruce Kramer is a
manager for an automotive supply chain management company and an independent
telecommunications analyst. Mr. Kramer is a former senior editor for
Faulkner Information Services and has been covering the technology industry
for over a decade. His areas of specific focus are CRM and business process
outsourcing, international communications marketplace trends, provider
strategies, and regulatory developments.

[return to top of this report]