Telecommunications- Latin America: Latin American Wireless Sector (April 2005)
From less than 20 mn subscribers to 160 mn subscribers in a span of just 8 years, the Latin America wireless market has achieved a stupendous growth, with a compound growth rate of more than 30% in the last 5 years. During the last 6 years, the penetration rate has grown from an abysmal 8% to nearly 30% at the end of March 2005.
The growth in the Latin American market kicked off during the late ‘80s and early ‘90s, when the governments of various Latin American countries began deregulating their telecom sectors and opened the sector for private participation. The incumbents began witnessing competition and various American and European telcos got the opportunity to enter the highly under-penetrated and lucrative markets. The new entrants relied on inorganic entry into various key markets, like Brazil, Mexico, and Chile, etc. Chile was the first Latin American country to allow competition in the telecommunications sector in 1978 and it privatized its state-owned companies in 1988. Mexico and Argentina followed soon thereafter and a spate of market liberalization and privatization began in the region.
Brazil, Mexico, Argentina and Chile are the major markets in Latin America. With a total population of around 525mn the average wireless penetration in Latin is around 30% with Chile leading the pack with penetration of more then 55%. Brazil (145mn Pops) with 38% and Mexico (104mn Pops) with 40% penetration are our 2 focused markets there.
The Latin American region is poorly served by wireline telephony, with a poor penetration of around 20% - which has been overtaken by wireless services. There are about 95 mn wireline subscribers in the region, as compared to around 145 mn wireless subscribers. Given the poor basic telephony penetration, wireless telephony in Latin America is all set to achieve a healthy growth in the future.
We particularly expect a steady rise in wireless penetration in Mexico, where AMX enjoys a lion’s share of around 78% of the market. Mexico has a per capita GDP of around $6400 as compared to its emerging market peers - Russia’s $4000, Poland’s $5900 and Chile’s $5600, while it has a wireless penetration of only around 35%, as compared to Russia’s 47%, Poland’s 48% and Chile’s wireless penetration of around 55%.
The growth of GSM mobile technology in Latin America is outpacing the growth of its rival CDMA technology. GSM technology has a 72% share in the incremental digital mobile market in Latin America.
In the Latin American wireless market, all the major players, namely AMX, Telefonica Moviles (TEM.MC) and Telecom Italia Mobile (TIM.MI) are expected to grow their revenues by around 32-35% Y-o-Y each during 2005. While AMX would derive 92% of its revenues from Latin America, TEM and TIM would derive only 46% and 22% respectively. AMX would generate an EBITDA margin of around 33% from its operations in that region, while TEM and TIM are expected to post an EBITDA margin of 16% and 24% respectively in the region during 2005.
The growth in the Latin American market kicked off during the late ‘80s and early ‘90s, when the governments of various Latin American countries began deregulating their telecom sectors and opened the sector for private participation. The incumbents began witnessing competition and various American and European telcos got the opportunity to enter the highly under-penetrated and lucrative markets. The new entrants relied on inorganic entry into various key markets, like Brazil, Mexico, and Chile, etc. Chile was the first Latin American country to allow competition in the telecommunications sector in 1978 and it privatized its state-owned companies in 1988. Mexico and Argentina followed soon thereafter and a spate of market liberalization and privatization began in the region.
Brazil, Mexico, Argentina and Chile are the major markets in Latin America. With a total population of around 525mn the average wireless penetration in Latin is around 30% with Chile leading the pack with penetration of more then 55%. Brazil (145mn Pops) with 38% and Mexico (104mn Pops) with 40% penetration are our 2 focused markets there.
The Latin American region is poorly served by wireline telephony, with a poor penetration of around 20% - which has been overtaken by wireless services. There are about 95 mn wireline subscribers in the region, as compared to around 145 mn wireless subscribers. Given the poor basic telephony penetration, wireless telephony in Latin America is all set to achieve a healthy growth in the future.
We particularly expect a steady rise in wireless penetration in Mexico, where AMX enjoys a lion’s share of around 78% of the market. Mexico has a per capita GDP of around $6400 as compared to its emerging market peers - Russia’s $4000, Poland’s $5900 and Chile’s $5600, while it has a wireless penetration of only around 35%, as compared to Russia’s 47%, Poland’s 48% and Chile’s wireless penetration of around 55%.
The growth of GSM mobile technology in Latin America is outpacing the growth of its rival CDMA technology. GSM technology has a 72% share in the incremental digital mobile market in Latin America.
In the Latin American wireless market, all the major players, namely AMX, Telefonica Moviles (TEM.MC) and Telecom Italia Mobile (TIM.MI) are expected to grow their revenues by around 32-35% Y-o-Y each during 2005. While AMX would derive 92% of its revenues from Latin America, TEM and TIM would derive only 46% and 22% respectively. AMX would generate an EBITDA margin of around 33% from its operations in that region, while TEM and TIM are expected to post an EBITDA margin of 16% and 24% respectively in the region during 2005.
posted by Vikas Maheshwari, CFA at 7:39 PM
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