Americas Market Perspective

Transcription

1 Americas Market Perspective V O L. 8 I S S U E 25 A U G U S T 2008 Telmex Internacional to Replicate Its Network Access Strategy and Bundled Offers Analyst: OMAR SALVADOR osalvador@pyr.com Tel: Over the past few years, Telmex has acquired cable companies in Latin America, which are being used to serve the residential segment with multi-play offers. In order to complement the cable networks serving the residential segment, Telmex has deployed WiMAX networks in several Latin American countries to reach the business segment. With its bundle offers, the company has become Telefónica s main challenger in Peru, and we expect it to continue competing in the rest of the countries with a dual-access cable/wimax strategy Pyramid Research While every effort has been taken to verify the accuracy of this information, Pyramid Research cannot accept any responsibility or liability for reliance by any person on this information. ID# 339 Pyramid Research Locations Worldwide World Headquarters 58 Charles Street Cambridge, MA USA Tel: Fax: Latin America Waterford Business Park 5201 Blue Lagoon Drive Suite 971 Miami, FL USA Tel: Fax: Asia-Pacific Suites 2701/2801, Floor 11 AXA Centre 151 Gloucester Road Wanchai, Hong Kong SAR Tel: Fax: Europe Bloomsbury House, Suites 17/18 London, WC1A 2RP United Kingdom Tel: Fax:

2 2 EVENT SPOTLIGHT In early June, Telmex launched a residential triple-play offer via cable in Peru with the brand Wow to complement its WiMAX network intended for the business segment with the brand Explora. Telmex multi-play offers in Peru include fixed voice, broadband Internet and pay-tv services at discounted prices that range from US$ to $ These triple-play bundles were offered initially in the districts of San Isidro, San Borja, Miraflores, La Molina, San Miguel and Magdalena in the capital Lima via its cable network. With its bundle offers targeting not only the residential segment but also the business segment, the company has become Telefónica s main challenger in Peru for both residential and business clients. Given Telmex s history of replicating business models and strategies, Pyramid Research believes that Telmex will use the same cable/wimax dual-access strategy to reach the different market segments in countries where they have operations, creating a strong challenge for market share leader Telefónica. Exhibit 1: Telmex triple-play advertising with cable access network in Peru Source: Telmex Peru BEHIND THE HEADLINE Over the past few years, Telmex has acquired cable companies in Latin America, which are being used to serve the residential segment with multi-play offers. With this strategy, Telmex seems to have found in cable a good alternative to other technologies for serving residential customers. We believe there are three reasons behind Telmex s cable strategy. The installed customer base of cable operators means low customer acquisition cost and does not require the investment of a completely new access network.

3 US$ VOLUME 8 ISSUE 25 3 Residential subscribers in the region tend to have lower ARPS than their business counterparts due to lower consumption and are usually clustered in neighborhoods (see Exhibit 2). Cable is a more suitable technology for customers concentrated geographically because it provides higher capacity to offer multiple services such as fixed telephony, broadband and pay-tv, whereas WiMAX capacity is still limited based on spectrum and the development of this technology. Residential voice revenue is decreasing regionally, while broadband and pay-tv services are growing in importance and in revenue share. Owning cable networks enables Telmex to integrate broadband and pay-tv services into multi-play bundles for the residential segment to compensate for the voice revenue decline. In some cases, using cable operations for pay-tv gives them first mover advantage for multi-play services due to pending regulation of IPTV and the need for operator investment to get IPTV ready for the market. In order to complement the cable networks serving the residential segment, Telmex has deployed WiMAX networks in several Latin American countries to reach the business segment. The pan-regional player believes that this access technology is an adequate solution to target the business segment in new markets due to its time of deployment, nomadic capabilities and suitability for the higher ARPS in the business segment. WiMAX allows Telmex to reach coverage of the target market rapidly as evidenced in the case of Chile, where Telmex covered 98% of the population in less than one year. WiMAX has nomadic capabilities and a planned evolution to full mobility in the future. Potentially, Telmex will be in a good position to offer fixed-mobile converged solutions in the medium term, giving the operator an advantage with business customers who are likely to be the first to demand this type of service. The high cost of customer equipment is offset in the business segment by corresponding high ARPS (see Exhibit 2). Exhibit 2: Voice and broadband ARPS in the residential and business segments in Latin America, 2008 Fixed voice Broadband Residential Business Source: Pyramid Research, Latin America Fixed Forecasts Q2 2008

4 4 With its bundle offers, the company has become Telefónica s main challenger in Peru, and we expect it to continue competing in the rest of the countries with a dual-access cable/wimax strategy. Telmex Peru s multi-play offers are attractive compared with Telefónica in Peru due to the aggressive discounts of up to 23% versus Telefónica s Trio packages. We expect Telmex to capture an important share of the latent demand in Peru. Currently, there is plenty of potential for growth as broadband penetration over population ended at 2% in 2007, behind the regional average of 4% in the same period. In other countries where the company has a presence, Telmex is moving in the same direction with a dual-access strategy. In Brazil, Telmex offers WiMAX to businesses via Embratel and multi-play cable offerings via Net Servicos. (Embratel actually owns 24% of Net Servicos.) In Chile, Telmex deployed WiMAX to target the business segment with national coverage, acquired the pay-tv company Zap TV in 2007, with an installed base of close to 60,000 subscribers, and is currenlty building a cable network to target the residential market. These are all telling signs that Telmex is moving in the same direction as in Peru. Going forward, we expect Telmex to continue acquiring cable companies in other countries and deploying WiMAX networks to follow its dualaccess strategy. CLIENT RECOMMENDATIONS Telefónica Be prepared for higher coverage and intensive commercial activity in South American markets from Telmex operations. Look to respond to movements quickly. Continue leveraging leadership position and knowledge from European experience with bundle offers. Use experience with DTH to offset Telmex s cable strategy in markets where IPTV is not present. Telmex Internacional Continue expanding to the residential segment in international operations where Telmex can leverage their know-how developed in Mexico and ensure adequate funding for intensive capital expenditures to fuel this expansion. Vendors Take advantage of opportunities for network expansions and network integrations from the two leading players. Given the multiple technology strategy of leading fixed players Telefónica and Telmex, there are interesting opportunities.

5 5 Recent reports and other products from Pyramid Research Social Networking Goes Mobile Research Report published February 2008 Social networking services like MySpace and Facebook have emerged as some of the hottest Internet names, with daily news of partnerships, advertising initiatives and acquisitions. This report looks at the SNS business model and analyzes its future, forecasting the number of social networking members globally by It also assesses the future of mobile social networking and the rationale for SNSs and mobile operators to collaborate, including the revenue mobile operators stand to gain. Finally, the report profiles some of the top players in the mobile social networking world. Mobile Operators Continue Growing despite Lowering Interconnection Fees Regional Perspective published July 2008 Mobile interconnection rates are decreasing in all of Latin America as regulators learn that imbalances in termination fees have not lead to open and healthy competition. As mobile data revenue grows, mobile operators will become less vulnerable to the impact of changes in interconnection rates. This Perspective examines the role mobile data revenue will play in mitigating the drops in interconnection fees. CLECs Choosing WiMAX to Challenge Incumbents in Latin America Regional Perspective published June 2008 Latin American CLECs are choosing WiMAX because it allows them to offer convergent solutions and a faster time to market. Because of their small size, these companies are more adaptable to opportunities and restrictions inherent in the technology and the market. This Perspective looks at this new wave of adoption to predict how WiMAX will impact the Latin American market. Mobile Players and Handset Vendors Capitalize on Mother s Day Event Regional Perspective published June 2008 Mobile operators and handset vendors embrace Mother s Day to take advantage of the biggest sales event in the first half of the year. Seasonal promotions are seen as a way to position top sellers and launch new handset models. In this Perspective, Pyramid Research examines Mother s Day as the first big battle of the year for handset vendors to increase market share and to push multimedia phones among a targeted female segment. Handsets Get a Latin Beat: Mobile Users in Latin America Turn to Music, Cameras and 3G Research Report published June 2008 Latin America s mobile handset market has grown remarkably in recent years, and device sales will increase further through This Report examines that transformation and what it means to vendors and operators, providing extensive forecasts. It looks at underlying trends in the mobile market, including technology developments, mobile services demand, the competitive landscape, ARPS, the battle between the two main regional mobile operators, handset revenues, unit sales, ASP trends, marketing campaigns, demographic factors and market shares. The focus is on the seven largest markets in Latin America: Brazil, Mexico, Venezuela, Argentina, Colombia, Peru and Chile. Additional Products Forecasts Updated on a quarterly basis, our Forecast products provide a complete picture of demand trends affecting each geographical market covered. The Excel output includes five years of historical data and five years of market projections, providing complete macroeconomic and market-sizing information. Available for: Mobile Communications, Fixed Communications, Mobile Data, Mobile Enterprise, Mobile Handsets, Mobile CAPEX, Internet and Media, Network OPEX. Country Intelligence Reports Country Intelligence Reports offer insightful analysis of a country's communications, media, and technology industries, including regulatory pressures and overall competitive landscapes. These data-intensive reports are published annually for 64 countries worldwide, and illustrate key trends within given markets, making them an excellent complement to our Forecast products. For more information or to purchase, contact Pyramid Research at: or sales@pyr.com or