LATAM and Brazil Telecom and general market X-ray for southpartner

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What is the ICT market about in Latin America and Brazil with special focus on mobile operators do and the trends linked to the mobile telco market.

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  • {"33":"2007: 1m iphones sold in 78 days\n2010: 1m ipads sold in 28 days\n2012: 2m in 24 hours and 5m on the first weekend\n","6":"Different possibilities in this grid but your role determines what you focus on bringing to your customers\n"}
  • LATAM and Brazil Telecom and general market X-ray for southpartner

    1. 1. LATAM and brazil Telecom and business Jesper rhode Ericsson Internal | 2013-02-01 | Page 1
    2. 2. MACROECONOMICS Ericsson Internal | 2013-02-01 | Page 2
    3. 3. LATAM in a global context › Stronger dependence on China over the last decade. › Brazil has increased power significantly over the last 10-15 years. › Several countries (incl Brazil) with Demographic Bonus until about 2035. › Middle class lift, GDP growth, and growing population makes LATAM interesting for the next decade. › Bi-lateral development is stronger than multi-lateral due to diverse policies (MERCUSUR) Ericsson Internal | 2013-02-01 | Page 3
    4. 4. the Middle Class is rising Evolution of the Middle Class in Latin America › The LATAM middle class expanded by 50% between 2003 and 2009 › ~1/3 of the LATAM Population is now considered Middle Class, around ~$150m people › Almost as many people in the middle class as in poverty › Brazil alone is responsible for ~40% of the LATAM middle class expansion › Consumer class is expanding with a huge appetite for variety of goods and services. Ericsson Internal | 2013-02-01 | Page 4 Source: Pyramid Reserach 2013
    5. 5. TELECOM INDUSTRY Ericsson Internal | 2013-02-01 | Page 5
    6. 6. re-thinking roles Applications & Services Systems & Platforms Connectivity & Service Network Communication developer enabler Ericsson Internal | 2013-02-01 | Page 6 Service creator
    7. 7. Global Trends 2013 Expansion into digital services to find new revenues Tiered, shared, bundled and real-time pricing models Experience and efficiency driving operator transformation Differentiation through superior network performance Ericsson Internal | 2013-02-01 | Page 7
    8. 8. Latin American and Caribbean trends 2013 Network performance & quality for service creation – OSS/BSS need 4G/LTE for speed and 3G for coverage Smartphone penetration from 20% to 65% in 2018, above global trend Mobile services from current VAS to ERP, entertainment and m-commerce Key events legacy: high performing 4G networks (capacity & efficiency), consumers’ increased demand Ericsson Internal | 2013-02-01 | Page 8
    9. 9. market figures 2013 PENETRATION RATES The telecom services business is around 180 B U$, 57% of that comes from mobile, 33% from Fixed and 10% from PayTV. MARKET SIZE Fixed: (M Lines) 2012A 19% (113) 2013E 19% (115) Mobile: (M Subscribers) 115% (696) 119% (729) 2012A 2013E Variation 36% (220) 39% (240) Fixed Internet: (M Users) 46% (280) 53% (325) Internet Accounts: (M accounts) 10% (58) 11% (66) Pay TV: (M HH) 36% (56) 41% (66) 36 B U$ 35 B U$ -3% Fixed Data: 22 B U$ 24 B U$ 12% Mobile Voice: 71 B U$ PC: (M Units) Fixed Voice: 71 B U$ 0% Mobile Data: 32 B U$ 15% 28 B U$ Pay TV: 15 B U$ 17.5 B U$ 17% ---------------------------------------------------------------Total: 172 B U$ 180 B U$ 4,5% Broadband and PayTV growth drivers in the Region Source: Pyramid Research (Sept 2013) + Dataxis (Q4 2012) Ericsson Internal | 2013-02-01 | Page 9 In the fixed segment, voice is decreasing but broadband is estimated to growth in revenues 12% this year. The reason is the low internet penetration that reaches only half of the users (10% of accounts penetration). Most of the countries have government plans to promote broadband deployments as it has a direct impact on economy growth. In the mobile segment, the region has reached maturity, with 119% of mobile penetration in 2013, however there are still room for growth given that some markets have still low penetration as Mexico (90%), Bolivia (96%), Nicaragua (67%). But the real growth driver in mobile is Data, revenues are estimated to grow 15%, data traffic doubles y-o-y for 4 years in a row and trend shows the same pattern for the coming years. PayTV is also a segment with important growth, estimated in 17% for this year. Not only due to bundling services help to mitigate the fixed drop in the packages, but also because of the importance that Video is having in consumers habits.
    10. 10. Operators performance KPI´s MOU (Minutes) & ARPU (USD) 180 14 160 13 140 12 120 11 › MOU continue to grow due to flat fee voice packages. MOU (Minutes) 100 2010 2011 2012 ARPU (USD) 2013 2014 10 2015 › Subscriber growth reduced by 60%; RLAM will reach 1 Billion subscriber by 2018, counting M2M › Brazil: Smartphone sales up 110% in Q2 YoY Penetration: SUBS & Smartphones 80 1,0 Subscriber growth Smartphone penetration 60 0,6 40 0,4 20 0 2010 0,2 2011 2012 2013 Ericsson Internal | 2013-02-01 | Page 10 2014 2015 › Brazil: 90% of the Smartphones use Android 0,8 2016 2017 0,0 2018 Source: MerrilLynch Matrix/Company Reports › Brazil: Smartphones make up 54% of total units sold in Q3.
    11. 11. Capex level affected in the region CAPEX / sales Entel Oi › Capex/sales declining trend TIM Brazil Millicom › 2013 average is 16% Telefonica 16 AMX › 2015 expectation to 14-15% › Entel is the investment leader Q112 Q212 Q312 Q412 Q113 Q213 -8% CAPEX H113 vs. h112 H112 8.809 H113 8.132 › NW & IT Capex; excluding spectrum and licenses purchase, acquisitions (M&A) -13% -8% +33% 2.389 2.202 991 1.323 Telefonica Latam Oi Ericsson Internal | 2013-02-01 | Page 11 3.687 -13% 843 731 TIM Brazil › 6 Customers representing 85% of the total market in the region 3.214 -30% -24% 344 241 554 421 Millicom AMX Entel › Capex declined by 8% in USD H113 vs. H112 Total Source:Company Reports
    12. 12. Competitive market: HHB Index › HHI index in Brazil is 0,247 › HHI index for the UK is 0,216 Ericsson Internal | 2013-02-01 | Page 12
    13. 13. Competitive market: EBITDA [%] › Measured on EBITDA margin Brazil and the UK are also in the competitive end of the scale. Ericsson Internal | 2013-02-01 | Page 13
    14. 14. Future number of players Brands Access networks Back-bone and long distance Ericsson Internal | 2013-02-01 | Page 14 Source:Company Reports
    15. 15. Mobile segment Ericsson Internal | 2013-02-01 | Page 15
    16. 16. Mobile Traffic Update Global total traffic in mobile networks, 2007-Q1 2013 Q1 2012-Q1 2013 ›Mobile data traffic doubled › Voice growth was 4% Based on actual measurements Note: Based on actual measurements Traffic does not include DVB-H, Wi-Fi, or Mobile WiMax. Ericsson Internal | 2013-02-01 | Page 16 Voice does not include VoIP. M2M traffic is not included.
    17. 17. 12 times Mobile data Traffic by end of 2018 Global mobile traffic: voice and data 2010-2018 Ericsson Internal | 2013-02-01 | Page 17
    18. 18. App coverage “App Coverage” – the area where my app works as I expect” Ericsson Internal | 2013-02-01 | Page 18
    19. 19. App coverage › Increased user demand puts new requirements on app coverage Ericsson Internal | 2013-02-01 | Page 19
    20. 20. MOBILE INDICATORS RLAM Mobile Subscriptions and Penetration 2009 - 2018 1.000.000 2013E 135% 900.000 126% 800.000 Penetration Subscribers Prepaid Smartphone penetration 119% 729 M 79% 20% › › › › ARPU (USD/Month) ARPU Data MOU Churn rate (annual) 12 U$ 31% 162 49% 700.000 600.000 141% Penetration 130% 119% 109% 99% Postpaid 89% 500.000 ) 0 ( e i r c s b u S › › › › 115% 138% Prepaid 400.000 300.000 200.000 100.000 0 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E Source: Pyramid research (Sep 2013) Ericsson Internal | 2013-02-01 | Page 20
    21. 21. MVNO expanding in latam The appearance of MVNOs in the mobile market may increase competition, but the sensation is that most MVNOs don’t set out to compete head on with established operators. The possibilities for offering added value or a new style of service are as numerous as the number of businesses out there, limited only by the entrepreneur’s imagination. Brazil, Colombia and Chile are the Latin American countries where great variety of business cases is being leveraged most, mainly because the governments are actively fine-tuning the legislation needed to encourage new MVNOs. Mexico and Argentina would do particularly well if they followed this example, due to legislation already in place. Source: Telecom Intelligence Serices (July 2013) Ericsson Internal | 2013-02-01 | Page 21 MVNO 2013E Argentina Subs (000) Fencosur: Brazil Subs (000) Porto Seguro Vigin Costa Rica Puerto Rico 105 27 27 Subs (000) Movilda Chile 145 82 Subs (000) Cable Tica Virtualis Fullmovil 12 Subs (000) Falabela Virgin: Colombia EPM UFF: ETB: Mexico 70 42 310 Subs (000) 48 329 65 Subs (000) Maxcomcel 38 Megacable 128 Virgin 11 Source: Pyramid research (Sept 2013)
    22. 22. lte in the region •25 commercial LTE network launches across 12 countries as of August 2013 in Latin America •LTE subscriptions in Latin America will grow at a CAGR of 105.6% during the 2013-2018 period •LTE subscriptions in Latin America will reach 1.9m at the end of 2013 and will hit 71.0m in 2018 •Brazil will end 2013 with ~ 1m LTE subsc, giving it 54% of Latam’s total base. In 2018 it is expected to be 49% and Argentina, Colombia and Mexico together will account for slightly more than 27% •4G spectrum auctions have attracted significant interest from traditional mobile operators as well as new entrants •In Chile the average price per MHz/POP (i.e., the average price per MHz per person within the licensed geographic area) for the 2.5GHz spectrum blocks was $0.012 in Colombia $0.039 and in Brazil $0.053. Ericsson Internal | 2013-02-01 | Page 22 Source: Pyramid Research LTE Report Oct 2013
    23. 23. broadband Ericsson Internal | 2013-02-01 | Page 23
    24. 24. FIXED BB INDICATORS RLAM Internet Subscriptions and Penetration 2009 - 2018 600.000 100% 87% › › › › Internet Users (mn) 325 Subscribers (mn) 66 ARPS Residential (USD) 27 ARPL Commercial (USD) 40 53% 11% 10% 39% 67% 60% 53% 34% 200.000 100.000 40% 46% 50% 40% 26% 7% 30% 8% 9% 10% 11% 12% 13% 15% 14% 16% 20% 10% 0 0% 2009A Users Ericsson Internal | 2013-02-01 | Page 24 70% 60% 300.000 90% 80% 74% 400.000 ) 0 ( Internet Users Penet. Internet Accounts Penet. Fixed BB Penetration PC penetration 500.000 e i r c s b u S › › › › 80% 2010A 2011A 2012A Accounts 2013A 2014E 2015E Penetration Users 2016E 2017E 2018E Penetration account Source: Pyramid research (Sept 2013) % o i a r t n e P 2013E
    25. 25. MOBILE bb INDICATORS RLAM Mobile Broadband subscriptions and Penetration 2010 - 2017 (Estimations) 400.000 57% 350.000 2013E 42% 250.000 50% 44% 40% 37% 30% 200.000 30% 27% 23% 150.000 18% 20% 14% 100.000 10% 8% 4% 50.000 0 % o i a r t n e P MBB Connections 188 M MBB penetration 27% Smartphone as % of sale 35% Smartphone penetration 23% Smartphone connections 19% 35% ) 0 ( › › › › › 51% 50% 300.000 60% 1% 0% 2010A 0% 2011A 2012A 2013A 2014E 2015E 2016E 2017E MBB Subscribers FBB Subsc Smartphone penetration MBB Penetration Source: Pyramid sept 2013, BNAmericas Ago 2013 Ericsson Internal | 2013-02-01 | Page 25
    26. 26. Service availability and demand gap 43% of the Latin American population resides in zones where fixed-line broadband service is offered, and yet they still do not purchase a subscription. Similarly, 57% of the population could purchase mobile broadband, yet they still do not. There reasons for the demand gap: •Limited affordability: The cost of broadband exceeds the household income allotted for communication and entertainment expenses. •A lack of digital literacy: Limited ability to operate computers or access the internet from a mobile phone. •Absence of relevant content or applications: Due to cultural, educational, or language factors, the available content on the internet does not offer relevant information or entertainment. Ericsson Internal | 2013-02-01 | Page 26 Source: GSMA MBB at the bottom of the pyramid Latam 2013
    27. 27. Pay tv segment Ericsson Internal | 2013-02-01 | Page 27
    28. 28. PAYTV INDICATORS RLAM 2013E › › › › › › › TV Penetration 94% PayTV subs. (mn) 59 PayTV Penetration 38% Digital TV Penetration 39% Cable ARPU(USD) 26 Satellite ARPU (USD) 34 IPTV ARPU (USD) 14 Ericsson Internal | 2013-02-01 | Page 28
    29. 29. video: 46% of data traffic in 2018 2012 2018 Video is the largest segment of data traffic in mobile networks expected to grow by around 60% annually until the end of 2018. Ericsson Internal | 2013-02-01 | Page 29
    30. 30. Mobile viewing Increases Average hours watching video on each device per week › A ConsumerLab study in TV & Media in 2013 conducted in Brazil, Mexico and Chile showed that: › 79 % of respondents watch TV and video on mobile devices each week in Latin America 48% of the respondents use the Laptop, Smartphone or Tablet to watch TV/Video outside the home on a weekly basis › the stationary screens are decreasing in usage , the TV mainly, while mobile screen viewing is increasing. › Specially smartphones have had an important rise compared to 2012, 26% more hours weekly of usage. hours Viewing is moving from stationary to mobile screens and this change is triggered by on-demand viewing BASE: Latam markets, [Those who have and use respective device] Source: Ericsson ConsumerLab TV Media Consumer trends 2013 Ericsson Internal | 2013-02-01 | Page 30 › Some of the reasons are: – Content availability – Schedule flexibility – Time shift / on demand
    31. 31. Important services for consumers The most important services/options when it to how consumers want their future TV/Video experience › In the region, excellent quality (HD) and free from ads/commercial are rated as the two most important services that worth paying for. › A relevant percentage of the consumers perceived also HD quality (57%), free from add content (40%) and Internet on TV (40%) as aspects of the experience worth paying for. › People are watching one piece of content across several locations times and devices. 60% of the respondents are looking for a different way of watching TV. % BASE: Latam markets Source: Ericsson ConsumerLab TV Media Consumer trends 2013 Ericsson Internal | 2013-02-01 | Page 31 › The main barriers for on-demand in the region is price (42%), followed by poor content available (36%) and not having on-demand availability in the TV screen (30%).
    32. 32. consumers
    33. 33. 3 times faster in 3 years 1 million iPhone 1 sold in 78 days 1 million iPads sold in 28 days 1 million iPhone 5 sold in ? Ericsson Internal | 2013-02-01 | Page 33
    34. 34. Brazilian business environment
    35. 35. Development in commodity export › Increase in commodity prices over the last decade. › South-South trade development has increase the share of the commodity in Brazilian export › Membership of Mercusur has locked Brazil from exploring bilateral trade agreements with developed markets. › Brazilian inter-state tax on circulation of goods (ICMS) incentives to straights export with little value add. Ericsson Internal | 2013-02-01 | Page 35
    36. 36. Brazilian protectionism has been increasing over the last years Brazilian Chaebols? › Historic tradition from the seventies and eighties. › Some strong believers in the government. › Short term protection? Some protected industries in brazil › Oil and Gas › Flex cars (Automobile in general) › Telecommunications Ericsson Internal | 2013-02-01 | Page 36
    37. 37. Resources for innovation Brazil invest roughly 1,2% of GDP in Innovation Ericsson Internal | 2013-02-01 | Page 37
    38. 38. Brazilian ICT market is one of the largest worldwide Market Position IT ▪ US$ 111,0 Bi ▪ 7th position Telco ▪ US$ 100,2 Bi ▪ 4th position TIC ▪ US$ 211,2 Bi ▪ 5th position Hardware 31.6 IT In-House 48.7 8.6 2.7 5.3 Export Ericsson Internal | 2013-02-01 | Page 38 BPO Software 14.1 Services 2011
    39. 39. ICT opportunities Currnet situation Economic development in the corporate sector Potential ICT applications ▪ Low labour productivity and commpetitive level. ▪ Tools for e-management ▪ Cloud soutions ▪ Process automation ▪ (53rd in global ranking) Innovation capabilities lower than comparable coutries (58th rank) ▪ Structural barriers for faster growth, such as: - Electricity distribution - Congested cities - Transport capacity Infra structure bottlenecks ▪ Health system with general coverage, but with Social development Efficiency in public administration ▪ some problems with efficiency and quality. Great evolution with results in education, but the PISA results are 20% below OECD average. ▪ Opportunities to improve e-government (59th in the UN ranking) ▪ Specific solutions for strategic sectors ▪ Smart grid ▪ Traffic management ▪ Logistics monitoring ▪ Habour efficiency ▪ Tele-medicin and mobile health ▪ Tools for hospital management. ▪ Digital content for education ▪ Education portals ▪ Portals for private and corporate users ▪ Management Tools (activity and expenses) ▪ Cloud based solutions solutions and optimization of IDCs Ericsson Internal | 2013-02-01 | Page 39Mundial; FONTE: Fórum Econômico Banco Mundial; WIPO; OCDE; ONU; Entrevistas a especialistas; Artigos de Imprensa 39
    40. 40. Brazil as an export platform › Brazil has good trade relationships with several African countries. › Mercosur could be a regional export platform, but Argentina and Venezuela needs to improve import regulation. › Brazil has gained power in the region over the last decade. Ericsson Internal | 2013-02-01 | Page 40
    41. 41. Ericsson Internal | 2013-02-01 | Page 41

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