evolution bb in latam

7/27/2019 Evolution BB in Latam

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OVERVIEW OF THE EVOLUTION OF

BROADBAND IN LATIN AMERICA

Pyramid Research

Andicom 2013

2013 Pyramid Research www.pyr.com).

The Pyramid Research Strategic Consulting Group


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Contents

1. Mobile Broadband Overtakes Fixed Broadband in Latin America

2. LTE Drives Latin Americas Mobile Broadband Explosion

3. LTE Commercialization Challenges & Implications

4. Role of LTE/ Mobile Broadband in the Smart City

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3

In Latin America,both fixed and mobile

broadband servicesare expanding.

While mobile broadbandtakes off across the region,

the residential fixedbroadband services face

challenges.

Fixed broadband for

business use will do better,fueled by operatorinvestments in fiber to the

home (FTTH).

With over 30% penetration of regions

households, residentialfixed broadbandwill be limited in the long run due to the

limited service coverage outside maincities and the high cost of the services.

More opportunities will emerge in thebusiness sector. Pyramid projects thatbroadband access lines for businesseswill grow at 12% compounded averagegrowth rate in the next 5 years.

The vast micro-enterprise segment willdrive the growth in fixed broadbandadoption among businesses.

Meanwhile, mobile broadband isenjoying strong growth and gainingmomentum across the region as apotential substitute of fixed broadband,especially in cities where mobile is theonly option to access the Internet.


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xDSL leads Fixed Broadband in Latin America; FTTxExpands in Large Metropolitan Areas

xDSL represents about 68% ofthe fixed broadband market inthe region.

Mxico and Brazil have the

highest penetration of FTTx,due to the large concentrationof enterprises and high-incomeconsumers in cities such asMxico City and Sao Paulo.

We expect the upcominginstallations of fiber optic to

improve significantly thebroadband connectivity acrossthe region0

20

40

60

80

100

120

2011 2012 2013 2014 2015 2016 2017 2018

Accesslines(millions) xDSL Cable FTTx

Latin America xDSL, Cable and FTTx2011-2018

Source: Pyramid Research


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Mobile Broadband Emerges as a Substitute for FixedBroadband in Latin America

Mobile broadband surpassed fixed broadband in 2012; Will reach 44% in 2018. Population density and terrain limit viability and reach of fixed broadband

service, resulting in coverage gaps and high rates.

Fixed versus mobile broadband penetration of populationLatin America, 2012-2018


5

0%

10%

20%

30%

40%

50%

2012 2013 2014 2015 2016 2017 2018

P

enetrationo

fpopulat

ion

Fixed Broadband Mobile Broadband


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Globally, Mobile Broadband Will Triple by 2018

The global Mobile Broadband market is expected to achieve phenomenal

scale in the next 5 years.

Source: Pyramid Research 2013

Year 2013N= 1.096 B

6

0.768

1.096

1.445

1.836

2.293

2.778

3.260

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

2012 2013 2014 2015 2016 2017 2018

BillionsofU

sers

Mobile Broadband Subscribers

APAC37%

NAM17%

WE16%

LATAM14%

AME9%

CEE

7%

Mobile Broadband Subscriptions By Region


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Emerging Markets Lead the Mobile Broadband Explosion

We project that emerging markets will grow twice as fast as developed world

markets, 35% compounded annual growth compared to 17%.

Source: Pyramid Research 2013

Mobile Broadband CAGR2012-2018

18%

27%

27%

32%

84%

18%

35%

0% 20% 40% 60% 80% 100%

United States

Africa Middle East

World

Latin America

China

Developed Markets

Emerging Markets

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Drivers of Mobile Broadband


Consumer

Sustained increase inmobile subscriptions,Internet usage andsmartphonepenetration

Increased socialnetworks traffic /webbrowsing

Consumers embracemultiple mobile devices

Explosive growth invideo content and

demand

Businesses

Enterprise mobilization

Rise in mobile e-commerce

Video collaboration andbusiness networking

Digital marketing

4G spectrum auctions &licensing

Aggressive LTEdeployment by

operatorsRapid proliferation ofdata-enabled devicesecosystem in allspectrum bands bymanufacturers

Universal accessmandates & smart

city initiatives

Governments &Telecoms Industry


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Smartphones, Multiple Devices, Larger Screens FuelBroadband Data Consumption

Globally, 50% of all mobile handset sold

are smartphones. Share to rise increaseto 68% by 2018.

Latin America smartphone sales to growfrom 36% to 59% of all mobile phoneswithin 5 years, a 24% CAGR.

The rapid adoption of tablet computersand the consumers adoption of multiplemobile devices to access data and socialapplications also have a multiplier effecton bandwidth consumption per user(megabytes).

Larger screens and high definition

features are enabling easier videoviewing from the various mobile devices.As a result video has become the fastestgrowing application driving mobilebroadband traffic.


0

50

100

150

200

250

300

2012A 2013E 2014E 2015E 2016E 2017E

Unitssold(millions)

Smartphone salesHandset total sales

Latin America Smartphone Penetration

2012-2017

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Substantial portion of TV/videocontent is consumed over theInternet from Smartphones.

Over 6 billion hours of video arewatched each month on YOU TUBE.25% of the global watch timecomes from mobile devicesover

1 billion views each day

More traffic from two-way videocalls (mobile-to-mobile and videoteleconferences) is going mobile

The quality of user experience is

paramount on video. Super fastmobile broadband is a necessity tomeet the speed and coveragedepth required for reliable videodelivery.

Source: Ericsson mobility report 2013

Video Hours Viewed by Device Type

1.2

3.1

4.2

5.0

7.1

8.4

15.2

0 2 4 6 8 10 12 14 16

OtherScreen

VideoPlayer

Tablet

Smartphone

Laptop

Desktop

TV-Screen

At Home

Out of Home

0hrs 8hrs4hrs 16hrs12hrs

Smartphones & Mobile Devices are Increasingly the ChosenMedia for Watching Video; QoE is Paramount


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Contents





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Globally, Numerous LTE Deployments Enable MobileBroadband; Latin America Strives to Reach Momentum

LTE deployment activity gained globalmomentum in 2012; today there are over 200live LTE networks globally in 75 countries.

Latin America strives to gain momentum with25 commercial networks, as of August 2013.

In-Service LTE networks-Worldwide

Sources: Global Mobile Supplier Association, 4G Americas (August 2013)

2

16

46

146 202

260

0

50

100

150

200

250

300

2009 2010 2011 2012 2013E

LTE Launches-LA Region

Band (MHz) Countries

2500-2690 8

1700/2100 7

700 41900 3

1800 2

850 / 1900 1

2013 projection

12

25 In-Service Networks in

Latin America
http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=-AxMtICnPCMJPM&tbnid=0TT51ftaCLbaDM:&ved=0CAUQjRw&url=http://www.softicons.com/free-icons/web-icons/north-america-flags-icons-by-studiotwentyeight/virgin-islands-icon&ei=VoDkUZKjFan3igKRrYD4Dg&bvm=bv.48705608,d.cGE&psig=AFQjCNHXzSgD0BZUkPWr7PVQ2nM2kED39w&ust=1374015946638110http://www.google.com/url?sa=i&rct=j&q=chile+flag+icon&source=images&cd=&cad=rja&docid=8Q5t7fT063qCbM&tbnid=tNEl0YnLOyoi4M:&ved=0CAUQjRw&url=http://www.iconseeker.com/search-icon/rounded-world-flags/chile-flag-2.html&ei=vz-6UdLpAca_qgG3g4DYDg&bvm=bv.47883778,d.aWM&psig=AFQjCNHxu_ewXrQsiCkAgZ14ltlhsLxr6Q&ust=1371246904792419


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Latin American Operators are Focusing Deployments onHigh Density Urban Areas using 2.6 GHz and AWS spectrum

Distribution of Current Commercial

LTE Networks by Spectrum Band

Unlike the rest of the world, in Latin America 2.6GHz (not 1800 MHz) is currentlythe most used band for LTE in the region, followed by the AWS band.

Time-to-market objectives drive the spectrum choices for early LTE deployments Following the example of leading US operators, AWS is becoming a popular mid-

term solution

Sources: regulators, operators, Pyramid Research

13

0%

10%

20%

30%

40%

1800 2600 700 800 AWS 2100 850 1900 900Percento

fLTEnetworks

Global Latin America


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As a Result, LTE Subscriptions Will Grow Faster inLatin America than Most Regions

LTE subscriptions in Latin America to multiply from about 2 million to over 70million in 2018, a five-year CAGR of 93.4%, almost 3X the growth in North America.

CAGR by Region of LTE Subscriptions2013-2018

114%

93%

69%

67%

66%

34%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%

AME

LA

CEE

APAC

WE

NA


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Brazil leads the regional subscriber growth and willaccount for almost half of the regional market in 2018

Brazil LTE deployment and subscriptions will take off as the country gears up

for the major sporting events in 2014 and 2016. Peru will experience the highest growth and together with Brazil, Mexico and

Argentina will account for 73% of total LTE subscriptions in the region by 2018.

Latin America LTE subscriptions 2013 vs. 2018,Top Countries

Brazil

ChileColombia

Mexico

Peru

Uruguay

Venezuela

Rest ofregion

Argentina

Brazil

Chile

Colombia

Mexico

Peru

Uruguay

Venezuela

Rest ofregion


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Supply of LTE devices in the Americas is driven by demand and specifications of

large US carriers such as Verizon and AT&T. LTE smartphones and tablets are being sold as premium products for the user

that demands speed and can pay for it. Manufacturers such as Samsung will position their mid-priced portfolios (such

as Mini versions of Galaxy S3/S4) for the short term.

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The LTE Device Ecosystem Growing at a Strong Pace;High Prices Challenge Operators in Emerging Markets

Over 900 LTE devices globally

Source: Global Mobile Supplier Association, August 2013 (GSA)

~316~132

SMARTPHONES DONGLESROUTERS /

PERSONAL

HOTSPOTS

MODULES

~297

TABLETS

~90 ~76 ~29

NOTEBOOKS

~9

OTHER


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Contents





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Analysis of Operators Strategies Surfaced 2 MainAreas of Focus to Make the Business Model Work

NetworkChallenges Monetization Challenges

Spectrum constraints:capacity, allocation timing,caps

Ambitious 4G coveragemilestones imposed byregulators

Required investmentsincluding backhaul capacity

Need for multiple solutionsto achieve adequatenomadic and indoor QoS

Price point for premium 4Gdata plans: how to price speed

Affordability of devices:

balance of device subsidystrategies between 3G/4G

Monetization of contentespecially video: how toinnovate and rollout servicesand content that will drive

ARPU from 4G users beyond 3Glevels

Achieving economies ofscale under spectrumfragmentation

Monetization of LTEtraffic: contribution torevenue vs. EBITDAmargin


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A Business Model Challenge: Aligning Data Traffic,Revenues and Margins

Data Contribution to Revenue vs. EBITDA Margin Evolution


-10.00

-8.00

-6.00

-4.00-2.00

0.00

2.00

4.00

6.00

10% 20% 30% 40% 50%

EvolutionofEBITDAMargin

OverPast3Years(pp)

Data (Non-SMS)Contribution to Revenue

Strong Data Performance HasDriven Up Margins

Limited data - Limitedprotection against otherpressures to the business

Non-desirable spot Datacontribution up, margins down


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Network RolloutStrategies

Time-to-market strategies, suchas spectrum re-farming

Rollout of 4G to boost capacityand performance of 3G

Network sharing: choice ormandated

Solutions for QoS: IntegrationWiFi hot spots and small cells to

improve coverage quality Investment in OS functionalitiesand analytics capabilities

Pricing & ContentStrategies

Price positioning and differentiation byfeatures (speed and QoS) and service

Device subsidies according to user typeand service plan

Service Pricing: Premium pricing vs.market penetration pricing

Service and content innovation VAS, Mobile HD Video, Mobile

Gaming, VoIP, Social NetworksApplications

With Long Range Network Strategy in Place, Pricing andContent Innovation Drive Success in the Short-Mid Term


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Pricing Right to Monetize- Some Early Examples

PricingStrategy

Pricing objectives Operators

Premium

Charge apremium

over 3Gservices

Service quality leadership. Subscriber segmentation. Promote an aura of exclusivity around the service and

attract higher-value subscribers. Position LTE as a premium service based on its

improved data speeds.

MovistarMexico

Claro ChileVivo Brazil

MarketPenetration

Data isdata, andLTE is justfaster data

Quickly build subscriber base. Encourage migration to 4G to alleviate congestion in

3G network. Attract price-sensitive subscribers. Maintain the per MB cost, but under the rationale that

users will need high amounts of data in order to have agood 4G experience, introduce more expensive, high-tier data plans.

Telcel MexicoClaro BrazilTIM Brazil

Entel Bolivia

Sample LTE pricing strategies, Latin America, 2013



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Innovating to Monetize- Services and Content

Beyond speed, video services such as cloud-based online gaming, video on-

demand and video streaming will be the primary drivers of LTE ARPU.

Operators can generate incremental revenue by offering their own content fordownload to the phone, such as OTT video or HD video streaming services.

Partnerships with OTT providers

can reduce time-to-market bydeploying a ready-to-go OTT videoservice, and increase operationalefficiency.

Locally relevant content such as

local TV channels and live sportingevents.

Example of OTT video services in Latin America

Sources: Provider web sites


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Contents





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Mobile Broadband /LTE Play a Key Role in theDevelopment of Smart Cities

LTENETWORK +

ICTSOLUTIONS

E-GOVERN-MENT

E-SECURITY

CAR ANTITHEFT

TELEMATICS

FLEETCONTROL

E-TICKETINGFOR MASS

TRANSPORT

SMARTHOMES

E-HEALTH

SMARTMETERS

FORUTILITIES

The deployment and success ofnew 4G LTE networks will beessential to create "smart mobility"of cities and citizens.

LTE capacity guarantees bandwidth

and latency required to fill the gapbetween the fixed world and themobile world.

The Smart City depends largely onbroadband services to powertransformative applications:

e-health, e-government andmachine-to-machine (M2M), such asremote energy monitoring, securityservices, infotainment, fleetmanagement & other



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Summary Globally, Mobile Broadband is experiencing tremendous growth driven by solid demand for

mobile data usage from smartphones, tablets and a wide array of data-capable mobile

devices.

Emerging markets such as China and Latin America will lead the growth in the next 5 years.In Latin America, mobile broadband is rising to become a likely substitute of fixedbroadband.

Video is by far the most compelling data application and its consumption from Smartphonesand mobile devices is on the rise, putting strong demands on capacity.

To capitalize on the Mobile Broadband opportunity and increase capacity, mobile and fixedoperators are investing in LTE as the technology of choice to deliver high quality userexperience in data. These investments coupled with upcoming auctions, and a healthydevice ecosystem will make high speed data via LTE ubiquitous.

Although currently deployments in Latin America are relatively few, the regions LTE

launches will ramp up driving a tremendous growth in LTE subscriptions in the next 5 years.

LTE development in the region poses network, marketing and business models challenges foroperators which call for innovative PRICING and CONTENT offers.

LTE/mobile broadband will be the engine behind the viability of Smart City initiativesbringing together citizens, government, private enterprises and ICT service providers.


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THANK YOU!

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Maritza Morales

Mobility & Broadband Practice Leader

[email protected]

Daniele Tricarico

Strategy & Innovation

[email protected]

Juan Gobbi

Account Relationship

[email protected]

evolution bb in latam

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