We recently came from LatAm and we got significantly interested in the fixed line and broadband market in these countries. We are currently preparing a broadband and fixed-line LatAm markets assessment with a detailed service offering and promotions benchmark of leading mobile and triple-play operators and we wanted to highlight some insights we found interesting.
In mobile, 62% of the promotions were for prepaid plans, and 52% were intended primarily to win new clients; 77% encouraged an increase in the consumption of telephone minutes, but price reductions potentially hurt revenues per user (ARPU) in 59% of the cases. The promotions were responded by competitors in 77% of the studied cases.
Among the landline promotions (including triple-play), 85% were focused on winning new clients or selling new products to existing customers, although 49% negatively affected the ARPU of the operators’ main product. Competitors retaliated in 53% of cases (which shows that this segment is relatively less aggressive than mobile).
Although we expect pressure in mobile ARPUs in Mexico, Brazil and Colombia, we remain optimistic on America Móvil. The cases of Argentina and Chile indicate that as penetration increases, promotions focus more on the post-paid and Internet segments, which opens the door to a recovery in ARPU over the long term. Also, with the cut in capex for 2009 (-30% YoY), we expect solid cash flows and payouts. In triple-play we are cautious on Telint because of Brazil’s deteriorated competition environment.
Brazil’s deteriorated competition environment? – you would ask…definitively yes.
You have to be here to see the strong response from Telefonica (TEF) to Telemar with “Muito, Muito.” – Telemar unleashed a price war that was promptly answered by competitors-. The best example of the price war in Brazil is the “Win 30 times” promotion, in which Telemar offered to multiply refills by 30 times for users in the month after their payment is credited. Since Telemar users who signed on for this promotion can also use the free balance on long-distance calls to landlines, we think LD prices will be under pressure in the short term, particularly because other carriers responded with similar promotions.
In our opinion, the best response to Telemar’s aggressiveness came from Telefonica, which launched a creative advertising campaign called “Muito Muito”, in which users take part in a massive price drawing (more than 44 million prizes have been given out). We therefore believe ARPUs will remain under pressure in Brazil despite the upside potential on minutes of use (MOUs).