2012 Argentina - Telecoms, Mobile, Broadband and Forecasts

Argentina’s telecom revenues flourish driven by fixed broadband and 3G mobile

While Argentina faces a number of difficulties – includinginflation, political controversies, diplomatic isolation, and declining foreign investments – the country’s economy has been expanding well above expectations.Telecom revenues were up by 21% in 2011, and they are expected to reach more than US$14 billion in 2012. In fact, compared with the rest of Latin America, Argentina has one of the most solid state-of-the-art telecom infrastructures in the region.

The government has adopted a single licence system (LicenciaÚnica), which telecom companies must obtain regardless of the services they wish to provide. Operators must list in their licence applications which services they wish to offer, but can at any time register for additional ones.All telecom providers must grant interconnection to other telecom providers.Wholesale internet is available, but local loop unbundling (LLU) has never been properly implemented and, as in the rest of the region, the broadband market suffers from lack of competition.

Argentina’s teledensity is about five percentage points higher than average for Latin America and the Caribbean, trailing only Costa Rica, Uruguay, Venezuela, and some Caribbean islands. Like other Latin American countries, Argentina shows a marked discrepancy between urban and rural areas, and fixed-to-mobile substitution has adversely affected the fixed-line market.

Besides the two incumbents - Telecom Argentina(Telecom) and Telefónica de Argentina (TASA) –there are many other fixed-line players, including about 400 cooperatives and small private companies, as well ascable TV operators such as GrupoClarín that offer triple play solutions. Yet, despite the large number of operators, there is scant competition in the local telephony sector; TASA and Telecom own respectively 48% and 44% of the country’s fixed lines in service. The long distance market, on the other hand, is highly competitive.

Argentina’sfixed broadband services are among the most advanced in Latin America, with some of the fastest and least expensive plans in the region. At around 12%, penetration is high for Latin America, though low compared with the rest of the world. The main technologies are ADSL and cable modem. Fixed wireless and satellite broadband account for about 1% of the market, while FttH is just starting. Broadband demand is expected to continue rising, particularly in areas outside of Buenos Aires.

The market for fixed broadband is divided between TASA (with ADSL services branded Speedy), Telecom (with ADSL services branded Arnet), and GrupoClarín (with cable modem services branded FiberTel). These three operators control over 97% of the market.

A national connectivity plan, dubbed ‘Argentina Conectada’, involves the deployment of broadband services and free-to-air digital TV to underserved parts of the country. The plan, launched by the government in October 2010, is to be implemented over five years. State-owned satellite company Arsat is responsible for the project.

The country’s pay television market is the most mature in Latin America. In fact, Argentina is a world leader in terms of pay TV penetration, with about three homes out of four subscribing to pay TV services. Pay TV households are evenly distributed, with penetration in the major cities only slightly higher than in the rest of the country.

Argentina is one of the most dynamic mobile markets and the third largest in Latin America, after Brazil and Mexico. Mobile penetration looks set to reach approximately 144% by end-2012, with the number of subscribers increasing by 6% annually. Many Argentineans own multiple SIM cards, some having different phones for work and personal calls, some having a phone for each mobile company to take advantage of special offers, and some requiring an additional SIM card for mobile broadband.

Prepaid cards have made mobile phones accessible to a far greater section of the population. More than 70% of mobile accounts are prepaid, but the postpaid share is slowly starting to rise. With such a large proportion of prepaid subscribers, mobile Average Revenue per User (ARPU) is less than half that found in the USA and Europe. And yet, at approximately US$13 per month, Argentina’s mobile ARPU is slightly above average for Latin America and on a par with Brazil, though trailing behind Chile and Uruguay. Since 2008, Argentina’s mobile ARPU has been gradually increasing, primarily driven by escalating mobile data revenues.

Three mobile companies compete neck-and-neck, each one controlling about one third of the country’s mobile market. AméricaMóvil’s Claro is the market leader, followed by Telecom Personal (the mobile unit of Telecom Argentina, controlled by Telecom Italia). Telefónica’s Movistar is in third place. Nextel has but a small 3% market share, and Fecosur, an association of fixed-line telecom cooperatives, offers Mobile Virtual Network Operator (MVNO) services branded Nuestro.

Market Highlights

• After years of delay, number portability was finally implemented in March 2012. A user’s first porting is free of charge, but additionalportingsare charged.
• The fastest growing telecom service in 2012 is likely to be 3G, both for mobile broadband and for cell phone internet browsing.
• Having invested AR$2.6 billion (US$607 million) in 2011, TASA has announced that it plans to spend AR$10 billion between 2012 and 2014.
• Telecom’s fixed-line revenues increased by 15% in 2011 driven by data communications and internet services.
• State-owned Arsat is building three new satellites (Arsat-1, Arsat-2, and Arsat-3).
• Argentina Conectada will require an investment of AR$8 million (about US$2 million).
• Several telecom cooperatives have been awarded pay TV licences, and a few plan to launch IPTV.
• Online social activities are hugely popular, so much so that Argentina’s Facebook user base has become the twelfth largest in the world, with 18 million unique users.
• The long-awaited auction for Movistar’s returned spectrum brings no new players to the market.
• Claro has launched HSPA+, while Personal and Movistar plan to do so by end-2012.
• Argentina has become an important manufacturer of cell phones and provides about 80% of all devices sold in the country.
• Driven by Twitter and Facebook, the combined penetration of smart phones and social phones has overtaken traditional devices.

Argentina fixed-line, broadband, and mobile statistics – 2010 - 2012

(Source: BuddeComm based on industry data)

Note¹: broadband stats for 2011 are also an estimate

For those needing an objective and high-level strategic analysis on Argentina, this report is essential reading and gives further information on:

• The development of Argentina’s fixed-line, mobile, broadband, and pay TV sectors together with industry outlook and forecasts.
• Company performance, ARPU, and spectrum awards.
• Regulatory hurdles and controversies.
• An analysis of Argentina’s broadband sector.
• The development and expansion of mobile broadband and 3G services in Argentina.
• How different scenarios are likely to affect the fixed-line, mobile, and broadband markets in the years to 2020.