The Latin American cellular and personal communications services market is projected to grow at a compound annual rate of 16 percent in the area’s major countries, reaching $39.5 billion by the year 2000, according to a new report from New York-based Northern Business Information.
In “Latin American Cellular Operators, 1996,” NBI estimated $3.4 billion in total revenues for the major markets last year.
The company said the total Latin American subscriber base stood at 3.9 million users in 1995, but is projected to reach 18.4 million subscribers by 2000, with an additional 1 million PCS subscribers possibly added to that total. Strong demand from Brazil could by itself account for as many as 10 million subscribers by the end of the century.
NBI reports the continuing unavailability of conventional wired telephone lines is one of the biggest market drivers.
“The Latin American cellular market continues to be among the most vibrant of the global markets for cellular services,” said Marta Kindya, NBI analyst and author of the report.
“In the case of Venezuela and Brazil, much of this growth can be attributed to the lack of a wired infrastructure,” she said. “In other Latin American countries, the elimination of connection fees is playing an important role.”
The report also notes a growing perception among both middle-and lower-income consumers that cellular phones provide important safety benefits.
Latin American operator revenues are not growing as fast as their subscribers due to changing user demographics plus economic uncertainty, inflation and currency devaluation.
Devaluation inflicts a double whammy on operators: Inflation-driven price hikes mean lower usage of the network and profits repatriated to foreign owners plummet when translated to dollars.
“One market that has avoided these debacles has been Peru, which, since 1994, has been charging dollars for cellular service. There the market characteristics have remained steady, and tariff packages have not undergone wild swings in price,” the report said.
NBI reports swings in currency valuation have seriously affected Mexico and Venezuela resulting in high levels of churn and fraud as well as decreased monthly usage.
The company reported Mexico had the slowest growth of the major markets and will be stagnant the next two years, recovering in 1998 with help from PCS.
