WASHINGTON-The story of the calling party pays (CPP) system for cellular service in Latin America has been a successful one for almost everyone involved, expect paging operators. The messaging sector has seen its subscriber growth dwindle as cellular telephony has become increasingly more affordable and available in the region.
Net annual adds for paging subscribers in the region fell from 550,000 in 1997 to 450,000 in 1998, according to figures from U.S.-based BIA Consulting. Year-over-year subscriber growth was at 34.6 percent in 1995, falling to 26 percent in 1996 and 17 percent in 1998.
Total paging subscribers numbered 3.1 million as of year-end 1998, according to BIA. Overall, paging currently has a penetration rate of 0.70 percent in the region, according to figures from Paging Network do Brasil S.A. (PageNet do Brasil).
Paging providers in many countries are still small-scale, family-operated businesses that are ill-prepared to face the cellular challenge.
In Colombia, cellular providers have been waging an aggressive marketing campaign, with phones being given to customers as promotional gifts. “It is very hard to compete [with cellular providers]. No longer is paging a complement to the cell phone,” said Juan Manuel Escallon, general manager at paging operator Delacom S.A., which has 16,000 subscribers in Colombia.
Edward Czarnecki, director-international consulting at BIA Consulting, believes paging providers need to educate the population about the value of the product.
“This market-education process hasn’t occurred as thoroughly as it should,” said Czarnecki. “Paging providers continue to face the challenge of convincing the mass market of the value proposition their service has to offer. In some markets, the perceived utility of the product itself is out of synch with the relatively high price [of alphanumeric paging].”
Options to revitalize the sector include calling party pays and prepaid for paging. However, neither is expected to be the sector’s savior.
“No company [in Colombia] has the means to launch the necessary marketing campaign to successfully make people aware of calling party pays,” said Escallon.
Carolina Pulido Rincon, operations manager at Colombia’s Mensatel Comunicaciones, added that “calling party pays wouldn’t work for paging [in Colombia]. It would be a nightmare to get the phone companies to get the billing right. From a business point-of-view, the company loses control over cash flow and strategy.” Mensatel currently has about 8,000 subscribers.
Czarnecki agreed that CPP poses significant risks, such as a carrier losing touch with its subscribers and their needs, but he added that it could nonetheless provide a useful tool for the sector.
For Thomas C. Trynin, president of PageNet do Brasil, CPP for paging could work in Brazil, but “paging would have to go through a bad time before this happens.” Brazil isn’t ready for it because paging carriers don’t yet have the close relationship with telephone companies that is necessary to make the CPP billing process work, he explained.
Trynin is even more reserved on prepaid: “With prepaid, the [pager] user isn’t in control anymore. The person paying the bill tries to limit whom he gives the number to.”
Wilson Olivieri, PageNet’s chief operating officer, also fears cannibalizing its existing product: “Unless you are really sure the volume of sales will compensate the loss of revenue, it’s not a venue worth pursuing.”
PageNet started operations in Brazil in mid-1997, and currently has more than 100,000 subscribers in Sao Paulo and Rio de Janeiro. In Brazil, the market experienced 100-percent growth in 1994, 1995 and 1996, but dropped to 50 percent in 1997. Because of the economic crisis afflicting the region, little to no growth is expected for 1998.
The financial crisis may prove to be a mixed blessing for paging operators. On the one hand, customers are realizing they actually cannot afford their cellular bills, and are returning to paging. On the other hand, collection problems are now common in the sector.
PageNet do Brasil is taking this problem seriously: “We try to get a little closer to our customers when we sell our product. We perform more credit checks, and try to attract those customers that are able to pay for the product,” said Trynin.
According to Olivieri, “The current moment of economic crisis requires us to be slightly more benevolent than we normally would.”
As if the sector didn’t have enough challenges to face, two-way paging (or narrowband PCS) looms ahead, ready to enter several countries, including Argentina, Chile, Mexico and Peru. Although N-PCS will provide a boost to the messaging sector overall, it almost certainly will lead to a decrease in numbers for conventional paging.
BIA’s Czarnecki forecasts 5.7 million paging subscribers in 2001, including both conventional and two-way.
