 Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
During the last decade, Latin America’s telecom industry has seen the rise and fall of many challengers to the iDEN “push-to-talk” service. The would-be successors used different technologies and had the backing of operators as diverse as Mexico’s Unefon (now part of the Iusacell Group), Colombia’s Comcel, and Argentina’s Movistar. But, none of these operators was able to capture a large portion of the region’s iDEN subscribers.
There are many explanations for this phenomenon. They range from the technological limitations of the PTT services that the mobile operators launched over cellular/PCS networks to the value-added services provided by the iDEN operators. But few of these explanations center on the tailored solutions for business customers that were provided by operators like Avantel in Colombia, RED Intelfon in El Salvador, or any of the various of NII Holdings’ Nextel-branded operations in Latin America.
Nonetheless, iDEN operators’ traditional differentiators are rapidly disappearing as mobile network operators (MNO) increase their focus on business segments and mobile virtual network operators (MVNO) center their growth efforts on data-centric applications. The evolution of PTT over cellular (PoC) applications and the expansion of next generation packet switched data networks means that any MNO or MVNO wanting to offer PoC services can easily do so.
Despite the aforementioned resilience, iDEN technologies are contemplating their last days in Latin America. The technology’s death sentence didn’t originate in a region that was never able to accumulate enough subscribers – 10.7 million at year end 2011 – to guarantee its survival. iDEN’s imminent demise is the result of a combination of other facts, including:
1) Motorola proprietary technology, which guaranteed higher prices than traditional mobile technologies,
2) Strong dependence on U.S.-based iDEN operations for an economy of scale, and
3) Lack of strong, worldwide adoption of the technology.
However, these facts were always present during the deployment and subscriber growth of iDEN networks.
The technology’s death sentence was the acquisition by Sprint of Nextel Corporation and the subsequent announcement that the operator was planning to migrate all of its iDEN subscribers towards 3G+ technologies. Luckily for RED Intelfon, Avantel, and NII Holdings, Sprint Nextel faced several challenges that delayed the shutting off of its iDEN network. As the U.S. operator renegotiated with Motorola the support of iDEN technology until 2013, in Latin America only NII Holdings operations seemed willing to deploy a traditional 3G+ technology that would offer a viable path to migrate away from the soon-to-be obsolete technology.
As of May 2012, NII Holdings already launched 3G+ services in two markets (Peru and Chile), while two others (Brazil and Mexico) are scheduled to go live by December. The only wildcard for NII Holdings is Argentina, where the operator is not alone in its request for the licensing and allocation of mobile spectrum by the authorities. Nonetheless, the low spectrum cap – 50 MHz per operator – that exists in this market positions Nextel Argentina as one of the virtual winners of any future spectrum auction. On the other hand, Avantel has remained a niche player that hasn’t shown much interest in participating in Colombia’s upcoming mobile spectrum auction. The other “large” Latin American iDEN player -RED Intelfon – has yet to announce the deployment of 3G+ technologies in its two markets: Guatemala and El Salvador. At least until now, El Salvador has shown more will to allocate spectrum to a new mobile player even when it means the indefinite delay of the Claro/Digicel merger.
Signals Telecom Consulting considers that it is necessary to understand the iDEN operators’ traditional business model prior to identifying their growth potential after migrating away from this technology. With the exception of Puerto Rico’s Proxtel Wireless, iDEN services in Latin America were commercialized differently than in the United States. In other words, one cannot talk about having ‘subscribers’ churning from an iDEN to a mobile operator, but mostly of one enterprise customer canceling (or not renewing) their contract and then assigning it to a mobile operator. Luckily for the iDEN players, this was difficult to do because churn between companies is much lower than for individual users, as the company would have to replace all of its handsets and proprietary and customized applications offered by the iDEN operator would need to be replicated by the new operator (cutover processes are always painful).
Most of these traditional advantages – tailored/customized applications will always be key differentiators – would disappear as iDEN networks are turned off and all market players begin to compete with the same technology and service capabilities. This new scenario will force iDEN operators to seek opportunities beyond their traditional addressable market and enter the fight for the consumer segment. NII Holdings operations in Chile and Peru have exhibited some of the strategies that could be expected throughout the whole region: emphasis on mobile data connections and, specifically in Chile, the negotiation of a national roaming agreement (although a MVNO would serve the same purpose).
Outlook
There is no doubt that the migration towards 3G+ mobile technologies will translate into increased competition for Latin American iDEN operators. Nevertheless, regional iDEN operators shouldn’t experience the same subscriber hemorrhage that characterized the initial years of the Sprint Nextel merger in the United States. The markets and dynamics are different. For example, in the United States, Nextel also targets the mass market. There, number portability implementation didn’t always have the consumer as the main beneficiary. Sprint Nextel faces 5Â to 8 mobile players in each market, compared to 2 to 3 for iDEN operators in Latin America markets.
The future of at least four of NII Holdings operations has been defined, with only the viability of Argentina depending on the local government’s decision to allocate mobile spectrum over the short term. Even in this market, the operator could be hopeful since the government’s latest promise to identify 2012 as the year that the decade-long wait for a spectrum auction would end. The future of the other iDEN operators – RED Intelfon and Avantel – doesn’t seem so clear. Although acquisition by a larger player is always plausible (rumors of NII Holdings interest in Avantel has been going around for years) it’s clear that these operators need to migrate towards 3G technologies either by deploying their own networks or at least by transforming themselves into hybrid MNO/MVNO players. If they select this latest option, hopefully they would have better luck than Ecuador’s Alegro or their future as viable telecom players will be compromised.
Jose Otero is president of Signals Consulting. Follow him on Twitter (@Jose_F_Otero) or email him at [email protected].
