Only a year ago, prospects for the GSM standard in Latin America seemed dim. At that time, Chile’s Entel PCS and Venezuela’s rural operator Infonet were the only operators offering GSM-based services in Latin America, and only a handful of other operators in Bolivia and Paraguay had plans to roll out GSM-based mobile services.
A recent wave of PCS licensing in Bolivia, Peru and El Salvador and, most importantly, Brazil’s decision to auction licenses in the 1800 MHz GSM band-as opposed to the 1900 MHz band-have significantly altered the landscape for GSM in Latin America. Furthermore, what once seemed risky-the award of GSM licenses-has now become a rising trend among Latin American regulators.
Regional roaming, one of the main concerns for the first operators that adopt GSM, is no longer a significant impediment given the fact that by 2002, there will be at least one GSM operator in almost every country in Latin America. Some countries, such as Bolivia, Brazil and El Salvador, will have at least two GSM carriers.
More remarkable than the award of GSM-exclusive licenses or the buildout of GSM networks from scratch has been the conversion of existing TDMA networks to GSM or, as in the case of Entel PCS in Bolivia, undertaking future expansions of TDMA networks using the GSM standard. El Salvador’s Personal, a subsidiary of France Telecom, initiated this trend when it replaced a TDMA network with GSM infrastructure in early 2000, just one year after the original TDMA network was deployed. Telcel, the largest operator in Mexico, is planning a GSM/General Packet Radio Service (GPRS) overlay to its TDMA network.
Pyramid Research has identified two interrelated factors behind the rising receptiveness to GSM in the region. First, there is an increasing consensus among operators and regulators that GSM may be the best-suited standard for third-generation (3G) migration. Second, France Telecom and Telecom Italia, strong proponents of the GSM standard in Europe, are increasing their presence in Latin America, and with them, the presence of GSM in the region.
In the early to mid-1990s, GSM was not an option for Latin American operators because of the region’s collective decision to follow the U.S. standard for awarding mobile licenses, which favored the 800 MHz band over the 900 MHz GSM band. Early PCS awards also saw the limited adoption of GSM given the fact that licenses, for the most part, were awarded to existing players that had already deployed TDMA or CDMA networks and opted to continue their buildout using the same standard.
In the mid- to late 1990s, 3G services seemed like such a distant reality that operators were not concerned about their mobile standard as it related to their migration to 2.5-generation (2.5G) and 3G technology. Increased awareness about next-generation technologies and services, the award of 3G licenses in Europe, and the increasing importance of mobile services as a basic means of connectivity have contributed to bringing 3G migration to the forefront.
The perception that GSM offers the best migration path to 3G is growing in the region, and not only are regulators pushing and new players adopting the standard, but existing players are also converting recently deployed TDMA networks to GSM. The perception of GSM’s superiority as a standard will be further enhanced by reports that cutting-edge global mobile operators, such as MobileOne (M1) in Singapore, are replacing CDMA networks with GSM-based systems.
Leading European mobile operators France Telecom and Telecom Italia have led the recent adoption of GSM technology throughout the region. Driven by the desire to develop truly global networks that enable global roaming and enjoy economies of scale in equipment purchasing, France Telecom and Telecom Italia are deploying GSM networks regionwide. Telecom Italia, for instance, has pursued a GSM strategy in Chile, Venezuela, El Salvador, Peru and now Bolivia. France Telecom has similarly pursued its own GSM strategy in El Salvador. Both are expected to participate in the upcoming GSM PCS licensing process in Brazil.
Given their commitment to GSM and their joint participation in Argentina’s Telecom Personal, Pyramid Research suspects that France Telecom and Telecom Italia will consider upgrading their TDMA network in Argentina to GSM. As these operators continue to expand throughout the region, Pyramid Research estimates GSM technology will expand with them.
Although TDMA technology continues to be the dominant standard in Latin America-more than 50 percent of subscribers operated on the TDMA standard at year-end 2000-signs show
TDMA’s predominance in the region is beginning to wane. As mentioned, European-backed operators that have traditionally used the TDMA standard are currently migrating their networks to GSM technology, but the migration is not limited to TDMA-GSM technology.
BellSouth, which operates a TDMA network in Colombia, is replacing that network with a CDMA-based network, an even more complex conversions than the TDMA-GSM conversion taking place in El Salvador and Bolivia. In an effort to enhance its regional roaming network and follow a similar 3G migration path in all 10 countries in which it operates, it is probable BellSouth will seek similar standard conversion strategies for TDMA-based networks in countries such as Ecuador and Panama. The decision of BellSouth, Telecom Italia and France Telecom to abandon TDMA, at least for future expansions, would mark a significant blow to the development of the standard regionwide.
This is not to say TDMA will soon disappear from Latin America. TDMA growth will continue to be driven by operators that currently lack personal communications services (PCS) spectrum as they expand regionwide. In addition, the cost of replacing existing TDMA infrastructure with GSM, both in terms of infrastructure and the triple mode (AMPS/GSM/
TDMA) handsets that will be needed to operate on these systems, may be prohibitive, particularly for operators covering millions of subscribers across wide geographic expanses.
Pyramid Research anticipates that operators with hybrid cellular and PCS networks will use existing TDMA infrastructure for rural expansions and reserve PCS frequencies for GSM growth in metropolitan areas, the most attractive markets for next-generation services. This was a strategy adopted in the mid-1990s, as operators built out digital networks in metropolitan areas and moved their analog networks to rural areas.
Leslie Arathoon is a regional manager in Pyramid Research’s Latin America group.
