Chile, Brazil and Argentina Leading Telecoms Investment in Latin America

Panama City, Panama, July 25, 2013 – Investment in the Latin American telecoms industry grew significantly between 2008 and 2011, as key countries acknowledge that growth in this sector can improve the economy by promoting new and innovative ways of doing business.

According to data from the Ovum and AHCIET’s Observatory*, Chile experienced the highest investment in telecoms per capita in the region in 2011 with US$69.83 per inhabitant, followed by Brazil (US$63.36) and Argentina (US$59.94). Mexico (US$31.34) and Colombia (US$30.64) follow in fourth and fifth. Countries with the highest absolute investment growth between 2008 and 2011 were Argentina (97%), Colombia (40%) and Chile (35%), followed by Mexico (20%) and Brazil (20%).  

“The increased contribution of telecoms to national economies is going some way to closing the digital divide,” says Matthew Howett, Principal Analyst and Telecoms Regulation Practice Leader at Ovum. “Giving as many citizens as possible access to the Internet is crucial to ensuring future economic growth in the region. Yet, regulators also play a key role in influencing and accelerating development in the sector, and as such, should be undertaking key reforms of the regulatory process.”

AHCIET, the Ibero-American association of research centers and telecommunications firms, noted that Chile’s data is remarkable because of its small size relative to other markets in the region. “It is not coincidental that Chile boasts the lowest tax burden and, at the same, the highest investment per capita. There is a clear incentive for companies to invest what they don’t spend on tax on extending coverage and service penetration,” highlighted Pablo Bello, AHCIET’s General Secretary.

The increase in telecoms investments in these countries has led to greater accessibility of telecoms services and stimulated growth in service penetration, greater competition in the marketplace, and reduced costs for consumer access. Average revenue per user (ARPU) has declined in Mexico by 15%, in Brazil, Colombia and Chile by 13%, and in Argentina by 1% between 2008 and 2011. In all five countries, the cost of mobile broadband access is less than 2% of GDP per capita, with Colombia leading the region in affordability at 0.18%, and Mexico taking third place with 0.61% GDP per capita for entry-level broadband access. However, this does mean that mobile operators today generate less revenue per user despite the significant growth in the number of people connected and the growing expansion in service coverage.

In response to increasing competitive pressure, operators have made a strong commitment to continue to invest in new networks, services and technologies. “This industry is very investment-intensive, particularly for operators that develop networks. This scenario requires a long-term regulatory vision because the countries that are working towards closing the digital divide require strong industries that are able to make the necessary investments in order to reach all users at accessible prices,” concludes Bello.   

Key data by country:

Argentina:

Telecoms companies in Argentina have doubled their investment during the period analysed. Capex has grown from US$1.2 billion in 2008 to US$2.5 billion in 2011, an increase of 103% during the period 2008–2011

Brazil:

Telecoms companies in Brazil have increased their investment by more than US$2 billion (23%), which represents the second highest level per capita in the region.

Chile:

Telecoms companies in Chile invested US$1.2 billion in 2011, which represents growth of almost 40% since 2008 (US$869 million)

Colombia:

Telecoms companies in Colombia invested approximately US$1.4 billion in 2011, which represents an increase of 46% since 2008.

Mexico:

Mexico shows the second highest level of total investment in the sector. Investment in 2011 was US$3.5 billion, which represents growth of 24% since 2008. This investment increase is particularly significant given that companies in Mexico experienced revenue decline over the same period of 3%.

About this study

*The Ovum-ACHIET Observatory provides analysis of regional and national growth trends, investment and industry financials and covers 15 countries in Latin America over the four year period of 2008 to 2011. It will periodically deliver reliable and relevant indicators for governments, regulators, enterprises, international organisations and academia to identify the variables that may accelerate or delay the full integration of Latin America into the Information Society.

The Observatory includes 31 key indicators created from more than 10,000 data points collected directly from telecoms companies in the region.

The study differs from others in the market because most of the data was obtained directly from telecom operators and measures the direct contribution of telecoms to the respective local economies. Future iterations of the study will aim to expand on the industry data and include additional indicators that quantify and track the indirect contributions of the telecoms sector.

For details of the indicators by country or for more information, please visit the Observatory website at www.observatel.net. For more information on telecoms in Latin America, please visit www.ahciet.net and www.ovum.com.