Argentina: land of opportunity

It's not just the steaks that are heartily sized in Argentina, as the market now boasts the highest penetration rate in Latin America.


May 8, 2008

6 Min Read
Argentina: land of opportunity
Country profile: Argentina

It’s not just the steaks that are heartily sized in Argentina, as the market now boasts the highest penetration rate in Latin America.

In the early part of this decade, Argentina – one of the wealthiest Latin American nations – was mired in a debilitating economic crisis that saw the government default on all of its international debt at the end of 2001. Nonetheless, the mobile market has proven resilient, and Argentina’s mobile sector was the third fastest growing in Latin America during 2003 and 2006.

Mobile services were launched in Argentina in 1989 when Movicom, a subsidiary of BellSouth, launched its AMPS network. This was followed by Miniphone in 1993 and CTI Movil in 1994. In 1999 Movistar and Telecom Personal entered the market, followed by Nextel, fully owned by NII Holding, at end-2000.

In addition, in 2006, Cooperativa Telefonica del Calafate (CoTeCal) launched CDMA services on its 450MHz licence. The number of mobile operators decreased in 2005, when Telefonica completed its acquisition of Movicom Bellsouth and received regulatory approval to merge the property into its own mobile unit, Unifon. The merged company gained significant market leadership, with more than 45 per cent market share. Telefonica relaunched it in April 2005 with the trading name Movistar.

With 40,663,000 subscribers at the end of March this year, according to figures from Informa Telecoms&Media’s (ITM) WCIS, Argentina is the third largest cellular market in South America, after Brazil and Mexico. The market has hit saturation point, with penetration breaking through the 100 per cent barrier during the first quarter of this year.

Technologically, the Argentine market is diverse, featuring GSM, CDMA, TDMA WCDMA, HSDPA and even an iDEN network, operated by Nextel Argentina. The AMPS networks belonging to the three other players, CTI, Movistar and Personal, were shut down at the end of last year.

At the end of March, according to ITM, CTI – operating under the Claro brand – was the leading player in subscriber terms, having overtaken Movistar last year, and is maintaining a gradual acceleration to increase the distance between the two. With market share of 37.2 per cent, the firm had 14,278,300 subscribers on its GSM 800/1900 network and 5,000 subscribers to its fledgling WCDMA network, which it launched in November last year. Its CDMA subscriber base has been steadily decreasing, meanwhile, and CTI shut the CDMA network earlier this year.

Movistar places second in the Argentine market with 14,076,600 customers at the end of Q1 this year, which translates to a market share of 34.6 per cent, indicating that it is losing small amounts in market share on a sequential basis.

The vast bulk of its customer base – 12,806,000 users – subscribes to the firm’s GSM1900 network. It has 626,700 subscribers on its US TDMA network and 633,300 on a CDMA network that it inherited through the 2005 acquisition of US carrier Bellsouth’s operation in the market. Between 2004 and 2005, Telefonica absorbed Bellsouth’s entire Latin American portfolio.

In July last year, Movistar launched Argentina’s second WCDMA network, which had attracted 10,600 users by the end of March and the firm is looking to consolidate its play around GSM and WCDMA. Indeed CTI and Movistar have indicated plans to migrate 1.5 million subscribers to their GSM networks by June of this year, with Movistar pledging to allow its TDMA customers to retain their telephone numbers.

The first 3G operation was launched a couple of months earlier, in May 2007, by Personal, the mobile arm of Telecom Argentina. Ranking third in subscriber terms, Personal has 11,415,800 users on its GSM1900 network, and 34,200 on its WCDMA service, making it the leading 3G player in the market. Bringing up the rear by a considerable distance is the niche iDEN network of Nextel Argentina, which with 853,100 users, is still growing its subscriber base month on month.

For a market of high penetration, growth has remained strong over the past year, with the market growing in size by 24.22 per cent from the end of March 2007, when Argentina had 32,735,400 subscribers. ITM predicts slower growth going forward, with the market reaching 53.7 million subscribers by the end of 2011, by which point penetration will have reached 128.24 per cent.

Prepaid is the dominant payment method in Argentina, and its share has remained fairly constant in recent years. At the close of Q1 this year, there were 29,605,000 prepaid subscribers in the market, a share of 72.8 per cent.

SMS is popular in the Argentine market, with the nation’s mobile users generating in excess of ten billion text messages in Q3 of 2007, according to Informa. Movistar and CTI ranked among the top 20 carriers worldwide for SMS volumes during the same period. Movistar also has some 3,030,750 MMS subscribers, and reported 12 million MMS messages sent in the third quarter last year, again ranking it in the top 20 global operators.

Movistar is some way ahead of CTI in terms of data revenues as a percentage of overall income. For the Telefonica-owned operation, the figure is comparatively high, according to Informa, at 30 per cent for the third quarter of last year. For the same period, CTI’s data services accounted for just 19 per cent of total revenue, with Personal close on Movistar’s heels with a figure of 27 per cent.

In other service developments, Movistar and bank Santander Rio announced the launch of a new mobile banking service in May 2007. Subscribers are able to send an SMS message including a keyword such as ‘saldo’ (bank balance) and receive information to their mobile phone regarding their bank account.

The move followed an earlier agreement with Banco Frances to launch a separate mobile banking service in Argentina. The service will allow customers to make payments, transfers and other banking operations from their mobiles. Customers will be able to make bank transfers to third parties, by sending an SMS from their phones.

Movistar’s revenues for 2007 increased 18.7 per cent year on year, to hit $2.11bn. On releasing its 2007 figures, Telefonica said that revenue growth, coupled with lower unit commercial costs and customer management expenses, as well as lower network expenses, translated into an operating income before depreciation and amortisation (OIBDA) of $654m. Despite these lower network expenses, capex increased 33.2 per cent year on year, to a figure of $192.5m for 2007.

Personal, meanwhile, reported 2007 revenues of $1.58bn, a 34 per cent increase year on year. The carrier’s ARPU was $12.31 at the close of last year. But the firm’s profits took a leap for 2007, growing to $116.8, an almost fivefold increase year on year. America Movil, which reports consolidated financials for its CTI operations in Argentina, Uruguay and Paraguay, had not published full year figures at the time of writing.

Given how recently the Argentine economy was in crisis, the health of its mobile sector is impressive. It’s a key market for the regional players which dominate Latin America and the fact that it is forecast to push far beyond the 100 per cent penetration mark gives those carriers plenty of opportunities for further growth.

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