This is not meant to be an in depth article but rather a collection of bits and pieces from my experience and personal observations about the trends I am seeing in the region. So without further ado here are my top predictions for the LATAM market in 2010:
(1) The economic environment and increased competition will put additional pressure on technology vendors.
During the last ten years, LATAM operators made huge investments in network infrastructure to meet growing demand and to incorporate new technologies. However, the economic downturn is forcing them to watch CAPEX spending closely and to do more with existing footprint.
The economic downturn will continue to affect CAPEX decisions; in addition to this, increased competition and changes in the relationship with mobile operators are putting additional pressure on technology vendors.
Increased competition is commoditizing network infrastructure, driving prices and margins down significantly. Vendors like Huawei and ZTE have gained market share in Latin America, winning important bids for network infrastructure. Traditional vendors like Ericsson and Comverse are reconsidering their presence and strategy for the region.
(2) New technologies in cloud computing will change the relationship between technology vendors and operators
Network operators have traditionally based their economic and business models around infrastructure CAPEX and ROI. This is understandable considering that entrusting operations to a cloud environment can be a risky endeavor and service reliability is a top priority for them. However, 'enterprise-grade' services are a reality now and 'carrier-grade' cloud services cannot be far behind.
Just six months ago, we wrote about Telefonica's launch of Personal Instant Messaging in the region (Telefonica Movistar (finally) moving in with SMS 2.0 in Latin America). This announcement was relevant not just because it's the first launch of this service in the region, but also because it is planned as a centralized, hosted solution.
Operators and technology vendors have tried for the last decade to come up with a business model that will allow them to deploy solutions without heavily investing in infrastructure, minimzing the market risk and allowing them to co-participate in a revenue share scheme with technology vendors.
What is needed now, however, is a business model that will result in a win win situation for both parties. So far, most attempts have been unsuccesful with either party having to invest heavily in infrastructure, marketing or both. Cloud based applications, however, can be the last piece of the puzzle for these initiatives, allowing for a demand based pricing solution.
This will require, however, changes in the way operators conduct business. This will require a restructuring of the VAS organization to a more simplified model, since CAPEX will no longer play a major role in the decision process. We can expect the decision process to be more customer centric.
(3) Advances in technology and changes in the customer base will drive demand for new services and applications.
As mobile market penetration reaches saturation in the region, new opportunities will open up. Revenue growth from traditional services -voice and SMS- have flattened in the last few years and operators are looking to increase ARPU through Value Added Services.
New technologies that allow managed services will affect operators' VAS offering, opening up opportunities for new players that will be able to provide services to giants like Movistar and America Movil.
In a similar manner as mentioned in my previous point, we can expect changes in VAS offerings. Traditional models will no longer work. We have seen in the last five years the limitations that a consumption based model can offer. Users have turned away from these services; despite the fact that usage trends in messaging indicate that instant messaging has a huge potential in the region (see LATAM 2009: A Mosaic of Opportunities), operators have stayed away from "all you can eat" pricing models. Such is the case for most IM initiatives in the region during the second half of the past decade (see Will 2008 be the year for Mobile Instant Messaging in Latin America?).
These are some of the major trends I see, as a result of changes in technology, competition and subscribers. I will continue to explore how these trends will affect specific markets and services in future posts.
]]>This is a follow up to my recent post in reference to F. Darmon's interview published by Telesemana at Futurecom (From Futurecom: Interview with Franck Darmon, VP Senior Comverse LATAM) where he addressed the many challenges of Latin American operators, including low SMS usage in Brazil.
I have posted before about messaging in Latin America, and about low SMS usage in countries like Brazil and Colombia (LATAM 2009: A Mosaic of Opportunities) and about call completion, one of the biggest challenges for operators in Latin America (Repackage, Reposition, Reinvent VAS services in 2009).
This is a huge problem in Brazil, where the average slamdown rate for calls diverted to voice mail is 70%.
To address this issue, operators have taken steps to deprovision subscribers from voice mail, effectively leaving them without a call completion strategy. This is one of the biggest areas of opportunity for operators in Latin America; even though voice is perceived as a service that will not grow anymore, the fact is, operators are leaving money on the table.
The solution, however, might not be in finding ways to increase MOU or SMS usage per se -as Darmon's interview seems to imply - but rather in offering subscribers solutions that meet their needs.
A solution to low call completion rates, for example, can be replacing missed calls with messaging.
In Latin America, subscribers have found ways around paying for incomplete calls: if a call goes unanswered for four rings, they hang up before the calls transfers to voice mail. They know that the called party will receive a missed call alert, prompting them to return the call. This service is offered at no cost to the calling party, effectively replacing a voice deposit with a text message.
While this may have been an unintended consequence for operators, since it generates no revenue for them, it does have the potential for connecting the called party with the calling party in several ways and missed call alert is just one of them.
Operators can consider, for example, options targeted at the calling party such as missed call alert for A party, where the calling party receives a notification when the called party is available (on busy or out of range/phone off scenarios).
Low SMS usage in countries like Brazil and Colombia can be explained in large part by the low cost of placing a call. Therefore, it makes sense that subscribers prefer to place a call rather than an SMS. However, messaging can be a solution for subscribers when the called part is not available, as usage of missed call alert clearly shows.
The best option, therefore, to address low SMS usage in countries like Brazil is in understanding user behavior and providing the right solution for their needs, rather than simply enticing them to increase usage per se.
]]>Here's the first two paragraphs:
"In the last 12 months Mobile Application Stores have evolved from hype to mass-adoption and even to currency; building an App Store marketing story can increase your valuation, even if no-one agrees what an App Store is. The mobile industry, from CEOs to developers, is engulfed in an app store hysteria such that everyone (operators, OEMs, and platform wannabees) wants to build one.
Yet the long-term reality will be very different; App Stores will become a dime-a-dozen and smart players will need to seek out where they can add and extract the most value, not what app store recipe they can photocopy the fastest. In this article we ‘ll review the present state of the market, the key App Store building blocks and where will the market be heading in two years."
Read the article at Vision Mobile.
]]>The interview is edited to a little over 8 minutes and is packed with information; Darmon covers a number of issues regarding industry trends and how they can be adapted to the Latin American and specifically Brazil: Converged Billing Solution, VAS Services, Mobile Internet & Mobile Advertising.
I recommend that you listen to the entire interview and I will post follow up comments with my thoughts on the interview and the points that Darmon makes.
]]>The question that remains is how this will play out. Setting aside differences in consumer habits and subscriber usage, what we see are mobile operators leading this initiative, an approach that may very well be setting them up for failure.
When Apple launched the iPhone in the United States, it not only introduced a groundbreaking device, it also redefined the relationship between operators and handset vendors. This device and its killer app, the Apple app sotre, changed the rules of the game (All I Really Need To Know About Mobile Applications I Learned from Apple). Mobile operators were no longer a bottleneck for new services.
In contrast to what happened in the United States, in Latin America this initiative is coming from mobile operators and their approach seems to be the same as for any other VAS they have introduced in the past.
Operators in Latin America have highly capable VAS teams, and some like America Movil, Movistar and Millicom are succesfully managing VAS teams across the entire region. Their approach works well for traditional services where network infrastructure and biling play integration are critical, but it might not be the best approach for mobile applications.
Last year's iPhone battle (Telefonica confirms it will distribute the iPhone: the battle in Latin America heats up) led to a half baked launch of the iPhone by Movistar. In their rush to meet America Movil's launch date, they left out services like visual voice mail (Movistar rushes to release the iPhone, leaves out services). This tells us that the data, messaging and content services are on the lower end of their priorities; the iPhone received the same treatment as any other device and Movistar so far has missed the opportunity to leverage the iPhone's capabilities to redefine their services strategy.
The success of the iPhone in the rest of the world shows that taking away some of the power from operators is a good thing. So far this is something that is still missing in Latin America.
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