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Latin America Telecom Insider / Vol. 1, No 4, Edition 6 - Multiplay Services in Latin America: Operators Target the Mass Market
Pyramid Research, Inc., June 2009, Pages: 12
As operators continue to exhaust the high-income consumer segments in Latin America, the bundling strategies with the best chance of success involve broadened offerings that will attract lower-income households to broadband and pay-TV, according to this latest report.
Multiplay Services in Latin America: Operators Target the Mass Market examines the multiplay strategies of several leading operators in Latin America and the rationale for engaging customers outside the higher-income population segments. This 12-page report compares the cost of multiplay services across several markets to demonstrate that there is potential for costs to come down in Latin America, which would boost penetration. Case studies of two integrated operators – NET Serviços in Brazil and Claro in Central America – examine the strategic challenges and choices involved in expanding target markets through bundling.
In Latin America, bundling has gained traction in the last three years as fixed operators expanded into the pay-TV market and cable operators pushed further into traditional telco territory. So far, bundling has attracted mostly people in high-end socioeconomic groups who can afford these services; however, the value proposition of operators is being challenge, notes Jose Magana, analysts at Pyramid Research and author of the report.
'Given that Latin America's GDP per capita was $7,856 in 2008, operators must face the fact that to keep penetration of fixed services growing and meet revenue expectations, they will soon exhaust the high-income consumer segments in Latin America,' says Magana. 'Therefore they must start developing strategies to attract lower-income households to broadband and pay-TV by offering an assortment of bundles,' he adds.
Although selling to lower-income consumers is a challenge, they also represent an opportunity to reap considerable benefits because of the significant size of the populations. 'The challenge is to find the right mix of prices, and differentiation, such as higher broadband connection speeds, pay-per-view content, and specific pay-TV packages, will be crucial to increasing uptake of packages and helping to contain the decline of ARPS,' he explains. 'The addressable opportunity for operators is to gain access to the 70 percent of households that remain underserved in Latin America – if operators can access at least half of those households, they will easily be doubling their service base in terms of customer relationships,' Magana says.
Multiplay Services in Latin America: Operators Target the Mass Market is part of our Latin America Telecom Insider report series. Telecom Insiders are packed with trend analysis, industry best practices, market sizing and forecasting, competitor analysis, and case studies, providing you information you can leverage to make better business decisions.
Key findings
- Latin America suffers from high income inequality, and most of the population is in the lowest socioeconomic groups. As penetration grows, fixed operators will face the challenge of producing services suitable for these segments in order to keep expanding.
- Multiplay services are currently too expensive to sell to low-income households. Compared with GDP per capita levels, the average Latin American multiplay package is about twice as expensive as the average packages in the US, South Korea or Spain.
- Multiplay ARPS numbers in Latin America have started to decline thanks to intensifying competition and greater uptake among lower-income consumers. Operators will be better able to protect their ARPS if they offer entry-level packages that let users add extras such as faster network access or special TV packages according to their own preferences or incomes.
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