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Latin America Telecom Insider / Vol. 2, No 3, Edition 7 - Prepaid Mobile Broadband Presents a Big Opportunity for Latin American Operators
Pyramid Research, Inc., July 2010, Pages: 11
In Latin America, mobile broadband has shown significant growth in the last few years and is expected to keep growing at a fast pace, particularly prepaid mobile Internet. However, Mobile operators need to expand their target market in order to generate more service sales and, therefore, revenues, according to a new report.
Prepaid Mobile Broadband Presents a Big Opportunity for Latin American Operators analyzes the opportunity that mobile operators have to expand their target market to include the prepaid market to generate more revenue. It also examines how the low penetration rate of fixed and satellite broadband, due to the high costs and poor services from lack of availability in the region, creates an opening for 3G Internet to thrive.
Pyramid expects prepaid mobile Internet service to take off and attract a significant number of users in Latin America as it 'will be used not only by customers without fixed Internet in their home or office, but it will also attract a high number of occasional users, especially those who do not require full-time mobility for their connections,'says Vinicius Caetano, Senior Analyst at Pyramid, and author of this report. 'This service will break the telecom industry myth that the prepaid service is not profitable,' adds Caetano.
'The traditional mobile model, where operators mainly offer valued-added services to postpaid customers, neglects the mid-to-low-end of the population in emerging markets in its early stages,' indicates Caetano. Up to half of the consumer spending in these countries is omitted due to the lower ARPU among low-end and prepaid customers. 'In order to better address this overlooked market, operators will have to focus on services based on characteristics that are compatible with the majority of the population, including the prepaid model,' recommends Caetano. Pyramid believes the business case for mobile data will follow the same concept as for voice: make it affordable, easy to use and flexible
Key findings
- Operators have used prepaid voice platforms to expand the addressable market for their services, and now prepaid is the world’s dominant service model. We should expect the same trend when it comes to mobile data.
- Prepaid is more than a billing platform for low-income segments. It is the nexus of a lucrative business model capturing the world’s mass-market consumer segments (4/5 of the population in Latin America).
- Prepaid mobile broadband is convenient, it minimizes billing surprises and it is the most appropriate choice when customers do not want a monthly subscription.
- Nearly all operators in emerging markets are predominantly prepaid operations. Most are highly profitable, and some boast some of the highest operating margins in the world. The total share of prepaid users in developed markets is also growing (e.g., Verizon acquired a prepaid MNO in the US).
- Operators are becoming more comfortable with selling mobile data. Many new offerings are seen every day around the world.
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