Posted on 19 June 2013 by by Ari Lopes, principal analyst, Latin America, Informa Telecoms & Media.
In the past several years, very few topics have seen so much discussion and so little action in the Latin America telecom market as mobile virtual network operators. For years now, operators, regulators and vendors have discussed this opportunity; some countries have approved specific regulations; and a number of vendors established offices in the region and begun to prospect the market. The biggest hype happened between 2010 and 2011, when Brazilian regulator Anatel approved regulations detailing how MVNOs could operate in the largest Latin American country.
Nonetheless, what happened over the last few years was an unbalanced development of the Latin American MVNO market. Some countries had a very interesting start and are now well poised for advancing further while others had intense negotiations and discussions but very few commercial launches. Suffice it to say that the three biggest countries in the region—Brazil, Mexico and Argentina—do not have more than five MVNOs together and a very small subscriber base.
On the other hand, Chile and Colombia have increasingly vibrant MVNO markets. Virgin Mobile has begun to deploy its regional operations via Chile and already counts around 145,000 customers. Local retailer Falabella has also announced its plan to enter the market.
But it is in Colombia where the most thriving MVNO market in Latin America can be found. As young as it is, the Colombian market has already reached 540,000 subscribers (not including Virgin Colombia which did not disclose its base). This number is distributed among four virtual operators and a fifth has already been announced, which is more than any other Latin American country.
The importance of the Colombian market goes beyond these numbers. The diversity of companies that have launched MVNOs there confirms what’s been said about the market in Latin America—that it has the scale to support many different business models.
It is possible to categorize Colombian MVNO investors in five categories: entrepreneurs, banks, telecom operators, retailers and businesses targeting the youth segment.
Under the entrepreneur category, there is Uff Móvil, one of the first MVNOs to launch in the market. It has seen impressive growth since its launch in November 2010. In fact, the company has 65% of the MVNO market in Colombia, according to Informa. Uff Móvil begun operations by offering cheap pre-paid international calls, which proved to be popular among Colombians with relatives living abroad.
Besides been a pioneer in the market, Uff Móvil is also important because it followed the path of many entrepreneur-created MVNOs. It was sold to Bancolombia in August 2012, therefore, proving to investors that the risks of investing in this new business could pay-off. Bancolombia’s purchase of Uff Móvil was motivated by its interest in the 30% of the Colombian adult population that does not have access to banking services.
In the telecom operator category, UNE and ETB are both important fixed-line telecom operators that chose to launch MVNOs as a way of adding mobile services to their portfolios with a relatively low CAPEX and without depending on spectrum auctions.
Grupo Éxito just recently announced its entrance into the market. As the leading retailer in Colombia with 427 stores, it enjoys both strong brand and distribution channels. The benefits for the retailer include not only the addition of new services but also the creation of a direct marketing and communication channel with its customer base.
Finally, Virgin Mobile launched its second operation in Latin America in Colombia, following its successful launch in Chile. Virgin is a globally recognized brand, known for its focus on the youth market; the company has considerable experience in the MVNO market with operations in 10 countries.
All in all, in just over two years, Colombia has proved that there is a market for MVNOs in Latin America. In a short period of time, the country already has a diversified marketplace with MVNOs of very different backgrounds and targeting different segments.
The market is still in its infancy. MVNOs account for just over 1% of the Colombian market but as the number of investors grows so does the confidence that there is opportunity for new entrants in the Colombian telecommunications market. And as the market evolves, there is a much welcomed increase in overall competition in the mobile market. Meanwhile, other Latin American countries are still struggling to develop their markets.