LatAm still has highest mobile termination rates - study

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Friday, July 4, 2014

Latin America still has the highest mobile termination rates (MTR) of any region worldwide, according to a new study conducted by global ICT consultancy TMG.

However, the difference in MTR between Latin America and the rest of the world has been declining in recent years, as regulatory authorities in the region have begun to intervene significantly in rates, TMG's VP legal and regulatory, Daniel Leza, told BNamericas.

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Over the last four to eight years, Latin American regulators have aimed to set cost oriented rates for mobile termination, which has led to decreases in many countries, the analyst added.

Mobile termination rates have also decreased significantly in all world regions in recent years.

Average MTR reached approximately US$0.06 per minute in Latin America in 2013, falling from US$0.09 in 2011 and US$0.11 in 2009, according to the report.

Meanwhile, the global average fell from US$0.08 per minute in 2009 to US$0.04 in 2013, the report added.

However, some regions' average mobile termination rates are still significantly lower than Latin America, with average MTR in Europe reaching US$0.03 per minute in 2013, similar to rates in the Middle East, North Africa and Asia Pacific.

FURTHER CUTS TO COME IN LATIN AMERICAN MTR

Further declines in mobile termination rates are expected in many Latin American countries in the coming years, according to Leza.

Brazil has recently announced that it will reduce rates by 90% in the next five years, with MTR set to reach just 0.02 reais (US$ 0.003) at that time.

Regulators in Chile, which as of the beginning of this year had the highest mobile termination rates in the OECD, also announced a decrease of 73% in MTR for the e next five years.

Colombia, too, is set to reduce MTR by 50% between 2012 and 2015, and Peru is also currently conducting a review process, with a decision expected by October, Leza said.

THE BENEFITS OF MTR DECLINE: GREATER COMPETITION AND CONSUMPTION

The key benefits of declines in MTR in Latin America, as well as other world regions, are greater market competition between telcos and an incentive for users to consume larger amounts of telecoms services, the analyst said.

Promoting competition is a "key factor," as termination rates are wholesale prices charged between operators, but these are then passed on to consumers in the form of retail prices. High MTR also typically leads to high tariffs for off-net calls.

If MTR decreases are passed onto consumers in lower markets, this will lead to increased consumption of mobile services, a key driver as many mobile markets reach saturation in terms of penetration levels, according to Leza.

MTR NO LONGER A CRITICAL ISSUE

Mobile termination rates continue to be a relevant issue for the telecoms industry, but as rates decrease it is no longer critical, the analyst said.

Latin America is little by little working towards MTR which are comparable to those seen in other regions, he added.