In 1997, a year before the privatization of the Telebrás system in Brazil, getting a fixed line for a telephone in São Paulo cost US$1,200 and installation time was three years. The situation was so difficult that there were companies earning millions of dollars buying and selling telephone lines in the secondary market. Ten years later, a telephone line in the Brazilian metropolis costs only US$38, installation time is barely three days and the secondary market is a bad memory of the old days.
A similar situation occurred throughout Latin America in the 90s. A lot can be written about the abuse of the incumbents, but one sure thing is that at the beginning of the last decade, in the majority of Latin American countries, having a phone line was a luxury. Today, the availability of lines is greater than the demand. But the fixed line system is also becoming a dinosaur in need of reinvention. In Latin America – as in many of the world’s emerging economies – the number of mobile connections has surpassed that of fixed lines.
This Hall of Fame of the decade reflects the huge changes registered in this industry in Latin America in the last TEN years. The explosion of business has allowed the appearance of new global monsters like Spain’s Telefónica, which mainly thanks to its Latin American subsidiaries, has become the third largest company in the world by number of connections, surpassed only by Chinese operators or Mexican América Móvil, the wireless telephony arm of magnate Carlos Slim, which has surpassed Deutsche Telekom in market capitalization. In this industry, the region has burned through phases quickly. The operators are now faced with technological changes of such magnitude that the traditional business model is becoming obsolete. Triple play, VoIP, WiMax and IMS are part of the alphabet soup that will shape telecommunications in the coming years, opening up opportunities for new players and creating important challenges for the established ones.
The rapid evolution of telecommunications goes hand in hand with the development of information technologies (IT). In this area, Latin America remains in second place. A study on IT Spending in Latin America in 2007 published by BNamericas indicates that the attitude of companies toward adoption of technology is conservative. Most of those polled prefer to incorporate technologies into their company that have already been tested in the market. This may explain in part the relatively limited development of the IT sector in the region, because global parameters of this industry indicate that these are small size companies. However, there are signs of activity. Latin American countries are beginning to take advantage of their geographical position to offer American businesses nearshore solutions, such as outsourcing services provided from locations relatively close to those of the client. Taking advantage of this trend, a global giant of the outsourcing and systems integration, India’s Tata Consulting Services, has established development and outsourcing centers in Uruguay, Brazil and Chile, while local companies such as Sonda, Softtek, Neoris or Datasul have found a way to grow in this market.
The Hall of Fame in figures Telecom & IT (US$mn)
Telefónica (LatAm )
NII Holdings (Nextel)
TCS Iberoamérica 1
1 Estimated figures Source/fuente:Company reports using FX rates for the end of period/Reportes de la compañías utilizando el tipo de cambio de fin de período