3G is an inevitable evolution of mobile telephony worldwide. For the last few years in Latin America each year has been touted as going to be “the year of 3G.” It appears that 2008 fi nally will be that year as networks launched in 2007 take a foothold and further auctions for licenses take place.
Brazil, Chile, Argentina, Uruguay and Paraguay all got a headstart in 2007 with some limited 3G deployments in urban areas, with further rollouts to other cities expected in 2008.
Brazil held the biggest 3G license auction in 2007 on December 18-20.
Brazil’s telecoms regulator Anatel said it raised 5.3bn reais (US$2.9bn) in auctioning 44 3G licenses in the 1.9- 2.1GHz bands. Operators paid 5.26bn reais, or 86.7%, above the stipulated minimum price of 2.86bn reais. Chile plans to auction 3G licenses in the first quarter of 2008 and Mexico is still to define the spectrum it will use for 3G.
But, while 3G may be ready for Latin America, is Latin America ready for 3G?
In a region where the average penetration of mobile telephony is still only 60%, there is still room for growth for fi rst time users of mobile telephony. Another sobering fact is that 80% of subscribers are prepaid, which tend to be low spenders. Regional average revenue per user (ARPU) is only US$15 with only 11% of that amount coming from data and of that data revenue most is SMS.
Going on the limited feedback from Latin American operators that have already deployed 3G or advanced data networks, 3G type services still have to click with the user.
Ancel, the mobile unit of Uruguayan state operator Antel, which launched HSDPA/ UMTS in July, has found that even with services such as ringback tones which are technically a 2G application, the public has not found it easy to adjust.
Finding the right pricing model is something that operators will have to solve. Do they charge per download or per kilobyte - a concept that most subscribers will fi nd hard to understand - or move to a monthly fl at rate subscription fee as some operators have done with voice, for example Centennial Puerto Rico. Developing local content will also be key for the adoption of 3G. And given Latin America’s high level of prepaid subscribers, most market observers believe that the launch of prepaid 3G services is going to be crucial.
Brazil’s regulator Anatel has been clever with its 3G regulations by attaching clauses to the licenses that oblige license winners to provide both 2G and 3G coverage in the less populous areas. Winners of licenses in the most profi table areas, namely the São Paulo metropolitan area and São Paulo state will be obliged to also provide 3G service in remote areas in the north.
License winners will also have to install at least 2G cellular telephony in the 2,000 municipalities with under 30,000 inhabitants, that still have no service, by the end of the second year. By the end of the eighth year at least 60% of all small municipalities should have 3G.
Another limiting factor, at least in the short term, is the high cost of 3G compatible handsets. Handset prices will come down over time as the service becomes more popular, but that idea sounds a bit like a what came first, the chicken or the egg syndrome.
Uruguay’s Antel has commented because it chose to deploy its service using the European 3G-allotted 1900MHz-2100MHz spectrum bands and the fact that 3G has reached more maturity in Europe than in many markets, there is currently greater availability of lower cost handsets for those bands as opposed to the American frequencies of 800MHZ and 1900MHz, for example.
This will favor Brazil, which offered 3G licenses in the 1900MHz-2100MHz bands. Chile on the other hand is opting for the 800MHZ and 1900MHz bands.
So, 2008 is likely to be the biggest year for 3G in Latin America so far. But it is likely that it will be many years before we can say 3G services are seen as indispensable.
