Latin America. When telecom markets tend to mature, operator revenues tend to go down. That is, as markets become more efficient, costs are reduced and therefore the prices of services begin to decrease, causing the average revenue per user (ARPU) to begin to reduce.
According to the latest report by The Competitive Intelligence Unit S.C., as operators cannot afford to let their revenues shrink over time they have to find new sources of income around their services in order to compensate for this trend and keep the business afloat.
In Mexico, there is a transition to this phase of market maturation and the best example of this behavior is identified in the mobile segment, which from the telecommunications reform observes a price decrease of around 45% and therefore the ARPU of the operators has gone down.
Faced with this situation, these bidders are incorporating different value-added services (VAS) which are generating new sources of income, which in the medium term will increase the ARPU of customers and therefore the profitability of the company.
More specifically some operators like AT&T, through their get it and connect services, are financing equipment and paying for some online services like YouTube Red, Netflix and NBA League Pass.
Through these strategies, their customers obtain devices on credit to avoid payment in a single exhibition, while receiving exclusive benefits for hiring OTT platforms through them. Meanwhile, the operator ensures that its customers stay longer on its network and generates more revenue than just by offering mobile services.
For now, these VAS are only available exclusively to postpaid customers, which represent only 17.4% of total mobile lines. The challenge will be to incorporate the remaining proportion to this scheme so that they can access the referred benefits. It should be remembered that in Mexico banking is well below developing countries by accounting for 32 million active cards for the 123 million Mexicans and that is not counting that several people can have more than a single card.
About Interconnection...
Despite the entire industry suggesting that reducing the gap in the payment of interconnection tariffs could affect their income, therefore, their investments, and even the well-being of consumers, the Federal Telecommunications Institute (IFT) decided to drastically reduce the differential in interconnection rates.
Let's hope that traders and analysts have made a mistake and that this reduction does not mean a setback in the profits that consumers have obtained.
Text written by Gonzalo Rojon of The Competitive Intelligence Unit S.C.
