Executive SummaryThe Andes mountain system extends for more than 8,900km along the entire length of western South America, from the Caribbean coast in the north to Tierra del Fuego in the south.
The Andes form a natural wall separating the narrow western coastal region from the rest of the continent.
This territory and it resources are shared by five countries: Bolivia, Chile, Colombia, Ecuador and Peru.Although Bolivia’s telecom market has been liberalised since November 2001, fixed-line teledensity is still a low 7%.
Ethnic conflicts, socio-economic problems and natural disasters all played their part in holding back fixed-line growth – but not mobile, which has grown steadily even during the recession years.
Mobile subscribers outnumber fixed phones by more than two to one.
Two companies offer GSM/GPRS services, making Bolivia one of Latin America’s most active GSM markets.
In 2004, the outlook became a lot more promising.
Political conditions stabilised, the economy picked up, and telcos invested US$100 million during the year.
Together with mobile telephony, Bolivia’s broadband market became the fastest growing telecom sector in 2004, although it is still remains small compared with neighbouring countries.Chile’s dynamic telecom market enjoys a state-of-the-art infrastructure and regulatory system.
A high level of maturity has been achieved through investment, competition and innovation.
But while Chile’s mobile market continues to flourish, the local telephony sector remains flat, mostly due the move towards mobile solutions.
Chile has the highest mobile penetration in Latin America: around 61% in early 2005.
Mobile subscribers outnumber fixed lines by about 7:3.
However, a reduction in fixed-to-mobile interconnection tariffs ordered by the regulator in January 2004, together with an ever increasing proportion of prepaid customers, is contributing to a steady decline in operators’ ARPU.
With the merger of Telefónica and BellSouth Chile in January 2005, the number of mobile companies decreased from four to three.
The shape of the mobile market changing yet again in 2005, when Telefónica/BellSouth’s returned spectrum is awarded to a fourth player.
The country’s broadband market is also a fast growing business, with cable modems growing by around 45% a year and Asymmetrical Digital Subscriber Line (ADSL) by around 108%.
Cable modems have traditionally led the broadband market, but in 2004 ADSL lines overtook cable modems.Thanks to a relatively modern telecom infrastructure and increasing competition, the average teledensity in Colombia is relatively high for Latin America, although there is a steep imbalance between rural and urban areas.
Despite the economic rebound, fixed lines continue to stagnate and actually decreased in 2004.
This has been attributed to the shift towards alternative technologies and mobile phones.
Colombia’s mobile market is one of the fastest growing businesses in the country, with subscribers growing 73% during 2004.
Mobile telephones overtook fixed lines in service for the first time in mid-2004.
After years of controversy, the government commenced a review of its Voice over Internet Protocol (VoIP) regulations in 2004, and began to issue VoIP licences to a few operators, creating a new window of opportunity.
New VoIP licencees launched services in the second half of 2004.In Ecuador, the fixed-line market has been liberalised since January 2002, but competition is slow to develop, hampered by the dominance of state-owned Andinatel and Pacifictel.
Repeated privatisation attempts have failed, and the regulator is looking for a foreign company to take over the management of both operators.
Fixed-line teledensity is one of the lowest in South America.
Unsatisfied demand, together with regulatory, technological and competitive developments, combine to make the Ecuadorian telecom industry an attractive financial opportunity for investors.
The mobile phone market, for example, increased by 50% to 80% a year during 2001-2004.
Growth does not appear to have slowed down even during the recession.
In early 2005, mobile penetration was well over double the fixed-line rate.
Internet uptake is hampered by the lack of telecom infrastructure and low PC penetration.
Broadband is freely available, though mostly limited to the corporate market.Peru’s telecom market has been fully liberalised since 1999, yet Telefónica del Perú still has a near monopoly over the country’s fixed-lines.
Lack of competition has stifled growth, and teledensity is among the lowest in South America.
Excessively high interconnection rates have been blamed for this state of affairs.
On the positive side, a multicarrier system introduced in 2002 has stimulated long-distance competition.
Fixed-to-mobile charges were reduced in August 2004 and again in February 2005.
The Peruvian mobile sector, on the other hand, has had four companies competing for market share and has expanded rapidly.
Mobile phones overtook fixed-lines in 2001.
In early 2005, the number of mobile subscribers was more than double the number of fixed lines in service.
However, the number of mobile players decreased to three in October 2004, when Telefónica acquired BellSouth Peru, thus securing over 70% of the Peruvian mobile market.
Internet use in Peru is above the average for South America – despite poor PC penetration and low teledensity – as many users access the Web from public Internet booths.
Most Peruvians still rely on dial-up access, but in 2004, dial-up subscriber numbers were decreasing in favour of new access technologies, especially ADSL, which is the fastest-growing Internet market in Peru.