A Vietnamese firm’s announcement that it will bid for the next 4G spectrum auction is the latest sign of red-hot competition in Peru’s telecommunications industry.
In 2013, Peru’s congress approved a law requiring mobile network operators to sell space to mobile virtual network providers (MVNOs) and, in 2014, a law making it easier for mobile customers to keep their phone numbers while migrating service providers took effect.
Those two changes have made one of Latin America’s least competitive telecommunications industries into one of its most competitive. This year will see as many as seven companies competing for mobile customers in Peru, up from three five years ago.
Vietnamese state-owned firm Viettel Mobile successfully purchased an operating license from Peru’s telecommunications authority OSIPTEL in 2012. Under its Peruvian subsidiary Bitel, the company invested over $400 million to build a 9,300-mile fiber-optic cable network throughout Peru. Bitel began marketing low-cost mobile plans in 2014 and now has 500,000 customers for a 1.5% market share. The company director hopes to have 1 million customers by the end of 2015.
Viettel Mobile, Vietnam’s largest operator by subscribers, has over $9 billion in global revenue and easy access to additional capital given its government backing. The firm has specialized in difficult geography and established footholds in Cambodia, Laos, Haiti and Mozambique with future operations in Myanmar, Cameroon and Tanzania. In Peru, over 70% of Bitel customers live in rural provinces.
According to the Fitch consultancy BMI Research, Viettel “exploits opportunities and weaknesses in emerging markets were its low-cost ‘good enough’ services will help it outperform struggling minor players and increase competitive pressures on market leaders.”
In the same year that keeping your phone number to migrate services got easier and Bitel entered the market, the Chilean telecom Entel purchased Nextel Peru’s assets and aggressively targeted Movistar and Claro customers. The company won more than half of the 121,000 service migrations in 2014. Entel plans to invest $650 million between 2015 and 2017 to upgrade and expand its wireless network in what will be an explosive expansion in Peruvian telecommunications.
“Mobile operators have responded with price reductions, mostly in phones because it was fastest,” said DN Consultores chief Carlos Huaman. “In the last quarter, with the entrance of Entel and Bitel, we have had very aggressive ad campaigns with prices starting at less than $3 [for smartphones].”
Huaman added that he expects to see the traditional providers improve customer service. “[Claro and Movistar] didn’t worry much about giving better service because there was only one competitor and there wasn’t much of a need. Now that there are two more companies, we believe that the post-sale budgets are going to have to improve because, in the long term, if there isn’t an improvement in the quality of service then customers will see a reason to switch.”
Spanish telecom Telefonica, the parent company of Movistar, launched the low-cost Tuenti as an answer to the new competition. But more players are on the way. Virtual operators including Falabella and Virgin Mobile are awaiting licenses from Peru’s telecommunications ministry, and rumors abound that AT&T’s DirecTV is contemplating a move into Peru.
Industry analysts see 8% to 10% growth in Peru’s telecommunications industry and the total number of smartphones in Peru to surpass 5 million this year.
“Large markets like Argentina, Brazil and Chile have three big operators with more than 20% market share plus two small virtual mobile operators,” said Jose Otero, director of the 4G Americas trade association. “There is no magic number of operators in Latin American markets. The success or failure depends on their business model, market investment and the presence of a transparent legal framework.”
Osiptel: “Tuenti es solo un producto más de Telefónica” (El Comercio)
Vietnam Aims to Take No. 2 Mobile Carrier MobiFone Public This Year (Wall Street Journal)
Vietnam’s Mobile Revolution Catapults Millions Into the Digital Age (Wall Street Journal)