Bogota, Beijing, Boston, Buenos Aires, Hong Kong, London, New Delhi, San Diego, Seoul – February 27, 2024

Colombia’s smartphone shipments declined 8.4% YoY in Q4 2023 and 19% YoY in 2023 to reach the worst Q4 and annual volumes since 2020, according to the latest research from Counterpoint’s Market Monitor. Some Chinese OEMs are gaining market share in the country, especially HONOR and OPPO. Besides, Motorola gained 100 basis points YoY, while Apple gained 200 basis points YoY.

Commenting on the market dynamics, Senior Research Analyst Tina Lu said, “Colombia was hit hard by macroeconomic turbulence and its economy grew half of what was expected, with the GDP only 0.6% higher in 2023. On a positive note, inflation closed the year in single digits. However, there are potential upside risks for 2024, like El Nino and the rise in fuel prices. Despite the economic struggle, demand is slightly resilient as some OEMs continue to increase promotions. Also, the 5G spectrum auction that occurred in December can become a driver for the market as customers want to experience the new technology. Colombia’s 5G penetration currently stands at 11%.”

Commenting on OEM performance, Research Analyst Andres Silva said, “Samsung suffered the most in the low-end segment in 2023. Consequently, its promotional activities were focused on other devices like the Galaxy A34 and Galaxy A24, both from the price band just above the low-end segment. Xiaomi doubled its market share to 20% in Q4 driven by a strategy under which its most promoted device in the open market was the Redmi Note 12, while in carriers it was the Redmi 10C. HONOR jumped 225% YoY by focusing on the marketing of its smartphones through sponsorship of events where the attendees are younger and more tech-savvy. HONOR’s market share of 7% put the brand in the fourth spot in Q4. But for the full year, OPPO took the fourth spot despite HONOR showing 2x growth.”

Other brand insights

• Motorola shipped 10% less on a yearly basis. However, the brand increased its share in Q4 2023 to 18% following its focus on mid-level LTE devices.
• Apple’s annual volume was the highest ever after a 28% YoY growth. The iPhone 13 series was the main focus of Apple’s promotions even as the iPhone 11 grabbed the biggest share of the brand’s shipments.
• OPPO grew 10% YoY in Q4, with the Reno7 persisting as its growth driver after a price cut.

Looking at 2024, Counterpoint expects a single-digit increase in smartphone TAM. Chinese brands will continue their quest to increase market share. As a result, incumbents like Motorola and Samsung will come under extra pressure in the market.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the technology, media and telecom (TMT) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

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The post Colombia’s Smartphone Shipments Down 8.4% YoY in Worst Fourth Quarter Since 2020 appeared first on Counterpoint.

Mexico is the second most important smartphone market in Latin America.  The country has the second-highest population in the region and hosts an extremely competitive ecosystem. Mexico’s geographical size and lack of import barriers make it an extremely attractive smartphone market.

The top-selling models accounted for 35% of Mexico’s total smartphone market in Q2 2023. The top 10 list almost appears like Samsung’s performance for the quarter as the brand dominated the top-selling chart in Mexico in Q2 2023. Five of the 10 best-selling models were from Samsung. According to Counterpoint’s Market Pulse Report, Samsung’s share in Q2 2023 was slightly more than 30%.

OPPO and Motorola both had two models in the Q2 2023 top-selling list. Motorola, which has always been a strong player in the Mexican market, launched a few new models during the quarter that helped the brand increase its market share. OPPO, a relatively new entrant in the LATAM market, managed to retain its third position in market share with two of its models in the top-selling list.

60% of the models in the top 10 list were priced below $150. This price band accounts for 52% of the overall smartphone market in Mexico. However, premiumization is infiltrating the Mexican market, and the number of models in the >$150 band is increasing in the top-selling list. This trend is accelerating slowly but will surely lead to a higher overall smartphone ASP.

Apple’s four-year-old iPhone 11 has been part of the Mexican bestseller list for a few quarters now. It was the third best-selling model in the Mexican market in Q2 2023. The iPhone 11, which is a 4G model, was the most expensive model on the list. The massive sales of this model reflect the strength of Apple’s branding.

The 4G version of OPPO’s Reno 7 was another model in the bestsellers list priced more than $150. This is quite an achievement for the brand, which arrived in the region just three years ago. OPPO is still building its branding in the Mexican market. The Reno 7 has been in the Mexican top-selling chart since December 2022.

It is noteworthy that only two models in the chart are 5G phones – the Samsung Galaxy A34 and the Samsung Galaxy A54 5G. The latter one is also the most expensive Samsung model in the top-selling list. Meanwhile, Telcel has been pushing its subscriber base to replace their phone with a 5G one. Mexican consumers are still not ready for 5G technology.  They would rather get more specs than access the technology.

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The post 4G Smartphones Dominate Mexico’s Q2 2023 Bestsellers List appeared first on Counterpoint.

In March 2020, just as the world was entering COVID-19 lockdowns, OPPO was landing in the LATAM market through Mexico. Since then, it has woven a strong relationship with the Mexican consumer. According to Counterpoint Research’s Market Monitor report, OPPO was ranked tenth in the Mexican market in Q3 2020 in terms of shipments. But in just less than a year, it took a giant leap to rank among the top three brands in Q2 2021. OPPO continued on the growth path and was a solid third-biggest brand in the Mexican market in Q4 2022 and fifth in the Latin American region.

OPPO’s Shipment Ranking in Mexican Market

Source: Counterpoint Research Q4 2022 Market Monitor

Mexico is one of the most competitive markets in the LATAM region, as most brands choose to enter the region through this country. But it is also a complex market as it has a strong operator, Telcel, that has more than 60% of the users and 70% of the mobile services revenue. The operator also manages the retail channel closely.

OPPO’s initial growth in Mexico was driven only by Telcel, as it had paired up with the operator. But now it is going for the rest of the Mexican carriers and the open channel that has been growing in the country. OPPO has the biggest team of in-store sales representatives, and the brand is visible at almost every big retailer and carrier store in the Mexican market.

OPPO’s Shipment Ranking in LATAM Market

Source: Counterpoint Research Q4 2022 Market Monitor

Although OPPO is already successful and appreciated by Mexican consumers, for the rest of Latin America, the brand is still a stranger. Therefore, it aims to repeat this success in the rest of LATAM.

4G technology still accounted for 83% of the sales in the region in 2022. Therefore, OPPO has included mostly 4G smartphones in its portfolio for the region. Besides, the portfolio is mostly focused on growing its share in the popular low-mid to mid-high price segments. There are no ultra-premium or entry-level smartphones. OPPO even launched an older flagship last year. But surprisingly, the brand launched its flagship Find N2 Flip in the region last week.

OPPO Find N2 Flip launched in Mexico

OPPO launched its Find N2 Flip smartphone in Mexico last week. This can be considered a huge effort for the company, as the product has been launched in only a few markets, including Europe, China, India, Thailand, and a few other markets in Southeast Asia. Mexico is the only market in the Americas to see a Find N2 Flip launch. This shows the commitment the brand has toward the LATAM market in general and Mexico in particular.

The OPPO Find N2 Flip has a GLOMO award-winning hinge that is gapless when closed. The crease is perhaps the most imperceptible available in the LATAM market. The device’s large cover display makes it easier to use when shut.

The smartphone has remarkable cameras – 50MP in the back and 32MP for the selfie camera, besides being paired with the MariSilicon X Imaging NPU that delivers exceptional photos. It has a 4300mAh battery with fast charging. This device is also a big win for MediaTek, as it is powered by the Dimensity 9000+.

On the downside, the launch price of MXN 24,999 (~$1,383) does not seem competitive enough. Besides, the device will only be available at Telcel Mexico initially. Foldables are the fastest-growing form factor in the ultra-premium segment (>$700). in Q4 2022, the clamshell category saw 201% YoY growth in Mexico, according to Counterpoint data.

OPPO is the third brand in LATAM to launch a clamshell product. Motorola was the first one, followed by Samsung. Currently, Samsung’s Flip 4 is the absolute leader of this format in LATAM, including Mexico.

What next?

Despite its success in the Mexican market, OPPO is still an emerging brand for the rest of the region. It might face some challenges this year. The LATAM smartphone market dropped 5.5% in 2022 and is forecasted to drop another 5% in 2023. This decline will affect all the markets in the region, including Peru and Colombia, OPPO’s focus countries for 2023.

Therefore, OPPO will try to expand in a contracting market. So far, the brand has managed to weather all headwinds. Colombia is the third most important market in the region. It has low import barriers and sales are almost equally distributed between operators and open channels. Peru is mostly an operator-dominated market. Both Colombia and Peru have lower ASPs compared to Mexico, but consumers in the two countries always welcome new brands to get the best smartphone experience.

The post OPPO’s LATAM Strategy is a Success So Far But Challenges Ahead appeared first on Counterpoint.

1. LATAM will have at least 22 operators launching 5G networks. But all of them will have limited coverage, with most of them being non-standalone (NSA) networks. These 22 will be in addition to the nine operators which launched 5G services during 2020.
2. At least six LATAM countries will auction 5G compatible spectrum. Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, and Peru have announced plans to auction spectrum that will enable operators to deploy stand-alone (SA) networks and offer commercial 5G plans.
3. 5G smartphones will start to take off in 2021, but not quite. 5G phones will unlikely bag more than 5% share in the region. Apple and Samsung will drive the growth of this segment in LATAM during 2021. Although 5G technology will reach the $150-$200 price band smartphones, buyers under this band will instead focus on having a better camera, a bigger screen, or more memory. 5G will not drive smartphone replacement in the region.

Exhibit 1: LATAM Technology Share, 2018-2021

4. The market will see double digit growth in 2021. Although the overall economy will continue to struggle, smartphone sales in 2021 are expected to grow more than 19% YoY. Even if there is a second or third wave of COVID-19, the demand will not decline. It will decline only when there is some disruption in the supply chain.
5. Chinese brands’ participation will grow, but slowly. Huawei’s share will continue to decline. Despite the regime change in the US, the trade ban on the company is unlikely to be lifted soon. Many Chinese brands are entering the region, seeking to grab the share shed by Huawei.
6. Smartphone ASP might return to growth.In 2020, the ASP decreased slightly but consistently each quarter. The entry of newcomers with aggressive plans may trigger a price war. This will benefit consumers and convince them to spend slightly more while acquiring a new smartphone.
7. Several countries will increase taxes on smartphones. As COVID-19 left many economies shuttered and some governments broke, smartphones will come under the tax scanner in many countries. Although the OEMs might absorb a part of the increased cost, it will ultimately impact the overall smartphone market ASP.
8. Online channels will see an increase in smartphone sales. Online sales are here to stay. In 2020, online sales in LATAM increased by at least 60% YoY. This growth will continue in 2021 but at a slower pace, trapped by the reality that only 55% of the region’s adult population has access to the banking system (according to the Alliance for Financial Inclusion), compared to 95% in Europe.
9. Contactless payment technology to see increasing adoption. COVID-19 accelerated the adoption of this technology in LATAM. All leading banks in LATAM are now launching an NFC (near-field communication) payment platform. Companies like Samsung, Mercado Libre and Facebook are also looking to tap into this trend. On the other end, an increasing number of stores are acquiring contactless payment technology. As the pandemic is still on, this trend will grow.
10. IoT devices will surge in the region. With the pandemic, many businesses have realized that it is essential to accelerate digital transformation to stay efficient. On the other hand, operators are pushing IoT solutions while looking for a new stream of revenue. At the consumer level, as many people continue to remain stranded at home, smart home and hearable devices will receive an extra boost. In particular, devices related to security, home entertainment and household tasks will be in demand.

The post 10 Predictions for LATAM Smartphone, Devices Ecosystem in 2021 appeared first on Counterpoint.

Exhibit 1: LATAM Brand Origin Share, Q3 2017 – Q3 2020

Source: Counterpoint Research Market Monitor, Q3 2020

Huawei used to be the second best-selling brand in LATAM, but it lost share sharply due to the tightening of the US trade ban. Motorola and Xiaomi took much of this share. But still Samsung alone had more than 45% of the market in Q3 2020. So, both operators and retailers are looking for brands that can challenge Samsung’s dominance in the region.

With all this context, Chinese brands OPPO, realme, vivo and OnePlus have set their sights on LATAM. All these brands are already available in small quantities at a few online marketplaces in the region. But now they are setting up teams and offices in the region. Interestingly, these brands have adopted a ‘divide and conquer’ strategy, with each brand entering a different country, trying not to step on each other’s toes.

realme has already announced its official launch in Colombia, Brazil, Chile and Peru. But so far it has set up offices in Colombia and Chile only. In the case of Brazil, realme is currently selling two models through some marketplaces and has promised their delivery by Christmas. But these models are not yet available through national retail or operator channels.

OPPO has set its foot in Mexico, selling its models through the country’s two major operators – Telcel and AT&T. In the short term, OPPO may not enter any other country in the region.

Meanwhile, vivo is launching in Chile and Colombia. In September, vivo set up an office in Chile after opening one in Colombia in August in the middle of the COVID-19 lockdowns. vivo models are sold through retail channels in Colombia and local operator Entel in Chile as it is an operator dominated market.

It is clear that vivo and OPPO will not compete for market share, while realme will be positioned as the low-cost option.

These are not the only Chinese brands looking to enter the region. Others such as Tecno are also looking to fill the gap left by Huawei. So far, the volume of such brands does not surpass 30,000 in any country in the region and is not expected to increase much in the short term. It takes some time to attain high volumes in this brand conscious region.  Xiaomi, for example, entered LATAM in 2015 but was able to cross the one million mark in quarterly shipments only in 2020.

The post Chinese Brands Set to Challenge Samsung in LATAM appeared first on Counterpoint.

LATAM countries have various levels smartphone penetration. Chile and Argentina have the highest, while Peru and Paraguay have the lowest. The varying maturity levels and local regulations largely dictate the competitive landscape:

• Brazil and Argentina both require local manufacturing/assembling. It is a complicated process to set up local manufacturing, so only a few brands manage to do so, which makes these markets highly concentrated brand wise the same three brands represent more than 80% of the market. In both countries, Samsung has more than 40% share. Motorola is a distant follower and LG continues as #3. LG has been losing share in many other markets, but it enjoys a competitive advantage of local manufacturing in these countries.
• Mexico: Samsung leads the market, but Huawei is a close contender. So much so that during two months in 2019, it overtook Samsung, making Mexico Huawei’s biggest market in the region. The battle for supremacy accelerated the replacement rate and increased smartphone penetration. Motorola is a solid #3.
• Peru: the top 3 brands represent only 65% of the market. It is one of the most brand diverse markets in LATAM. It also has high feature phone penetration. Samsung and Huawei lead the market, while Motorola is a distant third. Peru has one of the lowest smartphone usages in LATAM, mainly because of the low 4G LTE coverage.
• Chile is the most mature market in the region. It has LATAM’s highest smartphone penetration, rate of replacement and ASP. It is still an operator driven market, so brands need to have operator approval to succeed. Although it is a small market, it is among Apple’s top 3 market in LATAM. Samsung leads the market. Huawei’s performance was impacted by the US trade ban.
• Ecuador is the smallest market in this infographic, but with high growth potential. 3G smartphones are still relevant, partly because of the price of the smartphone, partly due to the limited coverage of the 4G network. Samsung and Huawei lead the market. Bmobile, a local brand, is a distant #3.
• Colombia is the third biggest market in LATAM. Samsung is the absolute leader. Huawei was challenging Samsung leadership in the market during Q1 2019. However, the trade ban imposed by the US government highly impacted Huawei causing a loss of share to Samsung and Motorola.

Samsung was the absolute leader in all the major market in LATAM in 2019. Motorola was a distant number two that excelled in Argentina and Brazil. Huawei was a strong number three, but its performance was impacted during the second half of the year.

The infographic is a high-level overview of the data we track in our quarterly Market Monitor Service.

The post LATAM Individual Markets Overview 2019 appeared first on Counterpoint.

However, the scene changed drastically in March. Following the arriving of the first cases of COVID-19 in the region, the feeling changed, more or less, overnight. The outbreak will impact the LATAM economy greatly, with the smartphone market being part of the collateral damage. The impact will be both on demand and supply. But in LATAM, demand will have the larger impact on the market.

Impact on Supply

Brazil was the first country to feel the supply shortage. In Q4 2019, 94% of smartphones shipped in Brazil were manufactured locally. During the first week of March, 70% of manufacturers reported having some impact from the lack of components from China. But by the beginning of March, China resumed shipments of components and sub-assemblies, allowing manufacturing to start recovering. A full recovery is estimated to take around two months.

Exhibit1: LATAM Smartphone Shipment Origin (Q4 2019)

For the rest of LATAM, shipment and sales of smartphones continued as usual until March. This is because operators and retailers already had inventory to last until March. Some shipments from China were decreasing through most of 2019. A few brands have shifted part of their production to Vietnam, and in the latter part of 2019, they accounted for 8% of LATAM sales. Shipment from Vietnam was only slightly affected during February.

Brands that have manufacturing source in Wuhan, such as Motorola, were among the most affected. Another side effect of this crisis will be an increasing brand concentration. Operators and retailers are already asking for better terms of payment, and only the big brands can offer them.

Impact on Demand

First cases of COVID-19 emerged, around the beginning of March, in various countries in LATAM. It was mostly dismissed as imported cases, and they would not spread. Cases in LATAM, were mostly imported from Europe. As the region has strong links with the old continent. At the same time, news about Italy and Spain’s high death toll, as a result of not ordering early quarantine, started to appear in the media. So local governments started to look for a way to cope with the upcoming crisis.

Most LATAM countries have either partial or total quarantine until mid-April, although many countries will likely extend it until the end of April. The degree of lockdown varies among different countries. Despite of the type of lockdown decreed by the government, all operators stores, retailers and shopping malls are closed. After the end date, provided new infections are moderating, there may be a shift to a partial lockdown.

Exhibit2: LATAM Main Market Lockdown Schedule

The duration of the lockdown has a direct correlation with the decline of the economy. Governments are all weighing between the health crisis and the recession. Brazil does not have a central government lockdown. Moreover, President Bolsonaro has said that he does not endorse strict quarantine. He said that the effect of not working can be worse than the disease. He has been calling the governors to stop the lockdown after Easter weekend.

The impact on the demand will have two different phases, during lockdown and post lockdown. During the lockdown, demand will free fall. It will plunge to close to zero, with all mobile device retail outlet closed. Lockdown in LATAM means that individuals are banned to roam freely, except to purchase food or other basic goods. This is strictly enforced by the police and the military. Only workers from service associated with food, health and security are allowed to roam in the street.

Online sales surged, but it only benefit what is in the list of essentials, such as food and pharmacy. In many countries, such as Argentina, delivery of mobile device is considered non-essential, therefore is not permitted.

The second phase is the post lockdown, which most countries in LATAM will enter in deep recession. ECLAC (Economic Commission for Latin America and the Caribbean) has indicated that the regional GDP will contract by at least -1.8%. “Although a contraction of -3% and -4%, or even more cannot be ruled out” it says. Unemployment will rise by at least another 10%. Formal and informal workers will lose their job. So, demand will take most of 2020 to reset.

After analyzing the impact of smartphones sales, from both the supply and the demand side, the smartphone market will likely contract by -22% YoY in 2020. The worst decline will take place between Q2 and Q3 of this year. The market ASP will also decrease as the economic conditions might force people to replace the current smartphone with a cheaper device.

Brazil and Chile smartphone sales will experience the smallest impact. Whereas Argentina and Mexico will suffer the highest impact. Although Argentina’s smartphone market was already contracting, it will decrease even more. Colombia and Peru sales will drop somewhere in between.

The demand for refurb devices will likely rise, but this would depend on the ability of the refurbishing companies to offer desired smartphone models and whether the users feel that they are getting good value for money.

In previous economic crises the mobile handset market has proven to be more resilient than the economy. Smartphone has become a basic good, especially in the time of home office, homeschooling and social distancing.

The post COVID-19 Overwhelming Impact on LATAM Smartphone Market appeared first on Counterpoint.

Telefonica has an accumulated debt of USD $42 billion and was recently pressured by large investors, to decrease its exposure in Hispanic Latin America. In the last two years, Latin America’s social-economic environment has been more volatile. This has spooked investors, who now want to reduce their exposure. Telefonica also sold all its Central America business at the beginning of 2019.

Telefonica’s Business in Hispanic Latin America

Telefonica Latin America is currently divided into three subregions: HISPAM Norte, HISPAM Sur, and Brazil. In terms of countries, Hispanic Sur includes Argentina, Chile, Peru, and Uruguay. HISPAM Norte includes Colombia, Ecuador, Venezuela, and Mexico.

Exhibit 1: Share of Telefonica Mobile Connections in Key LATAM Markets

Source: AMX 3^rd Q 2019 Financial results, TEM Ene-Sep 2019 Financial results, IFT, Mintic, Osipitel, Subtel, Enacom

Telefonica had also struggled in countries like Mexico and Colombia to increase share and profitability. Both of these countries’ subscriptions are mostly prepaid.

Early Warning Signals of Telefonica’s intention to quit Hispanic speaking LATAM

In addition to the sale of its Central America businesses, other signals have included:

• The CEO promising to do anything to return the company to growth and profitability
• Venezuela has a big impact on Hispanic Norte’s overall success. Until 2008, it was the most profitable market in HISPAM Norte. But after less than 10 years it is now a burden, though given the country’s dire political and economic situation, it may prove difficult to find a buyer.
• In October 2019, Telefonica Mexico signed an eight-year deal to use AT&T’s last-mile infrastructure. Hence Telefonica does not need to build its own network.Immediately after the agreement, Telefonica Mexico solicited IFT (Mexican regulator) to allow it to return not used spectrum, so it can be released to pay for the unused spectrum. As there is no regulation about the returning spectrum, IFT is analyzing how to implement it.

Securing the 80% of the Business

Spain, UK, Brazil, and Germany accounts for around 80% of Telefonica’s global revenue, while Hispanic LATAM represents just 20% (Exhibit 2). Furthermore, the Hispanic LATAM market contribution to total revenue and EBITA has been declining in the last two years, affected by economic uncertainty and downturns in several main markets.

Exhibit 2: Hispanic Latin America’s weight Over Telefonica’s Total Business Results 2019

Source: TEM Ene-Sep 2019 Financial results

Hispanic LATAM represents almost 40% of Telefonica’s total lines which means the operation consumes a lot of the company’s resources. Telefonica is determined to increase its focus on parts of the business that generate the 80% of the revenue and that are also the most profitable. Telefonica also expects this part of the business to provide most growth opportunities.

Potential Buyers

It will be difficult to sell all seven countries business in a block, unless it is a new player to the region; only a player that is not currently in the region could make it through the antimonopoly regulations. For example, the sales of Telefonica’s business in El Salvador to Claro has not yet been approved.  Possible buyers include:

Liberty Latin America: recently bought AT&T Puerto Rico. This operator is financially solid and looking for growth through acquisition but prefers to stay in small countries such as those in Central America and the Caribbean. The only outlier is Chile with VTR.

Millicom: purchased Telefonica’s Costa Rica, Panama, and Nicaragua businesses. These were markets most in line with Millicom’s target market. Similar to Liberty, the Luxembourg-based operator prefers to do business in smaller and less developed countries.

America Movil: is the biggest operator in the region. It is already the dominant player in almost all markets that Telefonica is selling its business (Exhibit 1). It bought the Guatemala and El Salvador businesses from Telefonica at the beginning of the year. And El Salvador’s transaction is still pending regulatory approval. It will be difficult for America Movil to get regulatory approval to buy any of Telefonica’s businesses this time.

Chinese operators: China Mobile is the world’s largest mobile operator. It established an office in Brazil in 2017. This generated attention from many players in the region. But the office is mostly dedicated to supporting enterprise customers. Telefonica’s sales may be attractive as an expansion opportunity, but it doesn’t look likely.

Telefonica’s announcement could also be a way to attract strategic partners and to subsequently launch a local IPO. At present Hispanic LATAM region will report to Telefonica’s CFO, a sign that this business is becoming a financial package.

Telefonica share price increased more than 5% following the announcement suggesting the sale will be accretive in value to investors.

Whatever type of sale is undertaken, Telefonica’s exit will change the Latam telecommunication landscape. We’re not sure it will be a positive change in the short run, but may lead to less concentration and more competition in the long run.

The post Telefónica On Sale appeared first on Counterpoint.

Deliberations mainly centered around four key issues that will have an impact on the future of the telecom landscape in the region over the coming years – the need to have more efficient and effective spectrum management and auctions, connecting the disconnected, regulations, as well as security, privacy, and data protection. Below are the key takeaways of the deliberations at the event.

• Spectrum Management and Auction (4G-IoT-5G)

The incoming 5G technology will need much more spectrum than any of the previous generations. But before getting to 5G, efficient and effective sprectrum management and auction needs to start right now with 4G and IoT, as LATAM lags in the rollout of 4G and has not yet started the meaningful rollout of cellular-IoT.

There are delays in 4G spectrum auction in many countries, and several operators are still waiting for spectrum to increase their network coverage.  The introduction of 5G will require even more spectrum to cover the low, mid, and high bands. Concrete action is required to ensure that LATAM countries do not fall behind in obtaining the spectrum required for IoT and 5G. So far, Brazil, Colombia, and Mexico have announced their intention to auction 5G spectrum.

Exhibit 1: LATAM 5G Spectrum Adoption Announced

Source: ANATEL, ANA, IFT

Discussions at the 2019 CLT was on whether spectrum auction should be a tradeoff between cash or service. Some countries treat spectrum as a cash cow and believe auctions will bring much-needed funds to government coffers.  Others, such as Chile, understand that it will be more efficient if the distribution of spectrum requires the operator to compete in tenders instead of paying a fixed fee. This methods sets targets for the operator for network rollout to increase coverage as well as supply of access devices.

• Connecting the Disconnected 

There are around 100 million people in LATAM that still don’t have access to the internet and an additional 80 million that don’t have adequate access to the internet. According to regulators, associations, like ASIET (Inter-American Association of Telecommunications Companies) and many private companies acknowledge that access to the internet will provide economic benefit. However, there is still not an adequate understanding of the digital divide.

The gap is not due to a lack of supply. Some form of internet, wired or wireless, covers almost 85% of LATAM population. But only 55% is connected. The problem lies in the lack of the ability of the population to pay for the service.

Most LATAM regulators have a budget to decrease the access gap. There is an El Servicio Universal (Universal Access) fund in most LATAM countries.  However, these funds are highly underutilized. The main problem is regulatory as the public sector does not know how or where to deploy the money. Further, the public sector is slow to formulate any type of regulation, and as a result, not much gets done. LATAM regulators know that they need to speed up ideation and implementation.

In Brazil, for example, the telecom regulator Anatel is working on driving “Gobierno Digital” to attract more investment and connect the 30% of the population that does not have internet access. Brazil has set a target to bring down the percentage of the population without internet access to 10% in 2025. Another example is Colombia, which is sitting on almost US$90 million for providing internet access. While the government gets the interest from the fund, current laws prevent the regulator from doing much about putting to use the fund for increasing internet access.

• Regulations

There is a need for new and updated policies, that would not only regulate current telecom operators but would also include other players in today’s communication ecosystem.  Companies such as Facebook, one of the sponsors of this event, are as incumbent as a traditional operator. Therefore, LATAM countries need a more modern, flexible, and convergent regulation.

The other issue is multiple regulators. Currently, most countries have more than one regulatory entity in charge of all regulatory process. Further, each municipal area has its own rules. This makes the network rollout a hideous bureaucratic burden for the operator. There is a need for unifying regulatory entities within a country to align the national, provincial, and municipal processes. Recently in Argentina, a judge ruled that a municipal body cannot overrule the national order allowing the building of antennas. This was a good precedent and other countries, such as Colombia and Brazil, agree with the need to bring in such practices into their countries.

• Privacy

Security and privacy are necessary across all verticals. This issue came up as IoT is still in its infancy in LATAM, and 5G might take few years before it enters LATAM.  There is a lot to do about it as security and privacy are key for IoT and 5G success. Many regulators already acknowledge that this is an important issue and are taking the companies and industry associations.

Besides the four major issues, the event also saw discussions around harmonization of the network to make roaming easier across LATAM. Many LATAM countries are in favor of slowly working on removing roaming charges.  This would require even more harmonization in the frequency used. Further, interesting deliberations also took place on the need to close the gender gap in terms of access to appropriate technology as well as encouraging girls in Science Tech and Mathematics (STEM) careers. While there is a necessity to connect those at the bottom, it is equally important to bridge the gender gap when it comes to internet access.

The theme of the 2019 CLT was ‘Accelerating the Digital Transformation of Latin America’. To achieve this, LATAM needs to learn from its past mistakes. Most LATAM countries have enough experience to understand that they not only need to work together, but also with the technology leaders to accelerate digital transformation in the region.

The post Key Takeaways from the 2019 Latin American Telecommunications Congress appeared first on Counterpoint.

In a market where sales of mobile devices have grown at a CAGR of only 0.24% between 2016 and 2018, the open channel has grown at almost 8% CAGR. As a result, operators have been slowly pivoting towards being a service provider after years of being device driven business.

Exhibit 1: Open Channel Mobile Devices Market Share 2016Q1 vs. 2019Q1

Source: Counterpoint Market Monitor Q1 2019

At Counterpoint, we have been mapping the top three operators’ share in mobile device sales for more than three years. The findings reveal starkly different strategies of LATAM’s two biggest operators, America Movil, and Telefonica, resulting in very distinct outcomes and share of the mobile device market. America Movil, which operates under the brands Claro and Telcel, and Telefonica, which operates under the brands Movistar and Vivo, still account for 70% of the mobile handsets sold through the operator channel. Counterpoint’s latest research tracks the changing trends of the sales channel and OEMs for mobile devices in the LATAM region over the last few years in great detail.  The comprehensive and in-depth report is available exclusively for clients here.

We believe the LATAM mobile devices market is heading towards an open channel ecosystem. Every other quarter, operators do regain some share. However, in peak season, the open channel claws back its lost share and even gains marginally. Over time, operators will continue to lose share. This forces OEMs to negotiate with the retail sector directly.

The open channel, which consists of big retail chains as well as small shops, in some instances, can be tougher to work with than an operator. However, the rise of the open channel has allowed more brands to enter the region. All the top five selling brands, that account for 78% share in LATAM, have a different approach to the operators and open channel when it comes to their channel strategy. Huawei is extremely strong within operator channels. Samsung, on the other hand, the leader of the market in LATAM, and its participation across different sales channels is very similar to that of the market.

This is why we believe that the increasing importance of the open channel is positive for OEMs. Although the operator channel was large, operators were often very selective about the models they stocked. For example, Claro (America Movil) Brazil would only range four brands. However, the same company in Mexico, under the brand name Telcel, would offer more than 22 brands. An increasing share of open channel sales removes such arbitrariness of distribution. But the open channel requires a more aggressive turnover than operators. We examine this and much more in our latest analysis, exclusively for clients, titled. ‘ LATAM Mobile Devices Sales Channel Analysis: The Rise of the Open Channel’.

The post Rise of the Open Channel in LATAM appeared first on Counterpoint.

By the end of 2018, Huawei was the leader of the market in Peru and a very solid number two in Chile and Colombia. In Colombia, Huawei became the second largest brand in 2018 and also the leading Chinese brand with 24% market share after including sales of its co-brand HONOR.  HONOR entered Colombia in H2 2018, and quickly picked-up share. In Mexico, its biggest LATAM market, Huawei has been increasing volumes through a two for one mix between high and low-price band devices and recently challenged Samsung to be the number one brand in the country. Even in Peru, Huawei keeps challenging for the top spot.

Exhibit 1: Huawei LATAM Shipment Volume Share Evolution

Source: Counterpoint Research Market Monitor

Part of Huawei success in LATAM is due to its improving reputation for offering excellent quality products. Heavy spending on marketing; up to several millions of dollars yearly, in sponsorship, and both online and offline campaigns has successfully built the Huawei brand in the region.

Further, its sales team was big enough to help the brand get into all channels and carriers. Huawei even opened flagship repair stores in most of the capital cities of the biggest countries in LATAM. All these efforts were quite synchronized.

However, just as it seemed Huawei was about to reach a peak for its consumer business unit, the US government decided to impose the export ban. Under a business-as-usual scenario, Huawei’s diligent efforts to enter Brazi would likely have been successful and further boosted its presence in LATAM. But in the current geopolitical environment, entering Brazil looks increasingly unlikely. For the short-term, it will be difficult for Huawei to maintain momentum in LATAM. Counterpoint Research’s analyst team has measured the multiple impacts of the ban in LATAM and other regions, as well as other Huawei business units.  This analysis is available to all subscribing clients.

The post Will Huawei’s Extraordinary Growth Story in LATAM Come to a Grinding Halt? appeared first on Counterpoint.

A few days ago, I had the opportunity to participate in the 2nd edition of the SmartCity Expo in Buenos Aires, Argentina. It was one of the biggest smart city events in Latin America.  Companies were promoting their services to the cities, while the cities were showcasing how they have evolved. It was a platform for the meeting of the public sector and the private sector. The key themes that emerged out of the event were – digital transformation, security, mobility, education, sustainable future, inclusiveness, and shared economy.

In the last three to four years, a bulk of the public investment in technology has been for digitalizing all processes. National and capital cities’ governments, especially, have spent a good deal of resources to improve their e-readiness. In Brazil, for example, Congress has approved a US$87 billion budget for 2019 to continue with its digital transformation goal.

E-Government index measures the government use of electronic communications devices such as computers and the Internet to provide public services. Exhibit 1 shows the list of ten most e-ready countries in LATAM.

Exhibit 1: LATAM Top Ten E-Government Development Index (EGDI)

Source: UN E-Government Knowledgebase.

However, even within the top ten countries, cities other than national capitals are far from being e-ready.  For example, Colombia has more than 1,200 municipalities, Argentina has 2,300, Brazil has 5,500, and only the top 5% of the cities in these countries have an online appointment system.  Many small cities, located wealthy parts of countries, are looking to improve their e-readiness. Nonetheless, even cities that started digitizing their data many years ago need intelligence to sort the data. They also could benefit from the use of blockchain technology to crossover data.

Another focus area at the SmartCity Expo was improving city security.  Big cities, such as Buenos Aires, Rio de Janeiro, and Sao Paulo, struggle in this regard. As security is an issue that city dwellers most demand, most governments have been installing cameras all over the cities. For example, Buenos Aires, had 8,500 security cameras by the end of May 2018, while Rio de Janeiro had 4,200 in 2017.  The cameras in Rio de Janeiro have been collecting information since 2003 and generate a few terabytes of data every month. Therefore, authorities in Rio de Janeiro are looking for new cloud services to manage and store this data. The city of Rio also needs AI to identify what is normal and what is an anomaly. In the case of Argentina, the coast guard generates 12,000 records each quarter. This year, it contracted Big Data Analytics services to process the data.

Mobility is another area where all major capital cities in LATAM had invested heavily to transform the physical infrastructure. However, there is still a need for major technology investment. For example, the city of Buenos Aires has 6 million people that commute within the city daily. However, it doesn’t have a platform or any information that would convey all the bus or train schedule.  To correct this situation, Buenos Aires is planning to launch an app that would inform commuters about the timings of public transport. Although, in the beginning, the coverage of the app will be limited. At present only six cities in LATAM have this service. With almost 60% smartphone penetration, soon all the other cities will have to provide such a service.

These are just a few samples of why there is such a hype about smart cities in LATAM. On average, each of these contracts is worth US$1.5 million.  As for opportunities, it is clear that “technology is global”. However, technology needs to be supported by a robust business model. And for this the biggest problem for any company are the LATAM governments in most countries, the contract process is often not transparent, always extremely bureaucratic, and many times tainted with corruption. These are the challenges which need resolution if the smart city opportunity in LATAM is to truly flourish.

The post Tapping the Vast Opportunity of Smart Cities in LATAM appeared first on Counterpoint.

But why did Telefonica exit a country like Guatemala, the largest market in Central America with a population of 17 million and 20 million mobile connections? Well, the answer lies in the new group strategy of Telefonica where it seeks to improve the return on capital with new strategic positioning.

The strategy started to take shape ever since José María Álvarez-Pallete López, took charge as the CEO of Telefonica in 2016. Lopez, who was earlier the CFO, has a strong financial background being an economist. At the beginning of 2018, he made it clear that the company will do everything to “bring growth and profitability”.

Except for Panama, Telefonica has been struggling across Central America. We expect the company to exit other markets in Central America: Costa Rica, Nicaragua and finally Panama. Telefonica might even let go of Mexico, where the company has struggled since it entered the market in 2000. Despite heavy investment, Telefonica’s subscriber base has remained over 90% prepaid. Like Guatemala, Mexico has struggled to deliver profits for Telefonica.

Over the past two years, Telefonica has systematically decreased its portfolio, sales and inventory of mobile handsets across all its markets. It’s subsidiary Movistar has started to offer a wide range of refurbished mobile devices in Argentina and Chile. Movistar may also start offering refurb devices in Peru and Brazil.

Overall, Telefonica is focusing less on traditional mobile services revenue income, such as selling devices and instead switching attention to offer new services. Recently, it launched IPTV in Brazil and Argentina for which it’s accelerating FTTH deployment in both countries.

Meanwhile, Telefonica’s exit from Guatemala and El Salvador also reinforces AMX’s long-term strategy. The Mexican operator is always seeking a dominant position either by acquisition, organic growth or a mix of both. As Telefonica is selling, AMX will most likely to continue with its shopping spree.

By purchasing Telefonica’s business in Guatemala, AMX will gain infrastructure, spectrum and other licenses that will help it surpass Tigo (Millicom).

Claro (AMX) Guatemala Will Reach 46% Share of Subscriptions After Purchasing Movistar

Source: Counterpoint Market Monitor 2018

So far, Guatemala has had three carriers. Tigo is the absolute leader with more than half the subscriptions.  Claro (AMX) is second while Movistar (Telefonica) is the smallest with around 19% market share. After the acquisition of Telefonica’s business, Claro’s share will jump to 46% and though it will remain behind Tigo, it will close the gap significantly. Postpaid accounts are 4.8% of Movistar’s subscription base in Guatemala, this percentage is much smaller than the countries’ average of 6.6%.

Claro El Salvador Will Lead this market after acquiring Movistar

El Salvador Mobile Subscription Share of Market

Source: Counterpoint Market Monitor 2018

Meanwhile, in El Salvador, Claro will become the dominant player with a subscription share of more than 54%. Therefore, the deal is still awaiting regulatory approval. El Salvador is a much smaller market than Guatemala. It has a population of 6.4 million people and 11 million connections. However, there are five carriers operating in the market. It was the latest country in LATAM to launch LTE.  Top three carriers are, Tigo (33% share), Claro (31% share), and Movistar (24% share).

The post Telefonica Begins Scaling Back in Central America in the Hunt for Profitability appeared first on Counterpoint.

Exhibit 1: LATAM Subscription Share by Technology

Source: Counterpoint Market Monitor 2018

Chile and Brazil lead the 4G-LTE penetration with more than 50% of their subscriptions. Colombia and Peru both have 4G-LTE penetration below 30% and will likely have the highest growth amongst major LATAM countries during 2019 and beyond. All Central American countries also offer ample growth opportunities in LTE technology. El Salvador was one of the countries to launch 4G-LTE most recently. It launched its 4G-LTE network at the end of 2016. By the end of 2018, its LTE subscription penetration remained below 13%.

Exhibit 2: 4G-LTE Penetration and Growth (2018)

Source: Counterpoint Market Monitor 2018

2G has shrunk to represent around 20% of the subscriber base. Brazil and Mexico have the lowest 2G participation, while Central America countries and Peru have the highest. However, in Colombia, Claro (AMX) expanded its 2G network at the beginning of 2018 mainly to serve the bottom of the pyramid users that can’t afford a smartphone device and smartphone data plan.

A few carriers in the region are considering shutting their 2G networks off so they can reuse the spectrum for 4G-LTE. This is to respond to the exponential growth of data demands or potential demands of 5G.  AT&T Mexico has already announced that it aims to shut down its 2G network starting April 2019. This task might not be that easy as AT&T will have to clean the frequency before it is usable to build a new network. This means not only moving 2G mobile users to 4G technology, but also those 2G M2M devices, which could complicate the shutdown.

LATAM has a population of 650M but more than 710M subscriptions. With 430 unique subscribers, there is an average of 1.68 SIM cards per user.  In many countries regulators and operators have been pushing to decrease the number of lines. There are more subscriptions than people due to many reasons, but the main reason is because many users have more than one mobile line and multiple devices.

As 4G-LTE is already the dominant technology–now what is next?  Currently, 18 carriers in the region have already launched VoLTE (voice over LTE), and at least 21 more have already announced their plans to launch it.  Additionally, AT&T announced the launch of its LTE-M network in Mexico and TIM Brazil announced the launch of an NB-IoT network.  In both cases, they will soon be offered commercially.

Many operators have also announced 5G trials and testing.  Brazil regulator, ANATEL, announced that it will be auctioned 5G frequency by the end of 2019. However, as we learnt from 4G, it might take at least two years between the auctioning of the frequency and the commercial launch of the technology.  5G frequencies most likely will have to be cleaned before it can be used, so it will take some time.  Many LATAM carriers, megacarrier or small, have said publicly that they need to work on recovering the investment of LTE technology before they can move to the large investments of 5G. LTE technology is now at the top of the wave, in LATAM, to prepare the region for the 5G wave that will unload full starting 2024.

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LATAM Mobile 360 brings together regulators, carriers, and technology providers to discuss important industry topics. The main themes discussed during the event pivoted around the future of the telecommunications business, IoT, 5G, cybersecurity, and new technologies such as AI, VR, etc. There was also a space, called 4YFN, aimed to connect start-ups, investors and companies, acknowledging that startups might be in the best position to provide adequate content for the local users.

Operator-Carrier Business Model Changes

Much of the discussion pivoted around how operators’ business models are changing. Increasing competition, changes in the ecosystem, and the need for new business models are among the top topics discussed throughout the conference. Telecommunication industry margins are getting tighter, and this is forcing operators to change the way they are doing business.

One regional operator admitted that operators are still working in an “analog” era when they should be migrating to “digital”. However, this condition could characterize many of the operators in LATAM. Changing this would require a great deal of resources but carriers are not yet ready to do so.

Most operators did not give clear guidance about when they plan to launch 5G. The reason behind the lack of visibility is that 5G needs to be funded by 4G, and the current 4G technology network investment has not yet paid off. The boldest statement was from Telefonica who plans to start commercializing 5G technology after 2021.

Regulatory Concerns

Regulators are gearing up for IoT and 5G technology, they were both big topics of the conference. For example, Argentina has just allocated the 900 Mhz frequency to be used as a none licensed network. It will provide internet access for small towns with populations under 10,000 people. This spectrum is intended to help connect the unconnected.

There has been a lot of discussion in the region regarding municipal level bureaucracy to set up antenna sites. Many municipalities in the region are imposing a great deal of red tape that has long drawn complaints from operators. These municipalities see operators as an opportunity to collect extra money from, while operators are urged to fulfill regulatory required coverage. To help in this situation, some central governments have imposed a mechanism to decrease the local bureaucracy. For example, the Colombian national government in 2009 approved a law that obliges local authorities (of 1200 municipalities) to help the network deployment effort. However, the results of the law has been lackluster.

Regulators acknowledge the need to manage new technologies, such as AI, blockchain, robotics, cryptocurrency, etc. The Colombian regulator admitted that they usually have an ex-post approach, rather than ahead of the technology. Most LATAM markets have a digital regulatory agenda, but some markets such as Chile are ahead of all the other countries in LATAM.  Chile has been actively working on regulations that would bring more certainty to those seeking to invest new technologies for example.

Red Hot Issues

Cybersecurity was another important discussion topic. According to the mega-operators, America Movil and Telefonica, LATAM’s internet usage growth is similar to that of other geographic areas. This usage requires more security to protect all data exchanges.  However, most of the LATAM companies are not spending enough on security, as it is sometimes difficult to convince the CFO of the ROI (Return on Investment) of such investment.

When discussing Emerging Technology Opportunities, Claro’s Argentina CEO said “In LATAM we adopt trends, we do not set the trends. Its success depends on who is launching it more successfully.”    This phrase can summarize the LATAM market when it comes to adopting new technology. For many markets, the major roadblock is the exchange rate instability. Sometimes it is too expensive to adopt new technology, other times the exchange rate changes sharply between the time a new technology project is set up, to the time the tech gets launched.

The conference also showcased new global platform companies that are seeking to enter the region, such as Pundi, a cryptocurrency company which showcased the first blockchain call in LATAM. Local entrepreneurs that are currently serving the local market are also beginning to expand their presence in the global market.

Another major subject that continues to stand out was the high tax burden in many LATAM markets. This was a major complaint among most businesses, as in markets such as Argentina or Brazil, taxes represent more than 30% of the overall telecommunication spending cost.  This tax load has an impact on the affordability of telecommunication products and services for the end user.

Despite all the issues mentioned above, LATAM is still a very attractive region to those who are seeking iinvestmentopportunities. According to GSMA, there is still a $5.7bn operator revenue growth opportunity for the region. Recent political and economic instability has placed the region behind most others in updating its technology.  However, it is still working to catch up.

The post Mobile 360 LATAM, Discussing the Issues That Matters to the Industry the Most appeared first on Counterpoint.

Rappi is benefiting from this investment spree. Rappi, is an on-demand delivery company and the most recent startup to join the exclusive unicorn club in LATAM. The region has had 12 unicorns so far and Rappi is the only one that is a sharing or collaborative economy enterprise.

Rappi was founded in 2015 by three veteran Colombian entrepreneurs. They used their previous experience to obtain funding to accelerate the growth of the new venture.  In its early phase, Rappi received investment from Silicon Valley VCs and graduated from Y Combinator. It recently received funding from VC firms such as Sequoia Capital, Andreessen Horowitz and DTS Global, which has increased Rappi’s valuation to more than 1 billion USD.

Rappi is currently established in 27 cities across six countries: Colombia, Mexico, Brazil, Argentina, Chile and Uruguay. It is a marketplace with around 10,000 participating stores and restaurants across six countries, with deliveries direct to customers.  Customers can order almost anything, from wireless headsets, to groceries, they even deliver cash. One of the founders, Simon Borrero, said that, “Rappi aims to be a store that delivers everything”.

Rappi value proposition

• Rappi charges a delivery rate between USD .80 to USD 1.8 depending on the country and the exchange rate. This rate is what the rider receives as payment for the delivery. Rappi takes a percentage of the sales total. Rappi also offers a premium subscription, with unlimited deliveries, for around USD 3 per month.
• The store must be located within 3 to 5 Kms of the client and Rappi riders only utilize bicycles or scooters. Once the customer places the order, it takes between 20 minutes – 1 hour to receive the order.
• The software Rappi uses sometimes gets confused and assigns orders that are located up to 10 kms away. This results in late deliveries and the rider not getting paid for the delivery, which increases rider discontent.
• Rappi is benefiting from the global gig-economy trend where increasing numbers of people would rather have an independent job, instead of a 9-5 dependent job.
• LATAM cities tend to be big, overcrowded, with heavy traffic and long transit times. By using scooters and bicycles, the delivery can be much more agile, which is what is driving Rappi’s swift growth.

Rappi will facilitate ecommerce growth LATAM, as it solves one of the biggest problems in the region – last mile logistics. In a survey conducted at the end of 2017, by CACE, Argentina’s e-commerce association, users stated that only 44% of all online sales are delivered.  The other 56% are either picked up at the store or from a central logistic location.  Courier services are quite expensive in the region, and not sufficiently reliable.   Rappi sharply decreases the cost of the logistics, which could unleash LATAM’s e-commerce potential.

Ranking based on numbers of monthly orders

Rappi is facing increasing competition in each of the countries it operates in. iFood, a Brazilian food delivery company, currently receives more orders that Rappi does, as it has been in the market longer.  However, it has so far failed to attract enough investment, partly because it only focuses on delivering food. The other competitor is the Spanish company Glovo, which entered the LATAM market in 2017.  Glovo offers multi-delivery on demand which is a slightly different service proposition, and the cost is calculated slightly differently.

The success of these local startups over global companies is their deep understanding of the local culture and tackle their needs.  They also know how to adequately get around local regulations, a key trait of successful tech startups in LATAM.  However, lack of funding has been one of the biggest growth barriers for LATAM tech ventures, as international investment firms have only recently started to take notice of potential opportunities in the region; Rappi was the inaugural investment in LATAM for Andreessen Horowitz.

Latin America is therefore offering a unique opportunity to investors to develop next generations startups.

The post Rappi, and the Untapped Tech Investment Opportunity in LATAM appeared first on Counterpoint.

The G20 leadership is increasing its effort to ensure women’s inclusion via digital technology as it has the potential to improve many aspects of someones life and work. Within the W20 more specifically, its Digital Inclusion Challenge aims to improve the employability of woman in urban and rural areas by helping them acquire the social and technical skills needed in a global and digitized world. Here are some highlights from the summit:

Digital Inclusion

This panel started with a speech from Sonia Jorge (World Web Foundation) where she emphasized that “Technology is not neutral regarding gender.  It is fundamental to include women in the process of technology conception”.

The quote was often repeated throughout the panel that included four leaders from the private and public sector. The panel highlighted that women are underrepresented in technology, beginning with educational opportunities and throughout many other areas where technology is used.

Panel III: Digitization, a key issue on the future of work

According to ITU’s (International Telecommunication Union) latest research, globally 200 million fewer women than men have access to mobile phones. Furthermore, worldwide the proportion of women using the internet is 12% lower. This gap widens exponentially in the low- and middle-income countries. Although men also suffer from structural inequalities, women are more likely to experience them due to social and economic barriers such as having less income, less access to education, banking, etc.

Cristina Ruelas (Regional Director from Article 19) shared a story to illustrate how enabling internet access to women in a few indigenous villages in Mexico significantly improved the quality of life of the whole village. Article 19 (a British human rights organization) approached disenfranchised women that lived in these communities who were not allowed to participate in the town meetings. These women felt that they were not respected by the men of the village because they had no access to information.  Hearing this, the NGO provided these women with an internet connection, devices to access to it, and instructions on how these new resources. After a few months of using their new found resources, these women realized that the Mexican government had assigned a doctor to provide health care to the village on a regular basis. However the doctor almost never came to the village, so they were not compliant with their assigned job. Furthermore, the doctor was withholding all the supplies of vaccines and other basic OTC medicines that the Government supplied the village.

The villages reported the situation to the Government. Presently these villages now know when the doctor is supposed to visit them and which vaccines and other supplies that they should receive. This action resulted in improved care and healthier families.  Last but not least, women also are now accepted into the villages’ assemblies. All this would have not been possible without providing internet access to these women.

The W20 Summit also emphasized that women are underrepresented at senior leadership positions in the technology industry and digital space.  This gap often starts at school and continues in the workplace in both developed and developing countries. According to UNESCO women are less likely to enter in STEM (Science, Technology, Engineering and Mathematics) disciplines and more likely to leave them. Currently, young women represent only 35% of students enrolled in STEM-oriented careers. The W20 is looking at ways to narrow this gap.

The digital gender gap will unlikely narrow on its own without the intervention of all its stakeholders. The G20 is committing efforts to increase women’s digital inclusion. As the gap narrows and women become more empowered, there are also new opportunities that arise in the private sector. This can affect areas such as digital platforms, mobile phone or mobile money usage as more women engage in these activities boosting growth in these markets which becomes beneficial for all those involved.

The post Mind the Gap appeared first on Counterpoint.

Chart 1: USD-ARS August 2018 X-Rate

Source: Bloomberg.com

A few days after the foreign exchange earthquake hit Argentina, the contagious effects of the depreciation reached Brazil.  In response, the Brazilian Real also depreciated more than 11% in less than a week. However, the Brazilian market has been soft since returning from its Summer recess in March. Brazilian presidential elections will be in October this year. The uncertainty of who might win has created a crisis of confidence among investors and consumers. This has triggered soft economic growth for most of 2018.

The Hurricane

Argentina is not facing a crisis of same magnitude as the one it had in 2001.  However, given the current economic and political scenario, consumer behavior will suffer in the short term, but most likely return to normal over the midterm.  Below are some of the main foreseeable areas that will be impacted:

• Mobile device sales could decrease around 15%-20% in volume as mobile phone users will postpone any plans to upgrade and will purchase a device only in case of absolute necessity.
• Smuggling of mobile devices (grey market) is decreasing, while refurbished smartphones are increasing.
• The share of ultra-low-cost smartphones likely increases. That means increasing the share of 3G smartphones, which are currently non-existent in Argentina. The Argentine government has also been slowly opening the market, giving opportunities to selected brands to import mobile devices.
• Internet access will become costlier, as wholesale access costs are priced in USD.  So many consumers will most likely to migrate to a lower-cost access plan.
• Mobile Postpaid subscribers will downgrade their current access plan. Argentina has one of the biggest bases of postpaid subscribers in all LATAM. The carrier that can offer the best plan for price, will increase its subscriber base.
• Android and Apple app stores are both billed in USD. The consumption of these apps will likely decrease.
• Services such as Netflix, Spotify, which are popular in Argentina, are both billed in Pesos. Netflix for example has around 1M subscribers in Argentina. Both services have already announced that they would not modify their subscription price, despite of the Peso depreciation. By maintaining the service price, they have not only secured their paid subscriber base, but even open the opportunity to increase their user base.

Argentina had many years of governments that were too worried about winning elections rather than fixing the economy.  Therefore, Argentina’s Central Bank was pumping Pesos into the economy which fueled more than 10 years of double-digit inflation, 30% annual inflation on average.  This inflation has been gnawing at the economy and consumer confidence, and it became a never-ending vicious circle.  Therefore, even though this whole crisis is painful for Argentina in the short term, this hopefully will offer a better picture for the midterm and a positive one for the long term.

The Tropical Storm

In the case of Brazil as mentioned above, economic growth has been soft during most of 2018. According to the Brazilian Statistics Institute, inflation has risen to around 4.5% in July, the highest in the last 16 months, after rising prices in fuels such as gasoline and diesel.  However, the unemployment rate has not increased during 2018.  Forex on the other hand has been stable, until Argentina’s Peso depreciated which has impacted the Real. Argentina is the third biggest trading partner of Brazil, according to the OECD  (Organization for Economic Co-operation and Development).

 Chart 2: Inflation Rate Variation in Brazil 2017-2018

Source: tradieconomics.com

• According to our Market Monitor, Q2 2018, Brazil mobile device sales suffered a -5% YoY decrease. This single digit decline will likely continue due to the uncertainty; end users are postponing their mobile device replacement plans.
• Feature phone sales should continue to increase. As there are very few ultra-low cost smartphones available in Brazil, people will turn to feature phones as a temporary solution.

This crises will impact the investment plans of both countries.  However, the degree of impact will differ. In Argentina at least 60% of the short-term investment projects in telecommunications have been paused. The impact on projects from small and medium enterprises might be even higher.

Most of the new Brazilian investment projects are delayed until the end of the year. As Brazil is totally influenced by political uncertainty, the impact should fade away after the elections, that is by the end of 2018.  But in the case of Argentina the uncertainty might extend until at least mid-2019.

Finally, retailers and OEMs in the region, that can endure without increasing prices, and/or continue to offer installment payment schemes, will have more of a competitive edge.  As consumers will most likely purchase a new device if they perceive it as an “opportunity”.

The post Economic Storm Threatening Argentina and Brazil appeared first on Counterpoint.

This regulatory project has been informally called: “La Lista Blanca” (the White List) in Argentina. This is different from the so-called “Lista Negra” (Black List). The latter is compiled from IMEI numbers of all mobile handsets reported stolen, so when activated, the carrier would automatically block the device. La Lista Blanca is different. It is intended to target devices that have been illegally imported into the country, often from a neighboring country such as Chile or Uruguay.

Around the same time, ANATEL (Agência Nacional de Telecomunicações – Brazil’s National Telecommunications Regulator) announced that project “Celular Legal” has been approved by the congress. Starting Feb 22^nd, 2018 carriers will start blocking all mobile devices that have not been homologated with ANATEL.

Chart 1: New Regulatory Project implementation Schedule

Sources: Anatel, ENACOM, Telam(Argentina National Press Agency)

Potential Impact of This Regulation

Samsung, Motorola and other brands’ sales in the affected countries have been most impacted by the smuggling, as their sales have underperformed expectations since 2014.  Meanwhile their colleagues in neighboring countries have exceeded sales targets.  Some OEMs/assemblers have been actively lobbying the local regulators, to enact and approve this regulation.

Chart 2: New Regulation Procedure and Impact

 Sources: Anatel, ENACOM, Telam (Argentina National Press Agency)

Brazil

1. Between 60%-70% of the illegally imported mobile devices in Brazil, arrive from Paraguay. Many brands have many models that are not approved by ANATEL and these brands will be most impacted.
2. When the regulation is implemented, the quantity of imports in Paraguay will likely diminish by between 20% to 40%.
3. The rest of the illegal mobile devices are from other neighbouring countries, such as Peru, Bolivia and Colombia. The volume of product being imported to these countries will also undergo a slight decrease.
4. Brazil’s TAM in 2018 should increase by 5% to 10% in addition to the market’s own growth.
5. However, we expect many consumers to lengthen their rate of replacement as local, approved, handsets are generally 40%-50% more expensive than illegal imports.
6. The second-hand devices market will also likely increase in the short-term. Most of these devices are sold, informally, from consumer to consumer, rather than back into official channels.

Argentina

1. In the case of Argentina, about 70%-80% of the illegally imported mobile devices enter from Chile. This was the principal reason that total imports of devices, had more than 20% growth, in Chile, between 2014 and 2015.
2. Samsung, Apple, LG, Huawei and Motorola were the main brands “traded”. So much so, that recently some of these OEMs, have taken a measure to decrease the number of units shipped to Chile.
3. The rest of the units arrive from Bolivia and Paraguay and brands such as Blu will likely experience the biggest impact.
4. If the regulation passes in Argentina, sell-in is expected to increase by at least 10%. However, it likely won’t recover the 25% of the market volume represented by the grey market currently.

As this regulation is set to be implemented in stages, its impact will not be felt until 2H 2018:

–          Sell-in in Chile, Peru, Paraguay, Bolivia and even Colombia will most likely be impacted.

–          Locally-established OEMs are not expected to fully recover the impacted volume until 3Q 2018.

–          Used devices will likely see an uptick I demand (and prices) in the short term to fulfill the needs of consumers that cannot afford a new phone; cheap new smartphones will not be available.

The LATAM region’s overall TAM will see a slight reduction during 2018 driven by reductions in grey trade between countries and a lengthening replacement cycle. For full regional recovery, it will require these two countries to open their markets leading to lower device prices. One other consequence is likely an upswing in sales of second hand devices, though the refurbished handset market remains at a nascent stage across the region.

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Commenting on the 2017 smartphone market trends, Counterpoint’s Senior Analyst Tina Lu, highlighted, “The LATAM smartphone market grew 5% YoY in volume. However, we see a deceleration in the rate of replacement. Despite healthy economic conditions, the market decreased by more than -5% in Q4 2017 when compared to the same quarter in the previous year. This is the first time that the smartphone market has had a YoY decline, denoting that the smartphone market is close to maturity. We expect this softer rate of replacement to continue throughout 2018, leading to a flat year in 2018.”

Miss Lu added: “On the value side, the smartphone market grew only 1% YoY. This was caused by a 17% YoY decrease of the premium segments (>$400), which led to slight drop of ASPs. Devices such as the iPhone or Samsung Galaxy S-series in LATAM have always been more expensive than the same model in the US. Differences in price can range between 25% to 110% higher, depending on the country. At the same time, the LATAM average consumer purchasing power is notably lower than Europe or US.  A smartphone is a significant investment for the LATAM consumer, inducing them to hang on to the device longer, resulting in slower rate of replacement.”

Commenting on vendor performances, Parv Sharma, Research Analyst, noted, “Samsung has been the absolute leader of the LATAM market.  Its success is due to its strong foothold in the region–especially in Brazil and Argentina. Assertive investment in marketing, sales, supply chain and aggressive prices has rewarded Samsung.  The company grew volumes more than 14% YoY. Samsung’s focus on having the best supply chain network, which starts with a well-established local manufacturing and assembly process, has allowed Samsung to launch the Galaxy S8 and Galaxy S9 almost at the same time as the models were launched globally. This competitive edge has helped it to increase its market share, which is more than triple its closest competitor.”

Exhibit 1: Percentage LATAM Shipment Volume Share – CY17

Source: Counterpoint Research Market Monitor CY17

Market Summary

• LATAM smartphone sales increased 5% YoY, reaching 147M units in 2017.
• 89% of the mobile phones shipped were smartphones. Smartphone penetration increased almost 2% YoY.
• LTE reached 87%. 25% increase compared to CY16.
• LATAM is still a highly concentrated market, top 5 brands represented almost 71% of the market, leaving more than 190 brands battled for the remaining 29% of the market.
• Only two (Motorola and Samsung) out of the top 5 brands had positive YoY growth.
• LATAM is still a mid-low range market. $100-$199 is the largest segment in volume and value. This segment has grown around 13% YoY.
• The main feature offered in this segment were >5” screen and between 8mp-13MP camera.
• Samsung J-series, LG K-series and Motorola G-series have all contributed to the growth of the $100-$199 segment.
• Ultra-low segment (~$99) grew around 5% YoY. Its growth has been impacted partly by the increased offering of refurbished (certified and non-certified) devices.
• The mid-high segment ($300-$399) grew more than 6%, mainly driven by older flagship models from Apple and Samsung.
• The smartphone category ASP decreased by 3% compared to CY16.

Exhibit 2: Latin America Price Band Volume Variation 2016 vs 2017

Source: Counterpoint Research Market Monitor CY17

OEM Performance

• Motorola gained 380 basis points of share YoY. It was the brand with the biggest YoY growth in LATAM. The launch of the C series with a sell-in price below $100 and its effort to improve its relationship with America Movil has enabled it to add a few models to the operator’s portfolio. This has boosted its performance and it has become second in volume share within the region.
• Samsung grew 320 basis points of share YoY. It was the brand with the biggest growth in terms of volume. It has been the absolute leader, in both volume and value, in the region.
• 9 out of 10 top selling smartphones models were from Samsung J series.
• Many Apple users are postponing the replacement of their device, resulting in a decline of 92 basis points of share.
• LG lost 91 basis points of share. Despite its aggressive pricing on the K series, it could not fight against Samsung and Motorola aggressive marketing strategies.
• Huawei decreased 70 points. It lost its momentum as it focused on promoting higher- end models.
• Lanix led the Local Kings (Brands) space. It successfully added a wide portfolio of very low-end smartphones for the megacarrier America Movil.

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