During a recent trip to Colombia I was pleasantly surprised by the advances and development on the telecom sector since I left more than a decade ago. During a visit to a mid-market level company by U.S. standards I was impressed by their use of the latest technologies to improve operations. To make a long story short, I witnessed their use of technologies like MPLS, video/voice/data collaboration tools, mobility apps, social media etc. to interact with employees, customers and providers around the world. I was also impressed by the innovative ways the telecom providers design, provision and charge for the services.
Growth in South America
Despite a global economy marred with uncertainty over the last few years, the growth and penetration numbers reported by entities and companies in the sector within the region speaks volumes. Without even going into the explosive growth of the wireless sector, where the region outpaces global penetration rates, broadband services have grown about 40% each year since 2007 (although overall penetration rates are far behind compared to the U.S. and Canada). Some analysts such as IDC have stated that South America will continue to be one of the top growth markets for technology for the foreseeable future. Here are some reasons why:
- Deregulation and modernization of legacy government entities and programs to compete in open markets. Since the mid 90’s, Executive and Legislative support for reforms to leverage both government and private capital investment has powered the growth of the sector. Clear examples driving broadband and mobile penetration through South America are programs such as Vive Digital in Colombia, Plano Nacional de Banda Larga (PNBL) in Brazil, and Todo Chile Comunicado in Chile.
- International operator’s significant investments in the region. The friendly regulatory environment mentioned in the previous paragraph has allowed for the continuous flow of major foreign operators to actively participate in privatization and M&A activities. The new “colonization” of South America is led by Spain’s Telefonica and Mexico’s Telmex, which have major service provider operations in virtually every country on the region, offering Broadband, Wireless and Cable TV.
- Incumbent Consolidation. Faced with the pressure of competition from abroad, incumbent local exchange carriers across South America decided to join efforts and created powerhouses of regional coverage across the area. Best example of this is Oi Brazil, which was the result of the merger of 16 state-owned ILECs across the country in 1988. Most recently, three of the biggest incumbent providers in Colombia (UNE, ETB and Emcali) signed a Memorandum of Understanding to combine operations to complete more effectively against foreign providers such as Telefonica and Telmex, opening the door for a potential merger that would create another national player.
- Newer technologies. While in the Broadband services arena ADSL continues to rule, it continues to lose market share to cable modem (DOCSIS) and lately FTTH services from emerging providers, who have made triple play offerings very attractive not just to the usual consumer but also to those from lower social stratification, increasing the size of the market. Also, WIMAX has been successfully deployed commercially in many areas to address poor rural infrastructure.
Bottom line, the region has a very resilient telecom industry that has continued to grow at accelerated rates in adverse conditions. If you have an opinion about it, I would love to hear from you!
At XO, we serve many enterprises with presence in the region through our international portfolio.
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