BMI View : A fragile Argentine economy had a hugely negative impact on the telecoms sector in 2014, as high inflation and concerns about currency stability affected purchasing power. Inactive mobile number discounting added to the contraction of the mobile subscriber base in 2014. High penetration rate suggests that Argentinean market is close to the saturation point, BMI believes that this will be reached in 2018. On the upside, BMI upgraded its 3G/4G outlook after successful spectrum auction and the launch of the country's first 4G networks. Operators have also launched extensive capital expenditure programmes to expand their LTE networks. Meanwhile, NII Holdings divesting Nextel Argentina can change the competitive landscape in the country.
Mobile connections contracted by 727,000 in 2014, bringing the total by the end of Q414 to 63.557mn. Growth is expected to slow significantly as operators upgrade existing subscribers to next generation networks.
There were 9.241mn lines in service at the end of September 2014, with INDEC data showing this rising slightly from 9.142mn at the end of the same period in 2013. The broadband market continues to be the market's most dynamic, with connections on the rise. Some 18.5mn are forecast to be in service in 2014.
Key Trends & Developments
The government of Argentina auctioned national 4G spectrum in the 700MHz and 1,700MHz/2,100MHz advanced wireless services frequency bands and also regional 3G spectrum in the 850MHz SRMC and 1,900MHz personal communications service ranges on October 31 2014. Five companies pre-qualified for the auction - Claro Argentina, Telecom Personal, Telefonica Moviles (Movistar), Nextel and Grupo Uno, but three companies have thus far been awarded spectrum - Movistar, Claro and Telecom Personal. Under the 15-year licences, the winning bidders of the 4G spectrum will be required to increase population coverage to 98% in five years. Following the auctions, both Movistar and Telecom Personal launched their 4G networks only days apart.Operators have responded by channelling their capex into expanding LTE networks. Claro Argentina plans to invest ARS2.65bn (USD303.7mn) by 2019, mainly in the expansion of its 3G network infrastructure and the deployment of its 4G LTE services across the country. Movistar plans to invest ARS3bn (USD346.8mn) to deploy 4G LTE services in Buenos Aires Province. The operator aims to provide 4G technology in 53 municipalities by deploying more than 1,300 LTE sites across the province.
There have been changes to the competitive landscape. NII Holdings has sold its subsidiary Nextel Argentina to private equity firms Kingsley Capital and Optimum Capital. Financial details of the transaction have not been revealed. The two firms are also trying to acquire the 3G and 4G-suitable spectrum tentatively allocated to media conglomerate Arlink in 2014's multi-band spectrum auction.
New rules proposed by the Secretary of Communications and the Secretary of Commerce will require Argentina's mobile operators to give the price of each service, promotion and discount. The aim is to make costs clearer for subscribers, a move BMI believes has real benefits for users' understanding. However, the packages offered to subscribers are usually more complex than the cost per second or SMS, allowing the operators to differentiate their offerings.
The Supreme Court of Argentina rejected appeals by the government and several telephony licencees against a court ruling that barred telecoms operators from offering broadcasting services. Previously, the Argentina Cable Television Association and local cable firms Cablevision, Multicanal and Telecentro initiated a lawsuit reacting to reports that telephony service providers had started to provide video-on-demand services. A court then ruled that under the licences terms awarded to firms offering telephony services, the holder may not provide broadcasting services, but this was later appealed by the government and several telecoms firms. The Supreme Court has now rejected the appeals against the ruling and directed Telefonica de Argentina and Telecom Argentina to discontinue offering pay-TV services through agreements with other firms.