In Latin America, bundling has gained traction over the past three years as fixed operators expanded into the pay-TV market and cable operators pushed further into traditional telco territory (fixed voice and broadband). Pay-TV is becoming a new growth engine for fixed telecom operators, which have seen traditional voice revenue decline as a result of fixed-to-mobile substitution. Increasing PC penetration, meanwhile, is helping broadband gain wider adoption, which is attracting more competition to the broadband market from cable operators, which see the service as a perfect companion to their pay-TV offerings. So far, bundling has attracted mostly people in high-end socioeconomic groups who can afford these services.
Given that Latin America's GDP per capita was $7,856 in 2008, operators must face the fact that to keep penetration of fixed services growing and meet revenue expectations, even saturating the highest-income strata won't be enough. By the same token, incumbent operators must use creativity to shield their current customers from growing competition while keeping their ARPS as high as possible. Given Latin America's unequal income distribution, the still low penetration levels of fixed services and the difficult global environment, Pyramid Research believes that the bundling strategies with the best chance of success for operators involve broadening their offerings to attract several income segments and financing equipment to overcome device penetration barriers.
This report examines the multiplay strategies of several leading operators in Latin America and the rationale for engaging customers outside the higher-income population segments. It compares the cost of multiplay services across several markets to demonstrate that there is potential in Latin America for costs to come down, which would boost penetration. Finally, case studies of two integrated operators - NET Serviços in Brazil and Claro in Central America - examine the strategic challenges and choices involved in expanding target markets through bundling.
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