3G mobile technologies will not make significant headway into Latin America's markets prior to 2006, Pyramid Research has confirmed through a traffic buildup and coverage modeling analysis developed for Pyramid’s new Mobile Networks service.

The findings substantiate recent statements made by regional operators expressing doubt that the high-speed mobile data networks will be deployed in the mid-term, extending to 2005.

"Sluggish macro-economic conditions, still unproven 3G technologies, and contracting financial markets are the principle reasons behind the delay," said Jonathan Tirone, analyst for Latin America. "While Pyramid Research still projects 3G to make some headway during 2003-05, investment will be highly targeted to the most affluent metropolitan geographies and penetration will amount to less than 1%."

Capital expenditures will slow to 2% CAGR between 2000-05

Mobile network investment will slow on a per-subscriber basis in the next five years as regional operators reassess their revenue-generating strategies. While the aggregated subscriber base will continue to increase, operators will not upgrade their networks at a similar pace due to suspect demand for wireless data services.

Revenue streams have come under pressure in recent years despite rising aggregate sales because nearly 100% of all net additions to operator’s subscriber counts are prepaid contracts. Prepaid clients generally use their phones for fewer minutes each month and are less inclined toward wireless data services. These factors combine to erode average revenue per subscriber (ARPS) figures.

Vendors still eye $34.6bn buildout opportunity

While operators battle the conundrum of downward spiraling ARPS and climbing subscriber rolls, network vendors delight at the prospect of $34.6bn in mobile infrastructure sales between 2000-05. CAPEX in 2001 will exceed $6bn pan-regionally spent on the core physical components of mobile networks — excluding software, backbone and management center costs.

With compound annual growth rates for mobile subscribers of 22% and revenue gains of 18% between 2000-05, vendors and operators still face a significant regional sales opportunity despite the limited impact of 3G. The long-term windfall of broadband mobile network deployment will go to those companies that implement superior new customer addition and technology migration strategies.

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last updated: January 12, 2004

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