Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Tuesday, December 10, 2019

The "price war" between operators leaves 5G and new business models in the background

The local regulator called Entel, Claro, Movistar and Bitel to compete in quality of service and overcome the constant competition to capture more portability additions. Telefónica leads the segment with a 35.34% share, closely followed by Claro, with 28.75%; Entel, with 19.23%; and Bitel, with 16.64%.

The Peruvian market stood out during 2019 for regulatory advances in terms of spectrum and the establishment of bases for an eventual transition to 5G. On the one hand,  the start of the rearrangement in 3,5 GHz; and the new guidelines for the development of new services and digital technologies were published for commentss, which contemplate the eventual shutdown of 2G, the sharing of infrastructure and the migration to new technologies. This scenario confronts a highly competitive mobile segment, marked by a “price war” that does not stop and a distribution that reached its lowest historical scale among the four main operators: Telefónica with 35.34%, Claro with 28.75%, Entel with 19.23% and Bitel with 16.64%, according to Osiptel data as of September 2019.

From the Osiptel regulator itself there was a call for operators to concentrate on improving the quality of service, above the focus on this "price war". Undeniably, to prepare the way for 5G, this constant competition to capture more portability additions leaves other efforts in the background that should be faced: testing the new mobile generation, new business models on the Internet of things and artificial intelligence - to name just two of the businesses that will be powered by 5G - and infrastructure sharing.

The president of Osiptel, Rafael Muente, in mid-October warned that mobile operators permanently   maintain a ‘price war’, because they need to make their operations profitable. He accused them of 'bleeding', instead of worrying about competition being at the level of service quality, and not just at the price level. This occurs at a time when the improvement in performance and speed becomes key looking towards the first half of 2020, when the spectrum tender for 5G is expected. And even more so considering that 60% of mobile connections in Peru correspond to 3G.

To name just one case among the operators that dispute point-to-point market share, in 2019 Entel focused to attract “Entel lovers”, loyal customers, especially in the postpaid segment, to maintain the leadership in portability in this modality. To attract them, the operator offers equipment grants and special offers to buy high-end equipment.

To promote this focus on quality of service, the regulator made public its quality ranking and new products, with the intention of making the user aware of the quality of the services he/she receives. The District Mobile Quality Ranking showed for the first half of 2019 8.043 interruptions, of which 47% were due to power outages and 27% due to failures in the network elements of operators.

Bitel leads in interruption time of the mobile phone service, with 10.7 minutes of monthly average affectation per subscriber: followed by Movistar with 5.8; Entel with 1.3 and Claro with 0.4. 

A new MVO with a flexible model

In parallel to this scenario of strong competition between the four companies with mobile networks, the virtual operator market was renewed by the start of operations of  Cuy Móvil .  If all the current actors are considered, the mobile market in Peru is constituted by Telefónica, Claro, Entel, Bitel, Inkacel, Dolphin and Cuy Móvil. Inkacel only has 0.04% of the park (September 2019, Osiptel); Dolphin, aimed at the corporate segment, which does not even reach this quota; and Cuy Móvil began operations at the end of last September, with the goal of reaching 30.000 users in its first year.

After three and a half years of preparation, the MVO offer is available, exclusively online, without branches. Users enter the web portal and select the amount of MB, SMS or calls they wish to have in the month, according to their preference. Then, they choose to receive the chip via Rappi, or pick it up at a distribution point - at the moment they are located near the main universities.

The MVO operates on the Claro network. To start its operation in Peru, in 2018 it received US$ 1 million from an investment fund. With a subscription-based business model and flexibility in selecting options in the hands of the customer, Cuy Móvil will try to achieve what Virgin Mobile (later acquired by Inkacel) could not. Virgin Mobile had started offering services in August 2016 with an eye on the young public, and gave up after a year: Virgin sought to reach 2% of the cake of the mobile segment within three years, but after six months in operation only managed to capture 58.000 users (less than 0.02%). Its heiress, Inkacel, decided to take a turn in the strategy and focused on micro recharges in segments of low purchasing power.

The Cuy Móvil model is 100% digital: at the time of the launch of services, the direct competitor of this new actor was Tuenti, a brand belonging to Telefónica also aimed at the young public, but in October the end of its operations was announced. 

Last news and analysis

América Latina · Convergence

28/03/2024

Convergencialatina returns on Wednesday, April 3

Puerto Rico · Fixed Broadband

28/03/2024

Puerto Rico must deploy fiber optics in more than half of the island's homes

The data came from a Fiber Broadband Association webinar that revealed the island's situation in FTTH services. There is a plan for the footprint to reach one hundred percent of homes in 2027 financed by federal funds and privately executed.

Puerto Rico · Fixed Broadband

28/03/2024

Puerto Rico must deploy fiber optics in more than half of the island's homes

The data came from a Fiber Broadband Association webinar that revealed the island's situation in FTTH services. There is a plan for the footprint to reach one hundred percent of homes in 2027 financed by federal funds and privately executed.

Uruguay · Pay TV · Internet & OTT · Operators

27/03/2024

Through agreements with Claro and Movistar, cable operators expand their Internet offer

These are agreements of different types, which include leaving the last mile for the cable operator or contracts for available bandwidth. Antel could join with infrastructure leasing. Some cable operators are already building their own networks.

Paraguay · Operators

26/03/2024

Government analyzes partial privatization of Copaco

The state operator is going through a delicate moment. Its income does not cover operating expenses and it must fulfil a debt obligation of US$110 million. Furthermore, the lack of investments led to the obsolescence of its infrastructure. Oscar Stark, president of the firm, states that alternatives are being evaluated to obtain the necessary funds, including the possibility of adding private partners. And he believes that in 18 months "the situation will be resolved."

Search news