Convergencialatina¿s presentation in the second day of the Latin American Conference CDMA 2003 in Rio de Janeiro, revealed that after Iusacell¿s purchase, Grupo Salinas became the fifth biggest operator in Latin America with 3.6 million lines at the end of the 2Q 2003. The group related to TV Azteca is closely following the four big regional players: America Movil (34.6 million), Telefónica-Portugal Telecom (26 million), BellSouth (11.4 million), and TIM (10.5 million in the 1Q).
Besides, after Telefónica Móviles¿s decision of moving Mexican operations to GSM, Unefon - Iusacell merger will be the only CDMA operator in Mexico. “I¿m working in the GSM world”, said Steckel in his presentation. “I spoke to people in Telefónica, and they admitted the true reason for change has been the cost of GSM terminals that, given scale, will always be lower”. Therefore, Steckel asked makers “to have the lowest gear costs possible”.
The following panel, “handset” vendors, both cast doubts and brought in hope for CDMA operators who can compete in mass voice segments. Adam Gould, CTO in Nokia showed how the firm is concerned about developing phones with inter-operable MMS platforms, between CDMA and GSM. Chuck Becher, Sales Director for Latin America in Kyocera, said that, after the purchase of the terminal division in Qualcomm, the firm focused on expanding product lines with the latest technologies, such as phones with digital cameras. The reason is that Asia will have 51 million phones fitted with cameras by 2006, and North America, 12 million, according to Strategy Analitycs. However, throughout Latin America there will only be 1.8 million phones with a camera by 2006.
“We have around 30 and 40 million users in Mexico; growth won¿t be driven by the million wealthy users, but by people under 25, that enter the cell service”, asserted Steckel. For them, Unefon has the lowest prices per minute in telephony. And only offers pre-paid services.
Grupo Salinas¿ reasoning is that it cannot compete in terminal subsidies with the financial capacity of América Móvil. “We have to draw a very different business line if we are going to compete with someone that has a lot of money and strategic capacity to get funds”, argued Steckel. That is, Unefon offers more expensive terminals, and cheaper services. Thus, churn is minimu, 2%, compared to 35% in the market. The CEO of the firm used the following metaphor to explain this phenomenon, surprising for all Latin American operators: “When I used my father’s car, I crashed several times and paid insurance; since I¿ve bought my own, I have never crashed, I have always taken care of it”. Mexicans that paid good money for Unefon phones “value services”.
Grupo Salinas uses synergies with affiliates, TV Azteca and the retail chain Elektra to sell and activate gear. It will also add Iusacell to the strategy. According to the analysis of the new owners of Iusacell, Verizon would have never been able to meet such an ambitious business plan given difficulties in getting clients. “The CEO in Iusacell gave me a courtesy phone, and for three days, I couldn’t activate the phone, though I¿ve tried several times”.
Unefon model needs to lower gear costs. However, Gould, Nokia, admitted they have “difficulties in setting something specific for Latin America, given lack of scale”. Though there was a light of hope when he mentioned CDMA growth in China, and Asia in general. The number of eastern users is outnumbering that in North America.
The new star operator is China Unicom, running on 1x EVDO technology. Steckel revealed Unefon will also launch 1X in big cities in Mexico, thus the operator is the sole high-speed service provider for mobile data in the country, until Telcel implements the EDGE network announced in December 2000.