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April 30, 2009
On April 28, Claro reported its financial and operational results for Q1 2009. The company closed with 9.21m subscribers, a 7.5% jump from Q1 2008 but a gain of only 55,000 compared with December 2008. In terms of revenue, total income for the quarter shrank 8.8% compared with same period a year earlier (to close at $334m) and a decline of 3.5% from its Q4 2008 level.
Mobile net additions in Central America were weak. The company pointed out that it had a good quarter in Nicaragua, which is in line with our mobile forecast predictions of a gain in subscriptions in Nicaragua and Honduras but net losses in El Salvador and Guatemala. The tough economic environment is reducing the flow of family remittances in the region, which is likely to drag net additions down in 2009.
Central America has been a challenging market for America Móvil since 2007. The company has faced serious competition in the mobile market from Tigo and Digicel, which have gained share at the expense of Claro. More significantly, Claro’s profitability and mobile ARPS have decreased (see Exhibit). However, the financial numbers from the first quarter broke the trend of declining EBITDA margins but show that the operator still has some work to do to recover from its peak levels. A week ago, as discussed on this blog, Millicom’s operational and financial data for Q1 2009 gave clues that competitors are carefully assessing the situation and preparing accordingly to fight for their customers.
Claro's EBITDA margin and ARPS for its Central American operation
I am seeing some signs of progress, though. On the fixed side, Claro is promoting bundles with Claro TV and Turbonett in Guatemala, El Salvador and Honduras that may help alleviate declines in fixed voice revenue. Claro’s DTH offering is attractively priced and, as forecast in our media models for El Salvador, Guatemala and Honduras, will drive growth in a market that remains largely underserved. On the mobile side, I believe that in consolidated markets (Guatemala and El Salvador), the battle for which operator will grab the highest number of subscribers is over. Therefore, I am pleased that Claro is focusing on increasing profitability of clients by following and industry-wide trend of curbing handset subsidies. Nevertheless, I would like to see a fresh new strategy from Claro that includes promoting more data services as well as a revamp of its portal “Ideas”. Also, due to Claro’s unique position as a fixed and mobile operator in several markets, more synergies should be possible and a quadruple-play offering in the most competitive markets should be on track. We look forward to further strategic developments from the operator.
— Jose Magana, Analyst
Related content:
Latin America Mobile Demand Forecast, Q1 2009
Forecasts published March 2009
Updated on a quarterly basis, our Mobile Demand Forecast products provide complete pictures of demand trends for 19 geographical markets in Latin America. The Excel output includes five years of historical data and five years of market projections for metrics such as GDP, mobile penetration, subscriptions (by operator, type of package, technology), ARPS and total mobile service revenue (data and voice). The Forecasts are based on extensive field research and use a consistent methodology across all markets, aiming to capture the total spending, from an end-user perspective, on mobile communication services in each market.
Tigo Bolivia Gains an Edge in the Mobile Market by Deploying 3G
Latin American Regional Perspective published November 2008
In Q3 2008, Millicom launched 3G services in Bolivia under the Tigo brand. With a strong regional presence and financial strength, an underpenetrated market and the government-owned market leader remaining idle, Tigo should be able to successfully implement and commercialize its 3G offering in Bolivia. This Perspective examines the deployment and how it will affect data services in Bolivia.
Millicom’s Acquisition of Amnet to Shake Up the Claro and Telefónica Domain
Regional Perspective published October 2008
In July 2008, Millicom announced the acquisition of Central American broadband and pay-TV provider Amnet, what could be a key step in transforming Millicom from a mobile telecom provider into a broadband and content provider. With Central American markets moving toward more advanced data services and pay-TV, this acquisition positions Millicom to be able to provide multiplay services. This Perspective examines this opportunity for Millicom to expand beyond its traditional mobile services and how this would affect the markets.
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