E Pluribus Claro

June 3, 2009

Even incumbent operators with extraordinary market positions can use some marketing help every now and then.

Faced with a growing portfolio of product brands in Nicaragua, Claro has decided to simplify its portfolio by moving to a single-brand strategy. The subsidiary of Latin America telecom giant América Móvil announced in May that it will relabel its Turbonett (Internet) and Cablenet (pay-TV and broadband) services as Claro, and will do the same for its most recent acquisition, pay-TV operator Estesa. With a single brand, the operator can avoid confusion among its customers and leverage the value of its regional Claro franchise.

As detailed in our new Nicaragua Country Intelligence Report, Claro is the undisputed leader in the Nicaraguan telecommunications market. On the fixed side, it controls more than 98.7% of the PSTN market and 84.3% of the broadband segment in terms of number of lines. In the mobile market, Claro holds a 68.2% share, while Movistar controls the rest.

Despite this market strength, Claro does need a branding intervention for a couple of reasons. First, unifying under a single label will enable Claro to leverage marketing efforts and even enjoy synergies with its other Central American operations. Second, its fixed operations get a fresh image when lack of competition could have eroded its perception among customers. Third and perhaps most importantly, the move prepares Claro for offering multiplay services under a unified brand umbrella.

In the pay-TV market, Claro has started to face some competition from Sky and its DTH offering (see Exhibit). Until recently, Claro has not needed a bundling strategy to foster organic growth, but with the arrival of competitors it should consider launching packages to protect its customer base, especially the lucrative high-end segment. Sky has moved decisively to grab this segment of the population and enjoys exclusive rights in Central America to broadcast the extremely popular Spanish soccer league La Liga.

Bundling can help Claro deter customers from subscribing to Sky and keep their broadband service with Claro. By the same token, in a country with a nominal GDP per capita of just $1,080 in 2008, the high-end market is likely to dry up quickly. Telecom operators will have to go after lower-income segments to spur growth, and bundling can make services affordable and shield the company against prepaid offerings from single-player operators in broadband, voice and pay-TV.

— Jose Magana, Analyst

Related resources:

Communications Markets in Nicaragua
Country Intelligence Report published June 2009
The Nicaraguan telecom market generated $502m in 2008, and it’s expected to grow at a 6.3% CAGR over the next five years. The sectors that will drive the expansion are fixed broadband and mobile services. While there’s opportunity in the underpenetrated Nicaraguan market, adoption will be curbed by the absence of a real competitive challenge to telecom incumbent Claro. This Country Intelligence Report analyzes Nicaragua’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.

Latin America Fixed Communications Forecasts, Q1 2009
Forecasts published March 2009
Updated on a quarterly basis, our Fixed Communications Forecast products provide a complete picture of wireline voice and data communications in each of 19 Latin American markets. The Excel output includes five years of historical data and five years of market projections for metrics such as demographics and economic trends, penetration of broadband and narrowband lines, Internet users, business users, voice telephony lines, VoIP, PCs, IPTV and revenue. We believe our Fixed Communications Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.

IPTV in Latin America: Not So Fast
Telecom Insider published April 2009
Facing the same stagnation of fixed voice revenue seen on a global level, most fixed-line operators in Latin America have made IPTV a key objective over the past few years. We believe IPTV is underperforming in the region because of regulatory obstacles, technological difficulties and deployment delays. As the market has evolved, however, it has become evident that there is significant demand for pay-TV, which is pushing telcos to seek alternative strategies. This report examines the market for pay-TV services in general and IPTV in particular in Latin America. It analyzes the regulatory hurdles faced by IPTV and the progress telcos are making in pay-TV, as well as the various strategies they employ to make the most of the opportunity. The report also contains case studies of Telefónica and Telmex/América Móvil.