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October 16, 2009
Panama posted frenetic growth in mobile subscriptions from 2007 to 2008 as Cable & Wireless and Movistar rushed to attract customers in anticipation of the arrival of Claro and Digicel in 2008. By the time Digicel was able to offer services in the fourth quarter, penetration had exceeded 100% and most of the Panamanians who were underserved at the time of the 2007 spectrum auctions had already gone to C&W and Movistar. For Claro, which launched services after Digicel, the situation was even worse.
As mentioned in our Country Intelligence Report on Panama, we expect Panama to close 2009 with a mobile subscription penetration rate of 120% of the population (see exhibit). The main question for all mobile operators is therefore what they can do to maximize revenue from an oversaturated market. This is a situation we have already seen in Argentina, where penetration has exceeded 100% since 2008 and has forced operators to focus on data services, such as mobile Internet access and messaging.
Mobile subscriptions and penetration of the population in Panama
Source: Pyramid Research Panama Mobile Demand Forecast, Q3 2009
In Panama, market leader C&W may start cleaning up its subscriber base, since the last wave of users probably had low margins, if any at all. In Latin American markets with lower penetration levels, we have already seen operators reduce the number of low-volume, low-loyalty subscribers after realizing that the cost of keeping those users is huge: handset subsidies, frequent customer service, low brand loyalty and low ARPS.
Recent entrant Claro should instead focus on data services. First, trying to steal market share from C&W and Movistar, which enjoy a huge advantage in prepaid thanks to their low costs for on-net calls, will be too expensive. Second, in a country that has the highest GDP per capita in Central America, data services are still in their infancy. There is huge potential in mobile broadband, mobile content and the emerging category of “connected devices” (e-book readers and cameras, among others), where the best network will gain an edge. Until now, C&W has had little incentive to invest in advanced networks, letting Movistar grab data-focused subscribers and position itself as the top provider of mobile data services. Nevertheless, the market is still small, and in Panama the game is just starting.
For Digicel, since it already made its strategic decision by deploying EDGE, opportunities are still available in messaging services, ringtones and other low-bandwidth services. Prepaid data services subscriptions bundled with handsets suited to texting fit well within a good strategy for Digicel, which has proven in El Salvador and Honduras to be a master of gaining clients in highly competitive environments.
— Jose Magana, Analyst
Related resources:
Panama: Mobile Opportunities Abound Despite High Penetration
Country Intelligence Report published October 2009
The telecom market in Panama generated $761m in 2008 and will expand to generate more than $1.1bn by 2014, a 4.8% CAGR rate fueled by mobile data services, fixed broadband and pay-TV services. The entry of two new mobile operators in 2008 (Claro and Digicel) will help to bring mobile penetration from 71% in 2007 to about 120% by the end of 2009, clearing the way for expansion in mobile data services. This Country Intelligence Report analyzes Ukraine'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 Mobile Demand Forecast
Forecasts published quarterly
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.
Latin America Mobile Operator KPI Forecasts
Forecasts published quarterly
Our Mobile Operator Key Performance Indicators 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 subscription totals, market shares, net and gross additions, prepaid and postpaid subscriptions, business subscriptions, data ARPS, aggregate ARPS, prepaid and postpaid MOU, churn and total service revenue — all broken down for the mobile operators in the respective markets. We believe our Mobile Operator KPI Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.
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