Global Insight Perspective | |
Significance | Iusacell will invest US$160 million on coverage expansion and increasing the network's traffic capacity within the next year. |
Implications | Much of this sum will be spent on the deployment of additional base stations on CDMA 1X EV-DO Rev. A technology, which permits transfer speeds of up to 3.1 Mbps. |
Outlook | Iusacell is to focus its strategy on high-revenue, post-paid users leaving coverage of the prepaid segment from sister brand Unefon, while expansion to other Latin American markets in an attempt to boost organic growth is not excluded from the CEO's plans. |
Iusacell plans to invest US$108 million within the next year to expand its network to 3,060 base stations from 1,860 at present to support the growth of its subscriber base. Aiming at a total base station count operating on CDMA 1X EV-DO Rev. A technology of 1,120 by December 2007, Iusacell is seeking to gain competitive advantage over its rivals by offering high-speed internet access. EV-DO Rev. A technology presents higher upload and download speeds of up to 3.1 Mbps, considerably higher than the first version's 2.4 Mbps, which permits use of applications such as IusaTV and BAM, the commercial names for Iusacell's mobile TV and high-speed internet access services, respectively. According to the company's CEO, Gustavo Guzmán, EV-DO technology is the "most-advanced" in the market. The investment plan involves national coverage to include 52,000 localities in Mexico, which correspond to 67 million people.
Outlook and Implications
Iusacell-Unefon Merger: Following a proposal from Mexico's third-in-size mobile operator Iusacell to merge with smaller rival Unefon in March 2007, the two companies' shareholders approved the fusion, which saw the creation of a new entity that accounts for approximately 7% of the local mobile telephony market and has a presence in all federal states (see Mexico: 30 March 2007: Iusacell Proposes Merger with Mexican Mobile Operator Unefon and Mexico: 18 April 2007: Iusacell Shareholders Approve Merger with Unefon). As of December 2006, Iusacell had a total of 2.1 million customers, with 66.7% belonging to the prepaid segment, while Unefon's total subscriber base reached 1.3 million users. The new player has to compete with Latin America's big rivals: Telefónica's local unit Movistar with just over 10.0 million customers and América Móvil's flagship operation Telcel with a momentous 46.1 million users. Despite the merger, the two companies decided to maintain separate commercial brands going forward to take advantage of the strong brand loyalty that they enjoy in the local market (see Mexico: 25 May 2007: Merged Iusacell and Unefon Will Maintain Separate Brands). Iusacell, mostly focusing on the post-paid segment and high-revenue users, has adjusted its investment plan to deploy and support services related to this segment; Unefon mainly offers services to low-income prepaid customers. As a result, marketing efforts are mostly directed to these accounts leaving services such as high-speed internet access to be promoted by the sister brand. This same service is now used by 12% of the total subscriber base and is subject of an extensive advertising campaign to be broadcasted on a national level.
Iusacell Sees Expansion to Other Markets: According to Guzmán, Iusacell plans to bid for wireless spectrum in other Latin American markets, as part of controlling shareholder Ricardo Salinas Pliego's expansionist strategy, Dow Jones reports. "We are interested in countries where there are spectrum auctions," Guzmán told reporters yesterday, confirming the company's interest in spectrum auctions in Peru, Honduras, and Panama. In addition to the mobile unit, Salinas Pliego also owns Mexico's second-largest television broadcaster TV Azteca and retail and financial services group Grupo Elektra.