Today's comment: Movistar launches LTE service in Peru.
- Movistar has commercially launched its 4G network in Peru.
- The service was launched on 2 January 2014 in Lima, including the district of Cercado de Lima, La Molina, Miraflores, San Borja, San Isidro, San Miguel, and Santiago de Surco.
Movistar received one of the two blocks of spectrum auctioned in the AWS band (2x20 MHz) at a cost of EUR116 million (USD157 million) on 22 July 2013 and must provide LTE coverage in the next few years to underserved areas, such as Iquitos, as well as the more highly penetrated areas of Arequipa, Lima, and Trujillo.
Our take
Movistar is the first Peruvian operator to launch commercial LTE services. The operator has introduced an LTE plan dubbed "Vuela" ("fly"), offering monthly data allowances of up to 4 GB, and is marketing its service through a variety of devices, including a range of smartphones and four consumer plans ranging from PEN99.9 (USD35.5) per month for 700 MB to PEN319.9 for 4.1 GB per month. In the third quarter of 2013, the average Movistar Peru mobile subscription generated monthly ARPU of PEN27, compared to PEN25 for Claro Peru. While these ARPU numbers do not include value-added tax, the average customer in Peru is spending significantly less than the starting price for 4G LTE access. Therefore, Movistar's initial service will appeal to higher-end consumers, as well as businesses. Greater competition in the 4G LTE space may lower the price of adoption.
In 2013, Telefónica Peru invested USD1.5 billion to complete its 1,800-km fibre-optic project FOA (launched in 2011), which crosses eight areas in Peru within the Andean and Amazonian regions, and will be expanded from the current 8,000 km to 16,000 km by the end of 2016. This deployment will help the operator to extend its 4G network to rural areas. Under the contract terms of the LTE auction, the operator will invest about USD400 million in Peru over the next 10 years to deploy a 4G network in the country. According to company director Jose Antonio Cassinelli, Movistar will invest USD250 million over the next five years in infrastructure development for the technology.
Movistar is the mobile market leader in Peru with a 50% share, followed by Claro with 44%, and Entel with 6%. Americatel (Entel), which also received spectrum in July 2013, has not launched LTE as yet. Entel, which owns both Americatel and Nextel Peru, is likely to merge the two players and use 4G frequency allocations to make inroads into the mobile space and to challenge Telefónica. As the government did not award spectrum to Viettel and Claro in the last auction, IHS does not expect immediate competition from these operators, but they will likely bid for spectrum in the next 700-MHz auction.