Jan. 11 2019 — Latin America and the Caribbean are starting to show signs of economic recovery, which has helped the region's multichannel market return to growth despite continued direct-to-home losses in Brazil. Meanwhile, some telecommunications groups are acquiring operators in Central America to strengthen their competitive position and gain convergent capabilities. DIRECTV Latin America LLC for its part is honoring its traditions of innovation by introducing the region's first virtual multichannel service and 4K linear TV channel. In Colombia, Empresa de Telecomunicaciones de Bogotá SA ESP's, or ETB's, cost-cutting plan's early results are showing progress.
The Latin America and Caribbean economic environment seems to be stabilizing, with GDP expected to expand 1.7% in 2018, according to the World Bank. Recovering private consumption, investments and commodity exports should be primary drivers of economic stabilization. Consumer price inflation was 2.6% during 2017, according to World Bank data. However, unemployment remained at 8.3%, a high for the past 10 years, based on World Bank data.
Intense fluctuations in exchange rates in several Latin American markets during 2018, especially in Argentina and Venezuela, are expected to cause multichannel revenues expressed in dollars to drop by 6.1%. The year was also marked by political uncertainty, with elections in seven countries, including the region's largest markets, Brazil and Mexico.
Already a client? Please refer to the economy and multichannel affordability section of Latin America profile for more information. For in-depth analyses of the perspectives following presidential elections in Mexico and Brazil, refer to the articles linked here and here.
Following a slight drop in subscribers in 2017, mainly due to direct-to-home losses in Brazil, the Latin American multichannel market returned to growth in 2018, while fixed broadband continued to grow steadily, with broadband households expected to overtake multichannel households in the region by year-end 2018. IPTV adoption accelerated in 2018, boosted by Telefónica SA's, or TLF's, decision to upgrade its last mile to fiber, mainly in Brazil and Chile.
Already a client? Please refer to the cable, DTH and IPTV sections of Kagan's Latin America profile for more information, and the article linked here for an analysis of Latin America's top multichannel groups.
Latin America and the Caribbean has one of the lowest levels of fixed-broadband penetration among the global regions included in our analysis, ahead of only the Middle East and Africa estimated at 44.0% in 2018. Cable overtook DSL in 2018 to become the largest broadband technology platform in the region, while FTTP continues to gain market share rapidly.
Already a client? Please refer to the broadband section of Latin America profile for more information, and to the articles linked here for an analysis of Latin America's top broadband groups and here for an analysis of broadband speeds in the region's largest countries.
AT&T Inc. subsidiary DIRECTV, América Móvil SAB de CV, or AMX, and Grupo Televisa SAB were the top three multichannel providers in the region ranked by pay television revenue during 2017. The top three fixed-broadband providers in the region ranked by revenues were América Móvil, Telefónica and Oi SA.
Click here to find out more about our Latin America Multichannel & Broadband Market Overview report, which provides an in-depth group-specific analysis on the multichannel, broadband and telephony market in Latin America.
M&A activity slowed during 2018 in terms of values compared to 2017, when the merger of Telecom Argentina and Cablevisión Argentina was announced. The deal ranks as the Latin American multichannel market's second most important M&A transaction in the past four years, with an implied value of $11.08 billion. 2018's largest transaction, meanwhile, was Millicom International Cellular SA's acquisition of an 80% share in Panama's largest MSO, Cable Onda SA, at an implied value of $1.46 billion.
Consolidation was intense in Central America, with several acquisitions registered during the year, mostly by Millicom, which is already the leading operator in most markets in the region. In 2017, Liberty Global PLC announced it would divest its Latin American operations and in 2018, Liberty Latin America Ltd. became an independent company, launching an inorganic growth strategy with its largest operation, Chile's Vtr.Com Spa, in charge of seeking acquisition opportunities in the region, also with a focus on Central America. The company led M&A activity in the year with its announcement in February that it had acquired Costa Rica cable operator Cabletica SA, but was outmaneuvered by Millicom, which throughout the year bought several other key Central American assets that Liberty had an eye on.
TV Everywhere and virtual multichannel
In November 2018, DIRECTV launched Latin America's first virtual multichannel service, DIRECTV Go, in Chile and Colombia. The platform gives non-pay TV subscribers online access to over 80 live linear channels, as well as VOD content, through mobile apps or browsers for 19,990 Chilean pesos (13,490 Chilean pesos promotionally) or 80,000 Colombian pesos. Traditional multichannel subscribers to the operator's top premium packages are also given free access to the service. In Chile, online-only subscribers also have the option of acquiring premium programming as an add-on, whereas in Colombia the service is offered in a single package. The company is expected to expand DIRECTV Go to Argentina and other Latin American markets over the coming months.
The company was also the first to launch a permanent linear 4K channel in the region, with a commercial offer in six of its Latin American markets (Argentina, Chile, Colombia, Ecuador, Peru and Uruguay) ahead of the 2018 FIFA World Cup in Russia. The channel will broadcast, in Ultra HD, live sports content from several international leagues as well as original programming and series and documentaries from third-party content providers.
Already a client? Please refer to the report tagged here for more information about global UHD deployments.
Cablevisión has also suggested that it may offer its TV Everywhere platform, Flow, to non-pay TV subscribers as a virtual multichannel service in the near future.
During 2018, content providers such as Fox Networks Group Inc., HBO Latin America Group (SM),Turner Broadcasting System Inc., Viacom Inc. and Sony Entertainment Television continued expanding their offerings of TV Everywhere platforms to non-multichannel subscribers as stand-alone over-the-top services across the region, mainly through partnerships with mobile and broadband operators, but also through mobile app stores and third-party OTT aggregators such as Clarovideo. New OTT and VMC platforms launched across Latin America may put a strain on the pay TV market.
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Mexico: Grupo Televisa not an agent with substantial power
The IFT, Mexico's telecommunications regulator, retracted Televisa's designation as an agent with substantial power in the pay TV market in March 2018. The IFT designated Televisa as an agent with substantial power in the pay TV market after Mexico's Supreme Court asked the regulator to review a previous ruling in 2017. However, a final ruling on this issue by Mexico's Supreme Court ordered the IFT to review the designation based on a new set of conditions. As a result of the new analysis, the IFT determined Televisa did not have substantial power in the Mexican pay TV market. The designation would have obligated Televisa to share its infrastructure, limit its growth in some markets, set pricing structures that promote competition and pay retrans fees to FTA channels.
Since overtaking Brazil in 2017, Mexico remains Latin America's largest multichannel market. In fixed broadband, the country ranks second, behind Brazil.
Already a client? Please refer to the Mexico country profile for more information on its multichannel and broadband market, and to the article here, for an in-depth analysis of the Mexican broadband market's revenues and ARPUs.
Brazil: Multichannel operators continue losing subs
For the first time since 2014, Brazil, Latin America's largest market, is projected to see subscriber growth in 2018, albeit slightly, as DTH operators continue to shed low-income subscribers as a result of the recent economic crisis. Continued political and economic instability has prompted a sharp deceleration of the multichannel market in Brazil. Brazilian pay TV operators have lost an estimated 1.4 million subscribers since 2014, with revenues expressed in dollars dropping 27.4% in the same period, also impacted by currency devaluation. The crisis does not seem to affect the broadband market, though, as the country's fixed-broadband operations added 6.4 million subscribers between 2014 and 2018.
In December 2018, Brazil also completed its planned analog switch-off and migration to digital terrestrial television in major cities, reaching an estimated 63.7% of Brazilian households. In smaller towns where carriers do not have plans to launch 4G services using the 700 MHz frequency, analog switch-off is expected to occur by 2023 but may take longer since the distribution of DTT set-top boxes will no longer be subsidized. There are also concerns among market players that local broadcasters may not be able to afford the migration to digital transmission by that date.
Brazil is Latin America's second-largest multichannel market, behind Mexico, and largest broadband market.
Click here for an in-depth analysis of the Brazilian broadband market's revenues and ARPUs.
Already a client? Please refer to the Brazil country profile for more information on its multichannel and broadband market, and to the article here for the complete article on the Brazilian broadband market's revenues and ARPUs.
Argentina: Operators begin to offer convergent services while currency crisis puts investments on hold
The Cablevisión/Telecom Argentina merger between Argentina's largest cable operator and telco was effective Jan. 1, 2018, the same date that new regulations allowing telcos to offer video services over "physical link" in Argentina also came into effect. Initially, convergent services were permitted only in the major cities of Buenos Aires, Rosário and Córdoba, in order to protect small operators in other regions. In cities with populations below 600,000, this was delayed to 2019.
The deal was approved by antitrust regulators in June 2018, but the approval came with restrictions, which include a delay for permission to offer convergent quad-play services to 2019, while competitors were allowed to do so as of 2018. The operator must also sell off its fixed-broadband business in 28 areas of the country where the merger could affect competition. Telecommunications regulator ENACOM also imposed conditions regarding spectrum caps and infrastructure sharing in regions where the two companies have a high market concentration in broadband.
The new regulations also allowed AMX's Claro Argentina and TLF's Telefónica de Argentina SA to enter the pay TV market in 2018. Both companies launched IPTV services in the country during 2018, leveraging their existing fiber-to-the-home networks, and may launch DTH satellite services in the future, pending congressional approval of a bill expanding permission to offer pay TV over wireless platforms. The law would allow these convergent DTH services in major cities starting in 2020, with gradual expansion to smaller towns up to 2022. Although passed by the Senate in July 2018, the bill still awaits voting in the Chamber of Deputies. Both América Móvil and Telefónica already provide DTH services in Latin America, and permission to do so in Argentina would significantly reduce the cost and time-to-market for their new services.
Argentina is Latin America's third-largest multichannel and broadband market.
Already a client? Please refer to the Argentina country profile for more information on its multichannel and broadband market, and to the article here for an in-depth analysis of the Argentinean broadband market's revenues and ARPUs.
Colombia: ETB cuts costs to improve its financials while sale is on hold
Empresa de Telecomunicaciones de Bogotá's sale is on hold after a Colombian judge ruled that the municipality did not follow the appropriate process to approve the privatization project. Meanwhile, ETB has been implementing an austerity plan since 2017. As part of this plan, ETB shrank its channel lineup during 2017, reducing its programming costs significantly. ETB's 2017 results show the austerity plan is starting to pay off, with programming cost as a percentage of average revenue per user dropping in 2017.
Colombia is Latin America's fourth-largest multichannel and broadband market.
Already a client? Please refer to the Colombia country profile for more information on its multichannel and broadband market, and to the article here for an in-depth analysis of the Colombian broadband market's revenues and ARPUs.
Peru: Operators cannot charge for set-top-boxes
OSIPTEL, the Peruvian telecommunications regulator, prohibited the sale or lease of set-top-boxes in March 2018. Installation expenses can be financed in a maximum of six monthly installments. As a result, operators increased installation fees. Telefónica del Perú SAA increased its installation fees to 309.5 Peruvian soles for cable, up 74.7% from 177.15 soles in 2017. Claro Perú started charging the same installation fee with the possibility of paying in six monthly installments of 51.6 soles.
Peru is Latin America's seventh-largest multichannel and broadband market.
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Global Multichannel is a service of Kagan, a group within S&P Global Market Intelligence's TMT offering
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.