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Latin American Pay TV, Broadband Market 2019 Recap

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Latin American Pay TV, Broadband Market 2019 Recap

Highlights

Uruguay is the first country in the region to offer commercial 5G.

Telefónica SA restructured its operations in the Americas.

AT&T Inc. launched DIRECTV Go.

Authors: Georgia Jordan, Tomas Sarmiento and Kwame Campos

Social and economic turbulence hit the region during 2019, which saw key economies experience devaluation and massive protests. Amid this environment, the multichannel market underperformed, while the fixed-broadband market ignored the economic turmoil adding more than 5 million subscribers.

Some other moving pieces in the region:

  • Uruguay is the first country in the region to offer commercial 5G.
  • Telefónica SA restructured its operations in the Americas.
  • Operators refocused on fiber-to-the-home.
  • AT&T Inc. launched DIRECTV Go.

Economy

Social unrest in key markets and economic turmoil in Argentina combined to reduce the region's economic growth prospects for 2019. The recent environment is expected to have decelerated private consumption and investment during the second half of the year, reducing the prospects for GDP growth. Chile, Ecuador, Bolivia and Colombia have been hit with protests seeking social reforms and political change.

Inflation and unemployment remained stable during 2018. According to the World Bank, consumer price inflation stood at 2.38%, while the unemployment rate declined slightly to 8.05%. World Bank estimates showed gross national income per capita using purchasing parity metric increased 2.5% reaching $16,092.

The Argentinean peso depreciated 18% overnight after Alberto Fernandez won the primary elections in Argentina on Aug. 11, 2019. The peso depreciated 37.1% over 2019, negatively impacting regional telecommunications revenues for the whole year.

Regional

Pay TV overview

The economic slowdown of Latin America and the Caribbean economies dragged down multichannel net additions around the region. Operators in Mexico and Brazil, LatAm's largest economies, struggled to gain ground as DTH disconnections continue.

Kagan estimates the multichannel subscriber base lost close to half a million households in 2019, dragging down penetration below 40% of TV households. Cable remains the largest multichannel platform by subscribers; however, IPTV was the fastest growing delivery platform.

AT&T Inc. subsidiary DIRECTV Latin America LLC, América Móvil SAB de CV (AMX) and Grupo Televisa SAB (Televisa) were the top three multichannel providers in the region ranked by pay television subscribers in 2018. Combined, these groups sold more than $10 billion in pay television services during 2018.

Already a client: Click here to access the full article containing key metrics for the top pay TV providers in LatAm.

 

Fixed-Broadband overview

Fixed-broadband adoption continues to outpace other telecommunications services in Latin America and the Caribbean. The segment has shown constant net additions over the past 10 years despite economic turbulence in key markets.

Supported by strong net additions in the FTTP segment, the fixed-broadband industry added more than 5 million households in 2019. We estimate the fixed-broadband subscriber base ended 2019 above 80 million households with cable boasting the largest share of subscribers.

In 2018, fixed-broadband became the largest fixed services revenue generator for the top 11 telecommunications groups in Latin America and the Caribbean. The top three fixed-broadband providers in the region ranked by revenues, América Movil, Telefónica and Telecom Argentina, generated revenues of $12 billion during 2018.

Already a client: Click here to access the full article containing key metrics for the top broadband providers in LatAm.

2019 Latin America multichannel, broadband and mobile market overview

Latin American groups turned to convergence to satisfy demand for data and mitigate risks of concentrated revenue mixes. In 2018, the top 11 telecommunications groups surveyed in the report generated services revenues of almost $100 billion with multichannel and fixed broadband outperforming fixed telephony and mobile. Megacable had the strongest financial position in 2018 thanks to low debt levels and high profitability. AT&T outperformed other groups in net additions, but its financials weakened.

Already a client: Click here to access the full report.

M&A: Millicom solidifies in Central America while Telefónica shrinks footprint

In 2019, M&A activity centered on Telefónica's Central América exit. The group disposed of its operations in Guatemala, El Salvador, Nicaragua, Panama, and Costa Rica raising approximately $2.25 billion. The market saw 10 transactions for a total enterprise value of $5.51 billion.

Another important transaction was AT&T disposing of its operations in Puerto Rico. The conglomerate sold its mobile and fixed operations in the island to Liberty Latin America Ltd. for $1.95 billion. The transaction did not include DIRECTV Puerto Rico.

In November 2019, Telefónica announced the restructuring of its operations in Latin America. Telefónica's board approved a five-point plan that included the operational spin-off of its Hispanoamerica subsidiaries into a single unit. The new entity will group all its operations in Latin America but Brazil's.

Already a client: Click here to access the complete list of 2019 M&A transactions and valuation metrics.

5G: Uruguay is the first to offer commercial fixed wireless 5G

Uruguay's state telco, Administración Nacional de Telecomunicaciones, or ANTEL, launched Latin America's first commercial 5G service in April 2019. The FWA service, which is deployed over the 28GHz frequency, is used as a last-mile solution for providing residential broadband where the company cannot deploy fiber inside the building — such as a historic building or where the building management does not allow installation. The country has Latin America's highest fiber broadband penetration, as the company, a state monopoly, began migrating its DSL network to fiber-to-the-home, or FTTH, in 2011.

Virtual Multichannel: AT&T launched DIRECTV GO in Latin America

DIRECTV expanded coverage for virtual multichannel service DIRECTV GO. Initially launched in Colombia and Chile in November 2018, the service was made available to non-multichannel subscribers in Ecuador, Peru and Uruguay in August 2019. DIRECTV GO was launched in Argentina, Ecuador, Peru and Uruguay in June 2019, but was so far exclusive for DIRECTV's existing DTH customers.

Operators continue expanding TV Everywhere and OTT services

Oi Play has been made available to Oi SA's non-pay TV subscribers and other non-Oi subscribers, through the acquisition of the company's Streaming Box, launched in September 2019.

In October 2019, the local unit of Argentina's Telecom Argentina announced a partnership with Uruguay's state broadband monopoly Antel to offer the telco's fiber broadband subscribers access to VOD content over its Cablevisión Flow set-top box.

Brazil: Regional ISPs drive broadband growth, but telcos fight back with FTTH expansion following telecom reform

According to regulator Anatel, Brazil's small regional ISPs added 2.4 million broadband households in the 12 months up to September 2019, a figure that includes 61.6% of the market's fiber net adds. The group, which encompasses more than 11,000 competitors, according to industry association Abrint, already became the second largest broadband provider in Brazil behind América Móvil SAB de CV's Claro Brasil, having overtaken telcos Oi SA and Telefônica Brasil over the past 12 months. The largest of these is Brisanet, a local operator in the Northeast of Brazil, reached 301,277 subscribers by September 2019. This success has attracted investors, with investment groups ACON Investments LLC, EB Capital and Vinci Partners USA LLC making several acquisitions.

The country's largest players are fighting back. Claro Brasil has been deploying FTTH in all new market expansions since 2018, and planned to reach 1.5 million homes passed by year-end 2019. Telefónica SA's Telefônica Brasil has also been rapidly migrating its legacy DSL subscribers to FTTH, reaching 32.8% of its total broadband subscriber base in the third quarter of 2019. Meanwhile, Oi rebooted its FTTH expansion strategy, increasing homes passed from 440,000 in 2017 to a whopping 3.59 million following its debt restructuring. The company revised its target homes passed from 3.6 million to 4.6 million for year-end 2019, and from 10.0 million to 16.0 million for 2021.

Mexico: Small FTTH ISPs drove out of the residential business | Megacable launches MVNO

Following Maxcom Telecomunicaciones SAV de CV decision to exit the residential market in 2018, Axtel SAB de CV exited the market in 2019. Monterrey-based FTTH provider Axtel finalized its exit from the residential business in early 2019, after completing the sale of its highly regarded but small consumer operation to competitors Televisa and Megacable. The company, part of Mexican industrial conglomerate Alfa, had been shopping its consumer business around with the intention of focusing on enterprise telecommunications and hosting services. Megacable purchased the company's business in the cities of Leon, Toluca, Puebla, Guadalajara, and Queretaro, while Televisa acquired the operations in Mexico City, Aguascalientes, Ciudad Juarez, Monterrey, San Luis Potosi and Zapopan.

Megacable, the country's second-largest multichannel provider, announced in November the launch of its long-awaited MVNO Megamovil 4.5G service, aimed at turning the Guadalajara-based triple-play provider into a quad-play. The company said it would use ALTÁN Redes S.A.P.I. de C.V.'s Red Compartida wholesale wireless network to provide the service.

Argentina: Peso devaluation affects operators' revenues

The Argentinean peso devaluation delivered a blow to operator revenues as expressed in U.S. dollars. The currency move might increase programming costs and capex due to a percentage of those costs being priced in U.S. dollars.

We estimate U.S. dollar-denominated multichannel revenues dropped more than 8% in 2019, primarily due to currency depreciation.

Colombia: ETB to reach 1 million FTTH homes passed | 42% of homes use OTT/VOD

In an interview with Colombian newspaper Portafolio, Empresa de Telecomunicaciones de Bogotá S.A. E.S.P.'s President Jorge Castellanos announced the Bogota operator intended to reach 1 million FTTH homes passed in 2019. This represents an addition of 200,000 homes to its existing 800,000 homes passes in the first half of 2019. The company expected to invest 350 billion Colombian pesos, or about $105.5 million, in 2019.

About 42% of Colombia TV households use one or more VOD/OTT services, according to a 2019 report by Colombian communications regulator Comisión de Regulación de Comunicaciones. The report indicated YouTube LLC was the preferred source with 38% homes using the service, Netflix Inc. came second with 15% and Facebook Inc. third with 14%. In addition, 3% of households used Home Box Office Inc.'s HBO Go.

Peru: Bitel launches fixed services | América Móvil deploying FTTH

Viettel Telecom Co's Bitel began offering FTTH and fixed wireless broadband services in Peru. Data from Panjiva, our shipment data service, shows the deployment has been slow with only three router shipments in 2019 for an aggregate of $57,562.30. We estimate the company acquired approximately 4,500 routers.

América Móvil's subsidiary Claro Perú put most of its network expansion capital expenditure to work deploying FTTH technologies, according to Roberto Bellido, sub-director of residential market, in an interview with Gestion, a Peruvian newspaper. The company planned to reach 15 cities in the interior of Peru, including Talara, Tarapoto, Ilo, Huaraz, Pisco and Juliaca.

Global Multichannel is a service of Kagan, a media research 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.

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