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Smart Speakers Take Off

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Technology, Media & Telecommunications
Smart Speakers Take Off

Highlights

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Jun. 25 2018 — As the smart home market continues to develop in fits and starts, one device has definitely managed to catch the attention of consumers: the smart speaker.

Smart speakers, also called virtual assistants or smart home speakers, have become increasingly popular over the past eighteen months, with total unit shipments surpassing 31 million in 2017, up from just 6.5 million in 2016

Smart Speaker worldwide unit shipments, 2015 - 2017

While smart speakers can function like a traditional speaker, allowing users to play music from a smartphone or the cloud, they also offer myriad other capabilities. One of their most popular features is the ability to respond to voice commands. This allows users to receive hands-free information about the weather, local traffic or the latest sports scores. Voice commands can also do things such as turn on a coffee maker, adjust the thermostat, read an audio book, and even change the channel on the TV.

All smart speakers rely on artificial intelligence, or AI, to carry out tasks, although the responsiveness and raw intelligence offered by smart speakers varies by product. A basic function of AI in a smart speaker is that it permits the smart speaker to learn about a user’s habits and preferences over time, thus allowing the speaker to refine and improve its search responses over time.
Two vendors, Amazon with its Echo products and Google with its Google Home smart speaker, have been the leading proponents – and the largest sellers – of smart speaker products. Other notable products include:
• Apple’s HomePod
• Sonos’ One smart speaker
• Alibaba’s Tmall Genie X1
• Xiaomi’s Mi AI smart speaker

In addition, several other vendors such as LG Electronics, JD.com, Naver, Baidu and Harmon Kardon offer smart speaker products. Even Facebook recently announced that it was planning to launch a smart speaker product before the end of 2018.

Voice assistants
Voice assistants are generally viewed as the key functionality feature in a smart speaker. For many consumers considering a voice assistants platform, they often also have to select an ecosystem, as the leading voice assistants do not work very well together. This selection becomes increasingly important if a user wants to equip multiple rooms throughout the home.

Voice assistants emerged from two distinct usage backgrounds. The first was solely as a controller for a smart speaker, while the second was a voice controller for a smart phone. Coming from the former category, Amazon’s Alexa was originally developed for the Echo smart speaker and then moved into the company’s FireTV devices. After Amazon opened up Alexa to third party developers, smart home proponents rapidly expanded its capabilities into features like controlling lights and thermostats by voice.

Google Assistant and Apple's Siri started out as the voice dialing features on Android phones and iPhones. The two systems let the user take calls, make calls, play music, and answer texts on the phone. Both systems are now focused on making their voice assistants more “smart speaker-friendly” by expanding their capabilities beyond the handset and into the home.

Other leading tech companies are also developing and deploying voice assistants for smart speakers, with Microsoft’s Cortana currently used in Harmon Kardon’s smart speaker product. Samsung’s Bixby voice assistant is reportedly in trials with at least one smart speaker vendor, although for now, it is currently only available on certain Galaxy phones.

Most smart home and voice assistant developers tend to segment the utility of voice assistants into three categories: top of the line; decent, but needs work; and still under construction. Both Alexa and Google’s Assistant are widely considered “top of the line” as the best voice assistants on the market, with Apple’s Siri and Microsoft’s Cortana considered decent, but needing improvement. Other voice assistants, such as Bixby and some being deployed by Chinese smart speaker vendors, are widely viewed as “still under construction.”

Market drivers
With demand spiking for smart speakers over the past year, a common question asked by those without a smart speaker goes something like “why do I need one of these products?” Or more specifically, what is the value proposition of the smart speaker? There are three broad value props for the smart speaker market:
• Usefulness/utility of smart speakers. The basic value of the smart speaker is in its utility, or more specifically its ability to perform a number of core functions (playing music, responding to voice commands, basic online search, controlling other devices in the smart home, etc.) extremely well.
• Directly tied to this utility is the price of smart speakers, with most products selling at retail for under $100. At this price point, the purchase of a smart speaker can be viewed as a relatively low risk purchase. In other words, if the user does not like it or find it useful, buying one is not going to break the household budget.
• While most consumers only use a smart speaker for a few simple functions, its ability to expand its reach – and its ability to control other devices throughout the home – is also a key driver for use and adoption. The intuitive use of voice control and its perceived “cool” factor (a sentiment highlighted by many smart home advocates) is also driving adoption.

• As homes become increasingly connected and more intelligent, most smart speaker vendors are counting on their products to be the centerpiece of the smart home. While not all smart home proponents want to see the smart speaker as the center of the ecosystem (some notable pay TV service providers are instead positioning the set-top box as the smart home centerpiece), many key players in the technology and telecommunications industries believe the smart speaker is a key steppingstone toward smart home development and adoption.

Market Challenges
The flip side to the growth of the smart speaker market are some key challenges that still need to be more thoroughly addressed by smart speaker vendors. Foremost among these challenges is security.
• Security concerns. Technology and business media publications have had a field day recently with stories of Amazon Echo products “spying” on users. One specific story highlighted how a family in Oregon found out Alexa recorded at least one private conversation and sent it to a contact in their address book.
Amazon confirmed that the incident did occur, and noted that the family’s Echo device woke up due to a word in background conversation sounding like "Alexa." The subsequent private conversation was heard as a "send message" request. When Alexa responded out loud "To whom?" the background conversation was interpreted as a name in the family’s contact list and a recording was sent to that person.
While this event seems to have been quite unusual, the fact that it did occur highlights the security and privacy challenges facing the smart speaker market. While smart speaker vendors are rapidly applying resources to better address security concerns, stories like this one are an obstacle to market growth.
• Another challenge to the market is a general lack of compatibility between smart speaker products and other connected devices. Leading vendors such as Amazon, Google and Apple have designed their products to interact and function with other compatible devices that often use proprietary software of operating systems. While Amazon has been aggressive in allowing third-party developers to integrate Alexa functionality into their products, for the most part Google relies on Android-based products to connect to its Home smart speaker, while Apple relies on IoS-based products for its connected ecosystem.
• Interconnection between the three ecosystems is tricky at best, and often just not possible. As Kagan does not see any serious drive for standardization among smart speaker products or technologies, this issue is going to remain a significant challenge for the near future.
• Related to compatibility with other products is the challenge of ecosystem complexity. While a key driver for the smart speaker market is the growing interest in the potential of the smart home, the caveat to that driver is how to best connect smart speakers with other devices in the home. Again, within the same smart speaker ecosystem (Amazon, Google, Apple, etc.), it is achievable. However, when third-party devices and services provided by cable operators, telcos or even security firms are added to the mix, the complexity of integrating a smart speaker into a broader ecosystem becomes a serious challenge.
• While Kagan identifies ecosystem complexity as a market challenge, we also recognize that some of the leading smart speaker vendors are purposefully designing their ecosystems to work best with their own proprietary platforms and products. This “silo” effect for a given ecosystem can offer the smart speaker vendor advantages over a more standardized and compatible ecosystem. As the smart home continues to develop, and as new revenue opportunities emerge from this development, having a proprietary ecosystem could turn out to be savvy business move on the part of some vendors.

Vendor Market Shares
Amazon, with its Echo smart speaker product line, dominated vendor market shares in 2017. On a global basis, Amazon accounted for just over 60% of smart speaker shipments, with Google’s Home smart speaker accounting for 31% of shipments.

Both Amazon and Google experienced strong growth in unit shipments in 2017. Amazon’s shipments grew from an estimated 5.5 million smart speaker products in 2016, while Google increased from an estimated 500,000 units shipped.

Alibaba and Xiaomi collectively shipped an estimated 1.5 million smart speakers last year, with almost all of their shipments occurring in China, while Sonos shipped an estimated 4000,000 units.

Apple’s HomePod smart speaker does not appear in these rankings, as it did not begin shipping until February 2018.

Worldwide smart speaker forecast
Since their introduction in 2015, demand for smart speaker products has risen impressively, making the product category one of the notable recent successes in the global consumer electronics market. After exceeding 31 million units in 2017, smart speaker shipments are projected to hit 50 million units in 2018.

Shipments
Kagan’s longer-term forecast is based on several assumptions, to include:
• the increasing demand for smart speaker products
• their increasing utility, especially in regard to voice-enabled search and response capabilities
• the growing demand for smart home functionality
• an increase in demand for smart speakers in regions like Europe and Asia
This final point is particularly important, as current demand for smart speakers relies overwhelmingly on the North American market. In 2017, 83% of global smart speaker shipments were to North America.
Unit shipments are forecasted to surpass 70 million in 2019 and rise to 142 million by year-end 2022.

While a few countries in regions outside of North America are experiencing some solid demand for smart speakers, such as the United Kingdom, Germany, France, China, and South Korea, the key market to date has been the U.S. With the expanding availability of smart speakers in Asian and European countries, coupled with voice assistants integrating new language capabilities, we expect smart speakers to appear in an increasing number of households outside of the U.S.

Revenues
Revenues for smart speaker products reached $2.52 billion in 2017 and are on track to exceed $4 billion in 2018. Average selling prices, or ASPs, for smart speaker products are generally below $100, with occasional sales promotions offering full-featured products for less than $50.
While most shipments have been concentrated among the sub-$100 price point, there are some notable higher-priced products available. These include the Sonos One, priced at $199 and Apple’s HomePod, priced at $350.
On a regional basis, North America produces the lion’s share of smart speaker revenues. In 2017, North American consumers accounted for an estimated $2.1 billion of the total $2.5 billion in product revenues.

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Jan. 14 2019 — The competition for deposits is quite fierce and banks might even feel the greatest pressure when vying for large commercial customers. In the episode, Kelly Brown, CEO of American Deposit Management, a financial services firm that helps connect depositors with banks, talks about the competitive landscape and pricing in the market, while offering strategies to win new business.

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Technology, Media & Telecom
2019 Outlook For Latin American Multichannel Broadband Market

Highlights

Pay TV and broadband growth trend strengthens in 2019.

Broadband net adds projected to be almost double those of multichannel in 2019.

IPTV gets a boost from new Telefónica strategy.

Jan. 14 2019 — The Latin America multichannel and broadband industry is heading into 2019 with positive headwinds. Demand for convergent services and economic recovery in larger markets should drive industry growth in 2019. The big caveat is the economy, with external shocks threatening to decelerate economic growth. Amid this environment, we expect the M&A market to remain active, with transactions in Mexico and Central America highly likely. New virtual multichannel, satellite broadband and IPTV services should also gain a foothold in the region.

Pay TV and broadband growth trend strengthens in 2019

Kagan estimates Latin America's multichannel and broadband subscriber bases should expand during 2019, with broadband net adds projected to be almost double those of multichannel. The trend toward convergent services is expected to help cable regain strength in the multichannel market, accounting for the majority of net additions. Multichannel revenues are forecast to grow, with Argentina, Brazil and Mexico expected to be the biggest contributors to multichannel revenue growth. The importance of fiber technologies is rising, concentrating the highest share of fixed broadband net additions during 2019.

Already a client? Refer to the regional profile linked here for additional details.

Economy: Outlook for 2019

The World Bank projects Latin American and Caribbean GDP will expand 2.3% during 2019. However, deteriorating external conditions and local challenges might hinder economic growth. Recovering private consumption and investments should drive GDP growth in the region for 2019, although foreign exchange volatility and rising financing costs could weaken this trend. Prospects for fiscal consolidation in Argentina and Brazil remain challenging due to political opposition, especially in Argentina, where general elections are to be held in October. Venezuela's economic prospects remain dire, worsened by the recent drop in oil prices.

M&A: Mexico and Central America to remain active

The possibility of Telefónica SA divesting its Mexican and Central American operations, along with Millicom International Cellular SA's and Liberty Latin America Ltd.'s continued competition for acquisition targets in Central America to strengthen their positions in the region, raises the prospects for active Latin American M&A in 2019. Investment funds and Latin American telecommunication groups seem to be competing for Telefónica's assets in Mexico and Central America. Liberty Latin America is actively looking for acquisition opportunities in Latin America through its Chilean subsidiary VTR and is cited as a potential buyer for Telefónica assets, along with competitors Millicom, Entel Chile and AT&T Inc., although the latter may be barred in Mexico due to the mobile market concentration that would result.

AT&T Inc.'s acquisition of Time Warner Inc. may also lead to changes in its Latin American operations. After the failed IPO of DIRECTV Latin America LLC (now named Vrio) in 2018, the company may still need to divest some assets in Brazil due to local regulations preventing pay TV operations from owning content producers.

Brazilian regulator Anatel also raised spectrum caps at the end of 2018, opening up the country's mobile market for consolidation. Embattled former iDEN carrier Nextel Telecomunicações SA has been looking for a buyer for years, and Telecom Italia SpA's TIM Participações SA has already announced it has made an initial offer. Regional telco Sercomtel Telecom may also choose to sell its spectrum assets — which may be allowed if a telecom reform bill currently under discussion in the Senate is passed — or even the whole company.

In Argentina, regulatory conditions for the approval of Telecom Argentina's merger with Cablevisión Argentina may lead the company to divest many assets in 2019. The operator must sell off its fixed broadband business in 28 areas of the country where the merger could affect competition, as well as excess wireless spectrum above the regulatory cap.

Already a client? Please click here for our annual global mobile spectrum roundup, and here for an overview of upcoming global spectrum auctions.

A final ruling by the Court of Cundinamarca put to rest the Bogotá municipality's proposal to sell Empresa de Telecomunicaciones de Bogotá SA ESP, or ETB. The court cited irregularities in the approval of the proposal as its basis to nullify the decision. Nevertheless, the court said the ruling does not prohibit the sale of ETB, but that the municipality will have to initiate a new approval process to achieve it.

Effects of election results

The election of Jair Bolsonaro in Brazil and Andrés Manuel López Obrador in Mexico introduced some uncertainty into the Latin American political picture. Both presidents are in the opposite side of the political spectrum, Bolsonaro on the right and AMLO on the left. Nevertheless, both candidates ran on a populist agenda, with ambitious campaign promises that pose a risk to fiscal discipline. Ivan Duque, Colombia's new president, is likely to maintain his predecessor's market-friendly policies, while Argentina's Mauricio Macri's inability to implement fiscal reform may cost him the presidency in general elections in October 2019.

In the telecommunications sector, AMLO pledged to promote market efficiency and close the gap in access to telecommunications, whereas Bolsonaro's program remains vague on issues related to media and telecommunications.

Already a client? Please click here for additional insights about AMLO election, and here for insights on Bolsonaro election.

LatAm countries with upcoming 2019 elections

Argentina
Bolivia
Dominican Republic
El Salvador
Guatemala
Panama
Uruguay

Virtual multichannel

DIRECTV Latin America launched Latin America's first virtual multichannel services in November in Colombia and Chile. The company is expected to expand the offer, DIRECTV Go, to Argentina and other Latin American markets during 2019. Telecom Argentina executives have also hinted that the company's video-on-demand/TV Everywhere service, Cablevisión Flow, which offers over 200 linear channels to pay TV subscribers, may soon be launched as a virtual multichannel service for nonsubscribers.

Telefónica has also been quietly rolling out access to its TV Everywhere platform, which includes several linear channels, to nonpay TV subscribers in some Latin American markets, such as Central America and Chile. The Movistar Play Full offer is available as a value-added service to Telefónica’s mobile and fixed broadband, and to voice subscribers for an extra fee.

Satellite broadband

Penetration of residential satellite broadband is set to increase as more Ka-band satellites become available in the region and new operators enter the market. Hughes Communications Inc. continued to expand its HughesNet service, launched in Brazil in 2016 and Colombia in 2017, to Peru and Ecuador during 2018. Competitors Al Yah Satellite Communication Co. PJSC and ViaSat Inc. also began operating in the Brazilian market during 2018, while satellite operator Hispasat SA launched a white-label service in the region.

Dish México announced it would partner with Hispasat SA and Gilat Satellite Networks Ltd. to launch satellite broadband service in Mexico. Dish México will leverage Amazonas 5, Hispasat's high-throughput satellite, to reach underserved markets. Amazonas 5 has the potential to reach 77% of Mexico's population. The broadband service will use Gilat's SkyEdge II-c platform to provide high-value services to Mexican consumers and small and medium-sized enterprises.

Already a client? Please click here and here to learn more about satellite broadband service offers currently available in Latin America.

Argentina quad-play

Following new regulations allowing telcos to offer multichannel services, Claro Argentina and Telefónica de Argentina SA launched IPTV offers during 2018, but coverage remains limited, as convergent services were initially only permitted in the major cities of Buenos Aires, Rosário and Córdoba, in order to protect small operators in other regions. In 2019, this will be expanded to cities with populations below 600,000. Delays in passing a telecoms reform bill allowing telcos to offer DTH may lead the two companies to abandon plans for a national satellite pay TV offer, choosing to focus on high-end convergent services based on their growing fiber networks.

Meanwhile, Argentina's largest player, Telecom Argentina, will be allowed to offer convergent services only in 2019, as part of antitrust regulators' restrictions for approval of its merger with Cablevisión Argentina.

IPTV gets a boost from new Telefónica strategy

Telefónica made a strategic decision during 2017 to prioritize investments in fiber deployments to power ultrafast broadband and IPTV services, as well as expanding its VOD portfolio for fiber-based subscribers with STB-embedded over-the-top services such as Netflix and Amazon Prime. Based on this, as well as the continued entry of new players and migration of many existing telco and cable networks to fiber, we revised our IPTV forecast up for 2019.

Regulatory outlook

In Brazil and Argentina, "mini-reform" bills for the telecommunications industry remain stalled in Congress but are expected to finally be approved in 2019. Argentina's "Ley Corta," as it became known for being a reduced version of the government's originally proposed telecoms reforms, allows telcos to offer direct-to-home 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, which also bans exclusive network agreements in order to encourage network sharing, among other measures, still awaits voting in the Chamber of Deputies.

Meanwhile, the Brazilian Senate is expected to resume discussions on the PLC 79 bill, which have been frozen since 2016. The reform would require telcos Telefônica Brasil and Oi SA to migrate their public fixed telephony concession contracts to a private service authorization contract, as is the case with their mobile and broadband businesses. In exchange, the companies would have to invest in broadband expansion the value of the public fixed telephony infrastructure they would be incorporating. The value of these "reversionary assets" and where these investments should be made are to be defined by the regulator Anatel and may take a year to implement. The PLC 79 bill also tackles several other measures favored by the industry, including a reduction in tariffs for satellite broadband services, which is expected to encourage more competitive prices, allowing telcos to sell spectrum assets and exempting broadcasters from regulatory tariffs.

The Mexican Congress reduced the annual budget for the telecommunications regulator, Instituto Federal de Telecomunicaciones, or IFT, by 25% compared to 2018. The budget cut would weaken the IFT amid regulatory battles with América Móvil SAB de CV's Teléfonos de México SA de CVand other important Mexican players.

Already a client? Click here to access the full article.

Global Multichannel is a service of Kagan, a group within S&P Global Market Intelligence's TMT offering.

This piece 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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Technology, Media & Telecom
Latin American Multichannel Broadband Market 2018 Recap

Highlights

M&A activity drives consolidation in Central America

DIRECTV launched region’s first virtual multichannel service

Brazil multichannel continues losing DTH subscribers

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.

Economy

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.

Regional

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

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.

Already a client? Please refer to the report tagged here for more information about content partnerships with mobile carriers.

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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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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