Proving the Business Case for the Internet of Things

Latin America enterprises to increase spend on M2M, says Pyramid

Steve Rogerson
May 20, 2015
Enterprises in Latin America are set to increase their IT budget for mobile value-added services (MVAS), presenting a big opportunity for MNOs (mobile network operators) and technology vendors.
According to a report by Pyramid Research, the demand for enterprise MVAS, such as mobile apps, IoT and M2M services, will experience a significant increase in Latin America in 2015. And a recent survey by Pyramid Research’s sister company Current Analysis shows that more than 40 per cent of Latin American enterprises already use some kind of enterprise MVAS. Moreover, 85 per cent of Latin American enterprises expect their MVAS spend to increase in the next 12 months.
“This is a great opportunity for MNOs and technology vendors, as enterprises are making MVAS a top priority to increase the mobility of their workforce,” said Daniel Ramos, senior analyst at Pyramid Research.
Large IT service providers, such as IBM and HP, are the largest providers of MVAS in Latin America. Four out of ten enterprises partnered with a large IT service provider to help them manage their MVAS, while 24 per cent opted for network service providers. Nevertheless, mobile operators will continue to engage in collaborative partnerships with IT service providers and technology vendors.
“By implementing MVAS platforms from technology vendors, mobile operators will be able to differentiate themselves from other MVAS providers in the region,” said Ramos
According to the report, LTE penetration will be a pivotal factor supporting MVAS growth in Latin America. MNOs in the region can take a more active strategy by developing and implementing MVAS over LTE. With this approach, mobile operators can increase their average revenue per user or machine, accelerating the return on their LTE network investments.
The adoption of corporate-owned and employee-owned smartphones and tablets will also generate demand for MVAS.
"The combination of LTE and smartphone adoption will empower employees to work from virtually anywhere, which will boost the demand for MVAS services further," Ramos added.
• Deployments of 4G networks and cellular M2M technology are poised for rapid growth across Latin America if mobile operators in the region can overcome a range of regulatory and economic challenges, according to GSMA research. GSMA Intelligence, the research arm of the GSMA, published two reports at the Mobile 360 Latin America conference held last week in Rio de Janeiro, outlining the need for a sustainable approach to both 4G and M2M deployments in the region.
There were 39 operators with live LTE networks in Latin America by March 2015, covering 15 of the 22 countries in the region. The first 4G network in Latin America was launched by Antel in Uruguay in December 2011. The number of deployments has accelerated recently with 17 operators launching 4G networks in 2014 and a further 21 operators planning launches in the coming years.
Despite this recent momentum, 4G only accounted for 2.4 per cent of the 683m mobile connections in Latin America in the first quarter of 2015, below the 8.4 per cent global average. This means the migration to 4G in the region is occurring at a slower pace than the earlier move to 3G. The report attributes this to a number of factors, including the insufficient allocation of suitable 4G spectrum (especially in frequencies below 1GHz, such as the 700MHz digital dividend band); the difficulties in deploying infrastructure at the municipal level to meet the stringent coverage obligations; and a difficult macroeconomic environment that has discouraged many subscribers from upgrading to 4G devices and services.
“Latin American mobile operators are investing billions in acquiring 4G licences and building-out 4G infrastructure despite challenges on both the supply and demand side,” said Sebastian Cabello, head of GSMA Latin America. “Many operators are investing despite declining revenue from traditional operator services such as voice. The new 4G networks are improving service quality and will be key for universalising mobile broadband access across the region. We therefore call on policymakers in the region to address the barriers to sustainable mobile broadband deployment in order to stimulate continued investment in both 3G and 4G networks.”
According to GSMA Intelligence, 4G will account for 28 per cent of Latin American mobile connections by 2020. And 3G networks – which currently cover almost 90 per cent of the region’s population – are forecast to account for 51 per cent of connections by this point. Mobile operators will be supporting the migration to mobile broadband (3G and 4G) networks over this period with rising investment in infrastructure; operator capital expenditure is estimated to total almost US$170bn in the six years between 2015 and 2020, an increase on the $106bn invested over the previous six years.
GSMA Intelligence estimates that there were 16.1 million cellular M2M connections in Latin America at the end of 2014, making it the fourth-largest M2M region worldwide behind (in order) Asia Pacific, Europe and North America. Growth in cellular M2M connections in Latin America is forecast to be strong over the coming years, rising by 25 per cent per year (CAGR) until 2020 and reaching 62 million connections by this point. Cellular M2M accounts for only around two per cent of total connections in the region today, but is forecast to rise to seven per cent by 2020.
Brazil is the largest M2M market in Latin America with 9.9 million cellular M2M connections at the end of 2014, accounting for 61 per cent of the total cellular M2M market in the region. Last year’s reduction in the sim card tax on non-person operated M2M devices has stimulated the market in Brazil, helping to accelerate M2M deployments in areas such as vehicle telematics and smart metering.
“Supportive regulatory frameworks can play an important role in stimulating the deployment and adoption of new M2M applications and services, as we have seen with the tax reduction in Brazil,” said Cabello. “Operators in the region are providing more that just the connectivity component underpinning cellular M2M; they are developing new business models in conjunction with both local public and private partners that can provide end-to-end M2M solutions that can serve a broad range of vertical markets.”