Mexico-based América Móvil, Latin America’s largest cellular operator, challenged only by Spain’s Telefónica on a regional scale, will invest more than US$100m in Peru by the end of the year to boost coverage of the local operation it acquired in August from Telecom Italia (TIM). The Mexican company’s marketing effort will focus largely on low-income consumers.
This year more than half of América Móvil’s US$200m, two-year Peruvian investment budget will be spent on installing antennae to expand nationwide service, according to Humberto Chávez, general manager of América Móvil’s Peruvian subsidiary. The company’s commercial manager, Rodrigo Arosema, says the new infrastructure will allow América Móvil to double the level of coverage it received-about 1.4m customers-when it paid US$490m to TIM Perú for the local operation. Some 200,000 customers have been added since the new ownership took over, he adds.
América Móvil is also planning an aggressive marketing strategy to gain customers in Peru’s lower socioeconomic strata, where just 16 of every 100 people own a wireless phone at present. According to Mr Chávez, América Móvil is targeting lower and middle socioeconomic strata consumers to build a customer base in the 14 Latin American countries in which it has so far invested some US$10bn. (The upper and upper-middle strata are likely well exploited already.) The company has also begun a multimedia rebranding effort to replace the TIM name with the same brand it uses in Brazil, Claro.
Telefónica’s Latin American wireless operation, Telefónica Móviles, currently dominates Peru’s cellular market with a 60% share, thanks largely to its regionwide purchase last year of BellSouth’s (US) cellular operations. (América Móvil won a concession for a new cellular band before acquiring TIM Perú.)
Although Mr Chávez says that Peru’s telecoms regulator, Osiptel, has come under pressure to lower interconnection charges, he still calls for less, not more, official market intervention. Lower interconnection rates will not necessarily lead to lower cellular fees, he says, noting that tariffs are more likely to fall because of rising overall market penetration. Mr Chávez likens Peru’s cellular market to those of Colombia and Ecuador, where growth has been exponential since his company entered as a competitor.
(C) 2005 The Economist Intelligence Unit Ltd. .