3G services will arrive in LatAm in late 2003 at best

Latin America's first 3G (third generation) networks will be deployed in late 2003 in the most advanced markets while smaller markets may have to wait until 2005, according to a Yankee Group Inc. analyst.

But before the arrival of 3G, Latin American wireless subscribers will see an improvement in wireless services, if, as expected, carriers upgrade their networks to 2.5G technology by mid-2002, said Yankee analyst Andy Castonguay during a teleconference Wednesday. 2.5G technology offers an improvement over current wireless technology, but not as much as 3G.

The markets that will enjoy 2.5G and 3G services first will be Venezuela, Brazil, Chile, México and Puerto Rico, which Yankee Group considers the region's most advanced in telecommunication, he said.

Still, economic turmoil could further delay the introduction of 2.5G and 3G wireless services, which will require investments from carriers to upgrade their networks and from subscribers to acquire more advanced devices.

"Economic conditions may delay 2.5G and 3G network deployment," he said.

Mainly through increased data-transmission capacity, 3G networks will allow wireless devices, such as mobile phones and Internet-connected PDAs (personal digital assistants), to handle more sophisticated applications and content than they are capable of handling currently. For example, 3G technology should improve the way mobile devices send and receive multimedia content, such as video, browse the Web and interact with back-end enterprise software, such as CRM (customer relationship management) applications.

But even in a good economic climate, businesses and consumers will not automatically adopt 3G services, he said. Carriers must price right the new services and handsets and make sure that their networks are interoperable, he said. Carriers must also explain clearly to consumers and businesses what are the benefits of 3G wireless services "to develop and encourage the culture of mobile data services usage," he said. Also key will be enticing users with content and applications that they can't access currently, he said.

Carriers must also understand that not all subscribers on prepaid plans are low-income people. In Latin America, where 68 percent of subscribers in 2000 were on a prepaid plan there are many corporate subscribers and high-income consumers on prepaid plans, he said. Prepaid subscribers are expected to shoot up to 82 percent in 2006.

"There is a simplistic view (among carriers) of what a prepaid subscriber is," he said. "The customer base must be separated by usage behavior, not by the 'prepaid' label." So carriers must be ready to pitch 2.5G and 3G services to subscribers on prepaid plans, because if they focus solely on postpaid subscribers, they will shut out most potential customers, he said.

Carriers also need to improve their understanding of the needs of businesses, if they expect to convince corporate customers to sign up for 2.5G and 3G services.

"Operators and providers must better understand corporations' business dynamics to develop adequate solutions," he said.

Overall, the adoption of wireless services is expected to continue climbing significantly in the region. The number of wireless subscribers in Latin America is expected to increase from 80 million this year to 147 million in 2006. Meanwhile, revenue from wireless data transmission is expected to grow from US$77 million this year to $9.37 billion in 2006, he said.

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