Telecom Infra Report: the shrinking Venezuelan market

By
Monday, February 12, 2018

Faced with recession, strong regulation and skyrocketing inflation, the telecom industry in Venezuela has been hemorrhaging customers, while modernizing the country's telecom infrastructure that is not owned by the state has so far proven to be an impossible task – with private players unable to access much needed dollars for investments.

According to the latest data available from telecom commission Conatel, the country ended the second quarter of 2017 with 27.5mn mobile lines, down from 29.5mn in 2Q16, for a mobile penetration of 83%, down from 92%.

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Of the mobile lines in service, 13.4mn were smartphone connections. LTE accesses were only 5.11% of the total. (In contrast, Uruguay reports nearly 80%.)

The country has three main mobile operators: state-run market leader Movilnet, with 47% of the market; Telefónica, which operates under the Movistar brand, with 37%; and Digitel, with 16%.

There were also 6.1mn fixed lines (20% penetration) in service at the end of 2Q17, compared to 7.70mn the year before. (The decline is also affected by users' preference for a mobile-only subscription.) Cantv dominates the fixed-telephony market with an 88% share.

Pay TV accesses declined to 4.8mn from 5mn, reaching a 63.5% penetration in 2Q17. (67% of all accesses were satellite connections.) DirecTV leads with 42.8% of the market.

Fixed broadband subscribers were estimated at 2.61mn, up from 2.58mn in 2Q16. Internet penetration was at 62% with 17mn users, up from 16.8mn users.

There was no official data on the number of telecom antennas in the country.

The telecom sector in the country invested a total of 30bn bolívares in 2Q17 (one bolívar is currently worth US$0.00004), up from 14.3bn in 2Q16. Conatel said telecom investments amounted to 59bn bolívares in 2016, up from 33bn in 2015 and 17.1bn in 2014.

Telecom revenues reached 240.2bn bolívares in 2Q17, 54.1% of which accounting for mobile telephony, the regulator said. In the year-ago period, total revenues were 68.2bn.

MACRO CONTEXT AND TELECOM PLAYERS

Regulation and forex also hit the operations of major private telecom players in the country, including Telefónica.

Venezuelan hyperinflation was the main reason behind an 18% increase in Telefónicas's total operational expenses in 3Q17 and a 14% rise in the January-September period.

"In Venezuela we have the best customers in the market and the best network. The operation there remains focused on capturing and maintaining high-value accesses despite the macroeconomic context," Telefónica told BNamericas last year.

With a base of around 10mn users, Venezuela is a revenue underperformer for the Spanish group. Currently, the country represents only 0.2% of Telefónica's consolidated revenues. Smaller mobile markets for Telefónica, such as Chile and Uruguay, provided 10 and five times more revenue, respectively.

As for regulation, Telefónica was prevented from adjusting the fees for its services in the country for five years. Last October, telecoms regulator Conatel finally authorized a rate increase – albeit a much smaller one than what was planned by the Spanish telco to maintain "the sustainability of networks."

In January, Conatel also ordered telcos to resume international phone calls that had been suspended since April 2016, when operators said they were struggling to find the dollars to pay international suppliers for the calls.

Meanwhile, Telefónica was reportedly investing around 30bn bolívares to expand its LTE network by 60% and cover six new Venezuelan cities, deploying 160 4G nodes.

For its part, Movistar provides 4G services in the cities of Porlamar, Cumaná and El Tigre, and three other cities were expected to be covered in the first quarter of this year.

Recently, Digitel said it sought to implement 26 new nodes to expand and strengthen its mobile coverage, and add 300km to its fiber optic network. Last year the telco installed 20 nodes and activated pieces of wave carrier equipment.

On a side note, both Digital and Movistar said that they have been affected by acts of vandalism against their telecom infrastructure. Last year, 910 base stations belonging to Digital were attacked.

CONCESSIONS

On February 1, Conatel granted 12 new local community broadcasting concessions with the goal of providing the departments of Apure, Bolívar, Mérida and Vargas with "accurate information."

Three of the 12 broadcasters received technological equipment, including three consoles, two transmitters and a PC. The regulator said that the move aims to "to promote the regularization of the ecosystem of community and alternative media in the country."

Last year international NGO Reporters Without Borders accused the government of President Nicolás Maduro of censoring local and international media during antigovernment protests.

"Websites and radio stations such as Hit 90.7 FM, Studio 92.1, Punto Fijo Stereo 90.3 and Jet have been closed, while opposition TV stations that have been broadcasting coverage of the protests online, such as Vivo Play, VPI (Venezolanos por la Información) and Capitolio TV, have been blocked or deprived of a broadcast signal by Conatel," it said.

Likewise, the US-based pro-democracy NGO Freedom House criticized the Maduro administration in a 2017 freedom of the press report for "increased government interference in private media and continued developing a communications apparatus that is meant to act as a state mouthpiece. Media organizations and workers face intimidation, threats, and violence by both state and nonstate actors, and are also deeply constrained by Venezuela's ongoing economic crisis."

DATACENTERS

According to the Data Center Map, there are currently three colocation datacenters in Venezuela: two in Caracas and one in Valencia.

SUBMARINE CONNECTIONS

According to TeleGeography's Submarine Cable Map, there are seven submarine cables going to or from Venezuela.

Venezuela Festoon: Launched in 1998 and owned by Cantv, it spans 1,200km connecting many cities across the country's coast through 12 landing points.

Americas-II: Developed by a group of carriers that includes AT&T, Verizon, CanTV, Sprint, Telecom Argentina, Portugal Telecom Entel Chile, Orange and Embratel, the cable system spans 8,373km from Hollywood, Florida, in the US to Fortaleza in Brazil. It has a landing point in Camuri

South American Crossing (SAC)/Latin American Nautilus (LAN): Launched in September 2000, it is owned by Level 3 and Telecom Italia Sparkle, and circles South America through 20,000km, with a Venezuelan landing point in Puerto Viejo.

ARCOS: A ring configuration of 8,400km developed by New World Network spans from North Miami Beach in the US to Nassau in the Bahamas and connects 15 countries with 24 landing points, including one in Punto Fijo, Venezuela. It was activated in 2001.

Pan-American (Pan-Am): Activated in 1999, it stretches from the Virgin Islands to Chile, running 7,050km. It is owned by a consortium of companies including AT&T, Telefonica del Peru, Telecom Italia Sparkle, Sprint, CANTV, Telefónica de Argentina, Verizon, Entel Chile, Telecom Argentina, Telconet, ICE, C&W Networks, Embratel. It touches Venezuela in Punto Fijo.

Globenet: the 23,500km cable connects the US, Colombia, Bermuda, Venezuela and Brazil. It was launched by GlobeNet in 2000 and is currently owned by Brazil's BTG Pactual investment bank. Its landing point in Venezuela is in Maiquetía.

ALBA-1: Owned by Transbit and Telecom Venezuela, the cable runs from La Guaira in Venezuela to Siboney and Santiago de Cuba, in Cuba, with a connection in Jamaica. It was launched in 2012 and spans 1,860km.