Venezuela – Latin America’s Sleeping Beauty

About 7-8 years ago, Venezuela was one of the most important markets for mobile devices in Latin America. It was so important that some smartphones, such as the Nokia 5800 were launched first in Venezuela – ahead of all other Latam markets. It also used to have the highest replacement rate and the highest ASP too. Its ASP used to be as high as USD$150 while Brazil’s and Mexico’s ASPs were around USD $80 – $90.

Since then the market has deteriorated so much that currently the ASP of the models offered in the market is around $75, while Mexico and Brazil’s sales ASPs have grown to around USD$ 130. Not only that but between the three operators there are only 28 models offered, and none of these 28 models are widely available. Any of these models would be offered in only a few stores in any city in Venezuela.   In the whole Venezuelan’ market the lack of devices is so acute that availability is restricted to only two or three stores in the whole of Caracas, the capital of Venezuela.

Conatel (Venezuela’s National Telecommunication’s commission) reported that by the end of 2014, Venezuela had 30.53M active subscriptions among three operators. Movilnet, Movistar, and Digitel, have 43.7%, 35% and 21.3% share respectively.

Movilnet is the state owned operator and holds the biggest share of connections in Venezuela. It operates CDMA and CDMA 1xEVDO technology. A few months ago it announced that it will be launching an LTE network by 1H15. However, with oil prices at their lowest in 5 years, 4G network roll out will likely take longer than planned. Movilnet offers a very limited mobile device portfolio, partly due to the lack of CDMA devices and partly because it has limited budget to source leading products.

Movistar reports 10.7M active lines from which 5M are smartphone users which represents about 47% penetration. Movistar is the carrier with the highest penetration of smartphone in Venezuela.

Movistar won the bid for 4G licenses in December 2014 and it is in the process of rolling out the 4G network. Movistar launched its 4G services in February, but availability of LTE capable devices will be a challenge under the current economic circumstances. Still Movistar is commited to offer 4G services as soon as possible.

Digitel is the smallest of the three operators with 6.5M subscriptions, but was actually the first operator to launch LTE network in Venezuela. It launched 4G services by the end of 2013. However it currently reports only 175K 4G subscriber. Digitel’s LTE subscriber base has been growing so slowly mainly because of the scarcity of LTE devices. Digitel currently has 10 models in its entire product portfolio, of which only three models are LTE.

LTE devices are too expensive to afford under the country’s current political and socioeconomic circumstances. The issue is more supply-side than demand-side however – it’s simply that operators are not in a financial position to source supply. All operators will face the same issue, while trying to increase their 4G subscriber base.

Venezuela’s market demand should be between 8.8 M to 10M units devices per year. Market size used to be as high as 12M in 2008. However, current market offer is below 7M units annually. 80% of the portfolio offered by the operators are Chinese brands. Samsung, LG and Nokia each offer between 2-4 models. With only 2 models above U$D 100. None of the OEM’s has launched any of its flagships models in Venezuela.

Venezuela Economical and Political Evolution

Venezuela is rich in natural resources, with the largest oil reserves in Latin America and the Caribbean. According to OPEC (Organization of the Petroleum Exporting Countries) in 2014, 95% of Venezuela’s export is oil, and it represents around 25% of its GDP. Therefore the falling oil price has had a tremendous impact on the economy.

The current government has been in power since 1992, initially under Hugo Chavez and then Nicolas Maduro, who was elected a month after Chavez died in 2013. Chavez changed the law to allow his party to be re-elected indefinitely.

Venezuela’s GDP growth was quite constant from 2003 – peaking in 2010. GDP has been fluctuating since – driven by demand for oil and the price of crude oil – both impacted by the global economy. Meanwhile, a mismanaged expansionary economic policy has driven massive inflation. In 2014 inflation was running at over 60% — though reported numbers differ widely.


 Source: The World Bank

 The government believes it must control every aspect of monetary policy. Since 2005 it started to tightly control the foreign exchange market, by fixing the exchange rate. This has led to a parallel market of the currency exchange. The price difference could be as much as 40 times higher. Official rates sells dollars at a preferential rate of 6.3 bolivars for imports of food and medicine and a complementary rate of around 12 bolivars for other goods. While the parallel market had reached 250 bolivars for one US dollar.


The conditions of the Venezuela mobile device market will likely not change in the short term. With oil prices at the lowest level since 2009, the country might not even have the money to start spending on 4G capable devices. But longer term, Venezuela is an attractive market as consumers would not hesitate to spend in leading devices. They love the bling factor, which means the current crop of flagship products would likely perform well in the market.