Will Unlocking Phones Drive the Latin America Market in 2016?

A week before Christmas, Claro Argentina announced that it would start selling only unlocked mobile devices.  This is the first operator in Argentina to do so, but not in Latin America. Chile, Colombia, and Peru’s operators have been selling only unlocked devices for quite some time, although they were forced to do so by their regulators.

Colombia

During 2014, the Colombian Telecom regulator, TIC, carried out an exhaustive regulatory update.  Number portability was one of the regulations introduced, along with banning operators to sell SIM-locked devices. The regulator argued that if the device is SIM-locked the end user could not freely migrate among operators.  This move certainly benefited the end user as the operators had to start competing by offering better plans, and superior service quality, instead of bundling the device (including some subsidy) with a, usually, expensive plan.

Before this regulation was introduced, the operators accounted for up to 85% of the Colombian mobile device market. Furthermore, some years ago, Claro Colombia used to own up to 70% of the handset market alone.  Claro was not only placing high barriers for new brands to enter the market, it was also making it difficult for other operators to get the hefty discount, from the vendors,  Claro enjoyed. In 2013 Claro had more than 60% of the handset market. But between January and September of 2015, its share declined to around 45%. Claro’s share of subscriber has also been decreasing since 2014. Furthermore, Claro’s revenue has being decreasing, it increased equipment revenue, but decrease service revenue.  Colombian end users have benefited from the regulation as it allowed low cost brands to enter the market.  Despite the regulation, Colombia’s telecom market is  still has limited competition.

colombia operator share

Colombia Operators’ Share of Mobile Handsets Sell in

Peru

In early 2015, Osipitel (Peruvian Telecommunication Private Investment Supervision Organization) announced that Peruvian operators can only sell unlocked devices. The Peruvian market is effectively a duopoly. Claro and Movistar had around 73% of the handset market at the time the regulation was implemented. This number has barely changed during 2015.

Peru operator share

Peru Operators’ Share of Mobile Handsets Market

 So what does all this imply for Argentina?

Argentina telecommunication space has three strong operators, Claro (AMX), Movistar (Telefonica), and Personal (Telecom), each with approximately one third of the market.  Besides, Argentina has the highest postpaid share among top six Latin America market.  Despite of this, subsidies in the Argentine mobile device market have been pushed to the bare minimum in the last few years.  Thus operators have been losing participation and revenue to the open and unsubsidized market, which is currently about 40% of mobile devices market.

Claro Argentina announced in late December 2015, that it would start selling only unlocked mobile devices.  This was a unilateral decision by Claro – not something mandated by the regulator. Claro said the move was to allow it to compete against the open market.  Claro selling only unlocked devices will not modify the overall handset market in Argentina; however, it will definitely alter slightly the share of each of the players of sales channel.

Latin American regulators have been pushing for more and fairer competition in their markets.  Some markets, notably Colombia and Mexico, have already been insufficiently regulated and redressing the balance will take significant effort. One of the measures regulators have used is outlawing SIM locking. This reduces the level of subsidies and levels the playing field with open market distribution channels.  For Argentina, the open market was already competitive. Given the tumultuous state of the Argentine government, it might be some time before the regulator applies a mandate preventing the use of SIM locks. Although, in this case the market has already been regulating itself.