TBY talks to Francisco Gíl-Díaz, Executive President, Mexico & Central America of Movistar, on the trends in the local mobile industry, the affordability of new technology, and the potential for 4G.
What does Mexico represent for Movistar's global operations?
It is an important operation in terms of clients. We have close to 21 million customers, which is about 22% of the Mexican mobile market. Movistar is the second largest operator in Mexico. Mobile penetration rates in Central American countries and South America are about 100%. We have not reached those percentages yet, meaning there is an opportunity in terms of market growth. Ours is also an underdeveloped market, considering smartphones and data. Data is the future of telecommunications, and this sector is still in its infancy in Mexico; there is a lot of room to grow. Despite the fact that we have a smaller operation than, for example, Brazil, and despite the fact that our market share is smaller than in most other South American countries, in terms of potential Mexico is a very important country. It is the second largest economy in Latin America with a lot of opportunity for growth.
What has been the significance of 3G in the local market?
If one service provider has 3G then everybody has to have it. The difficulty for us—and fortunately we were able to overcome it—was that we did not have enough frequency, or enough spectrum in the metropolitan zone of Mexico City. If you want to have good wireless broadband access for your smartphone, you need 3G. LTE is the next step—we expect to provide it throughout Latin America. We are just waiting for the terminals that are needed to offer a sufficiently low price. The iPad now comes available with a 4G-type connection, but smartphones are still too expensive for our market. It is going to take some time. If anybody dives into 4G, that will pull everybody else into the new technology.
You recently presented the BlackBerry Curve 9380 and the BlackBerry Bold 9790 in Mexico. What has been the reception among Mexican consumers?
We have had good a reception to all our smartphone launches. What we are trying to do now is find the most inexpensive smartphones because the purchasing power of the Mexican population is not comparable to European or US customers. We are trying to convince the manufacturers to bring the prices down. Movistar is already providing a reasonably low-priced smartphone, as most people want to be able to use messaging services, access the internet, and download music and videos. We do not want this to be something that is limited to wealthy consumers.
What is your evaluation of the local ICT sector?
There is a need for fiber-optic backbones to be constructed all over the country. We teamed up with Televisa and Megacable in order to bid for fiber-optic lines from the Federal Electricity Commission (CFE), because the backbone provided by Telmex is expensive. For many applications, mostly industrial, technological, and scientific, you need a considerable amount of broadband. We still have a long way to go in Mexico in terms of infrastructure needs. We need to be able to have a broad enough market for the population to be able to acquire tablets or PCs. The population in Mexico is, to a considerable degree, urbanized, but there are parts of the population that are still rural. That rural population does not have sufficient coverage or none at all. That is another challenge for the future, especially for educational purposes. To improve coverage, satellites are part of the answer.
What financial performance are you expecting for 2012?
We have a very reasonable earnings before interest, taxes, depreciation, and amortization (EBITDA) figure, considering the challenges we have faced. We have been able to control our costs and cut our administrative and operational expenditure substantially over time. At the same time, our customer base has been expanding. We are happy that our results have been improving and we are projecting a continuous improvement in the future, mostly because of data. Voice is becoming more and more an IP-type of connectivity and, therefore, less attractive, and more like a commodity. The percentage of post-paid to pre-paid services, as well as the percentage of smartphones and tablets, is expected to increase. That's where the future lies.
© The Business Year - August 2012