Frost & Sullivan: Brazilian Telcos Bet on 3G and 4G Mobile Data Services to Power Market Growth

Residential segment predicted to show greatest increase, with non-voice services leading the way, through 2022

SANTA CLARA, California, Jan. 10, 2018 /PRNewswire/ -- Economic uncertainty, tax burden, shortening technology cycles, reduced profitability, and disruptive competition are multiple factors currently holding back growth in the Brazilian total telecommunications services market, reveals Frost & Sullivan in its recent analysis. The revenue of most telcos is declining, but opportunities can be found in non-traditional services. To take advantage of such opportunities, telcos need to evaluate strategies and options that focus on business needs, innovation, and transformation, which include smart and connected industries, business process management (BPM), Big Data Analytics and Internet of Things (IoT).

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A recent analysis from Frost & Sullivan's Digital Transformation team, Brazilian Total Telecommunications Services Market Outlook, Forecast to 2022, finds that:

• The total revenue of the telecommunications services market in Brazil is expected to attain $45.76 billion by 2022, while it reached $38.00 billion in 2016.
• The revenue of the residential segment is expected to have the highest compound annual growth rate (CAGR) of 4.2% from 2016 to 2022;
• The small and medium business (SMB) segment has an expected CAGR of negative 0.5%, and the large business segment is projected at a CAGR of negative 3.0%.
• As regards to the type of services, the revenue of the fixed broadband services market has the highest CAGR of 8.1%, while Pay TV, mobile, data communications services market have a CAGR of 4.3%, 4.1%, and 1.9%, respectively. Fixed Telephony has a negative CAGR of 5.9%.
• Non-voice services, especially mobile data (3G and 4G), will drive market growth through the forecast period.
• Voice revenue will continue to decline, while handsets and value-added services (VAS) are expected to have a CAGR of 17.9% and 16.3%, respectively, driven by the increase in mobile data usage.
• The largest 3 groups in Brazil, América Móvil, Telefonica VIVO, and Oi, concentrated 74.9% of market revenue in 2016.

"In 2016, the economic crisis and political instability severely affected the market. In Pay TV, where the payback period is long, direct-to-home (DTH) operators became stricter with credit analysis for new adds, and in parallel faced disconnections from families cutting domestic household spending due to the economic distress, thus reducing the customer base significantly as well as the revenue. In the same way, certain new technologies/apps over voice services, as well as multi-protocol label switching (MPLS), were highly impacted," explains Carina Gonçalves, Digital Transformation Industry Analyst at Frost & Sullivan.

Disruptive competition over traditional services, Pay TV and data communications is the key concern for telcos. Over the top (OTT) providers are considered to be the largest threat, most likely to alter customer demand scenarios in the future. The advancement of direct and indirect competition in the telecom market is impacting revenue growth rates and the profitability margin of traditional operators. However, telcos are also having a hard time monetizing OTT services, VAS, and cloud, as they try to move away from the traditional connectivity and capacity business.

"To succeed in these non-traditional services, companies have to rethink their organizational structure and the portfolio they offer to their clients by focusing on their digital and innovation strategies to reinvent business operations and enable new services. The main elements of the digital transformation currently being worked by telcos are self-service, agile IT and vertical solutions," added Gonçalves.

Brazilian Total Telecommunications Services Market Outlook, Forecast to 2022 is part of Frost & Sullivan's Digital Transformation Growth Partnership Service program.

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Brazilian Total Telecommunications Services Market Outlook, Forecast to 2022
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SOURCE Frost & Sullivan