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Latam pay TV party as subs explode

By PETER WHITE

Published: 11 November, 2011

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We told you that South America was hot and we didn't meant the climate. One of our usually astute pay TV equipment customers told us, "We don't do any business in Latin America," as if that meant they didn't need to know about our report in January which made it clear that Latin American pay TV was taking off.

Today NOT having an operation in Latin America is a bit like NOT having your set tops or chips made in China or India - you are missing out, and badly.

Another player told us, "Your report is wrong, Latin America cannot sustain the types of revenues that China and India can," which is why he should have bought the report. This week results from that part of the world show that there are still opportunities for set top players, chip vendors, home gateway manufacturers, TV builders and anyone else within the food chain of pay TV as the market explodes.

The critical thing is that pure numbers may not challenge the growth in India right now or in China, but not only is ARPU significantly higher, a fact that makes the operators more stable and helps them move rapidly into profit (which makes them better payers). And our report in this week's Faultline, taking in results in the region, shows that ARPU continues to rise and that more money will be made here than China and India combined.

There are also few local technology challengers and virtually all of the technology has to come from outside Latin America's borders, something patently untrue in both India and China, and the reason for significant tax issues if you fail to set up local Latin American manufacturing.

Not only was our report the most aggressive published, assuming economic growth rates ahead of the major economic forecasters, an idea that has proven to be true, but even we under-estimated the growth in both Brazil and Mexico the two main markets.

Brazil ended September 2011 with 11.9 million subscribers according to the country's regulator Anatel, already well ahead of Rethink's prediction of 11.4 million by the end of the year. This represents phenomenal growth in subs exceeding 30% over the whole year from September 2010, with 780,608 added during Q3 2011. Of these additions 650,000 were satellite, highlighting the massive performance of that sector across the whole region. By contrast cable was generally fairly flat, while IPTV performance is patchy, with growth in some countries such as Venezuela increasing its share of overall Latin American subscriptions from 1% late 2010 to just under 2% by September 2011.

The top four countries, Brazil, Mexico, Argentina and Colombia, between them account for about 83% of the overall Latin American pay TV market. The region is also dominated by relatively few big operators, with just two significant players on the satellite front, DirecTV and Dish Networks. The cable side is characterized by large numbers of small local operators in some countries, but with the lion's share of subscriptions taken by a few big national operators, such as Cablevision in Argentina, which is 60% owned by the country's Group Clarin media group, Televisa in Mexico, and NetServicos in Brazil. For IPTV, Spanish Telco giant Telefonica is one to watch in several of the countries, even though so far it is only a fairly minor player right now.

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