Chilean Mobile Phone Market Taking a New Turn

After years of low prices created huge penetration levels reaching 100%, Chilean mobile network operators are slowly changing their policy. The subsidy on Handsets is being lowered, mainly on lower-end products, together with a strong shift in offers from pre-paid to contract. For some years the 'disposable' Handset was also very popular in Chile.

These offers significantly increased the demand and penetration of mobile phones in Chile, but this did not generate the effect the operators desired. Instead of buying a new tariff card after the free amount was spent, the consumer simply bought a new handset in a similar offer. Given the price for a call per minute, this was still a profitable business for the operators, but since the minute prices have been heavily reduced (and as a result also reduced the operators margins) the interest shifted in another direction.

In September and for the fifth month in a row, prices of handsets have increased by more than 20% compared to the same month in 2007 according to GfK Retail and Technology.

Of course this is a combination of offer and demand for higher featured products combined with lower operator subsidies, but the last two months have seen the average price go up by almost 30%. With this change of policy, the market has reacted with a drop in sales: In September Chilean consumers bought 15% less handsets and the accumulated January to September period is showing no increase in unit sales.

Posted to the site on 5th November 2008