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Quality Not Quantity for Entel Chile As New Growth Dries Up
Both net additions and growth figures at Chilean incumbent Entel have fallen to record lows for the second successive quarter. The size of the potential market for new additions looks to be steadily decreasing in the country as the penetration rate approaches 100%; Telefonica Moviles may yet be in with a surprise, but we doubt it. EntelĂ's situation was also worsened this quarter by the fact that America MovilĂ's Chilean operation took a greater share of the new connections than its larger competitor for the first time in six quarters - although the size of the premium this time (51k to 28k) versus that in Q1 07 (178k to 118k) indicates just how much new growth has dried up in that time. EntelĂ's churn rates bear testament to this: churn actually hit a six-quarter low of 1.75% in Q3 08, and still net growth fell to its lowest ever level.
Nevertheless, as any mature-market operator will know, raw growth is not everything. At around this point in a marketĂ's development, the focus tends to shift to quality rather than quantity, and here Entel is ahead of the game. Over the year to September, contract net additions outnumbered prepaid by three to one, increasing the importance of postpaid in the mix from 25.6% to 29.3%. The size of the opportunity to convert customers to postpaid plans also seems to have diminished, however, as the progress in the mix made this year (+3.7pp) is down compared to the 5.5pp added in the previous 12 month period. Despite the quality improvement, Entel saw just ARPUs rise just 3% year on year. Minute usage was up 16% to 167 per customer per month, but the effect on ARPU was tempered by the fact that the average price per minute slipped 11% to CLP61.1. The story looks to be one of customers being lured to postpaid plans with ever more favourable bundles, increasing volume but limiting the effect on the top line, whilst the majority prepaid part of the base continues to benefit from price competition.
The 0.5% increase in EntelĂ's customer base in Q3 2008 took its total to 5.85m, leavingthannual growth at just under 8%, down from 13.6% for the 12 months to 30 September 2007. Results from Telefonica will establish EntelĂ's final position for the third quarter, but it is likely to end up with more or less 38% of the market, a decline of around 0.5pp year on year.
Posted to the site on 13th November 2008
This article was extracted from The Mobile World Briefing, the weekly newsletter from The Mobile World.
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