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Rising Demand And 4G Technology Bode Well For Latin American Telecom Companies

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Rising mobile data usage has spurred growth in the telecom sector and new content, the explosion of mobile applications, the evolution of smartphones and tablets, and connected machine to machine applications will likely support demand for mobile data services in the next few years, said Standard & Poor's Ratings Services in a report.

In Latin America, about 15%-16% of the population uses smartphones, which is low compared with other developed markets, but sales are climbing rapidly.

"Given customers' massive use of data, we believe it is just a matter of time before mobile broadband subscriptions rise also," said Standard & Poor's credit analyst Marcela Duenas.

Industry experts expect that by 2017, 55% of new handsets in the region will be smartphones. Mobile broadband penetration in Latin America is only 12%, or 47 million broadband users out of nearly 662 million mobile subscribers during the second quarter of 2012. However, mobile data traffic in the region will grow at a 79% compound annual growth rate from 2011 to 2016, according to Cisco Systems Inc.

These trends create an opportunity for telecom operators to boost their revenues, provided that they're able to invest in the network upgrades and technology required to cope with the higher data usage. In the long run, this spending could affect some ratings though.

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