Visant Strategies

Emerging regions have long been a focus for fixed wireless vendors. Actively selling to areas in need of basic telecommunication infrastructure makes perfect sense; it will not only allow the vendor to keep producing more gear, it also allows the potential for a long and lucrative series of contracts that will only lead to more interest and more utilization.

For WiMAX vendors this will be no different and in many developing regions WiMAX will do well while mostly being used for fixed applications. When ranking these areas, Visant sees Latin America, including Mexico, as one of the better regions to start with.

Population
The Latin America region is home to 550 million persons. Population growth is approximately 1.5% per year according the UN, a decline from the peak 2.5% recorded during the early 50's but a sizable population nonetheless.

Households
Housing shows a different trend than population. The region is expected to add over 75 million new households by 2025 to its existing 130 million. Decline of extended and nuclear families is considered the cause and the trend is good news for broadband and telephone providers who tend to light up households rather than people.

Income
Per capita in the region is $7,000 but wealth is heavily concentrated; it is common for the top 10% of wage earners to control 35% to 50% of wealth. In addition, per capita in 13 of the total 30 nations in the region is sub $4,000 per year on average. According to CIA statistics, 200 million of the 550 million Latin American residents live in poverty.

The emerging handset initiative for low-cost GSM voice communications is expected to experience the greatest impact on low income segments of the Latin American community in the next five to ten years.

Great Population Density for WiMAX
Population density is also factor when we consider the opportunity for WiMAX in Latin America. According to the UN, over 75% of the region's populace lives within urbanized areas and one third of the population live in cities with one million or more inhabitants. That makes Latin America one of the most urbanized areas in the emerging world and it also has ramifications for BWA and WiMAX.

Together with income distribution trends, it suggests deployments of fixed and mobile systems will be focused on urban areas and typically with a moderate number of base stations despite overall population density, to address the upper financial echelons within these cities; this is already the case with existing cellular and fixed wireless systems.

Although not necessarily good news for base station sales, this is still good news overall. A substantial number of potential subscribers can be covered with a limited number of base stations and hence investment, which lowers risks to operators. This applies equally to fixed and any next generation mobile networks such as 802.16e which might be deployed, though operators might need to supplement coverage with GSM/GPRS or another wireless air interface choice outside of the core coverage areas.

Penetration of Existing Communications Services
Teledensity in Latin America lingers at roughly 20% which is well below the 60% or more figure common in leading economies. Mobile phone penetration stands at 35% and broadband penetration is below 15% when considering households in the region. There is evidently room to grow within the region but again, growth is typically nurtured by other factors such as equipments pricing, system economics, and the financial status of the area's inhabitants rather than the potential for use.

Proven Business Models First
Mobile voice is a proven business model throughout the world. Further reductions in the already low cost of GSM infrastructure and the emerging handset initiative will extend the serviceable market for mobile voice throughout Latin America. Pursuit of this opportunity is a no-brainer, as it is already proven. We should expect investment to flow in this direction first.

The same may apply in the case of fixed wireless. Carriers in the region are proving a model which relies on fixed voice and 56K to ISDN type of data rates for residential users and high speed links via 5.8 GHz links for enterprise. That model may prove to be more attractive than a mobile WiMAX approach, though mobile WiMAX itself could be used to address the fixed market.

Competition
WiMAX is not alone. 802.20, FLASH-OFDM, UMTS TDD, and subsequent releases from UMTS all address the same fixed and mobile opportunities and all will share similar feature sets including intelligent antennas support, IP core network, efficient MAC layer as WiMAX. UMTS TDD and FLASH-OFDM have substantial leads in commercialization as both are already up and running in commercial networks and both are veterans of years of trials with major mobile carriers such as T-Mobile, Nextel, Sprint, Vodafone, and Orange.

Our Expectations
Alvarion, Airspan, and traditional fixed cellular vendors such as Telular are experiencing substantial growth (in excess of 30% per year) from Latin American operators who seek to deploy fixed wireless networks. Yearly contracts were roughly $200 million from the region in total in 2005.

We expect growth in excess of 30% per year for the next 3 years to 5 years as existing carriers fill out their networks with subscribers and other carriers and investors become more comfortable with the business model, which is greatly facilitated by lower equipment costs. Proprietary systems and fixed cellular systems will continue to account for the lion's share of these revenues through 2007 but leading vendors such as Alvarion and Airspan are expected to shift their existing clients to WiMAX over the next several years.

This is a summary of the just released report "WiMAX in Latin America: Room To Move," published in February 2006 by Visant Strategies.

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