Peru Telecommunications Report Q3 2007

Peru's mobile market is underdeveloped and immature in comparison with most other countries in Latin America. Both subscriber numbers and penetration rates are now rising sharply and the gulf between it and the other countries in the region analysed by BMI is narrowing, but we believe the gap is too wide to be bridged in the short term and Peru must continue to languish at the bottom of the pile. The country is also way behind its regional peers in terms of value-added service development - let alone 3G deployment - and operators continue to rely on lower revenue-generating services to drive subscriber growth as they continue to roll out services to underserved rural areas.

However, it is now one of the fastest growing mobile markets in the region, with subscriber growth of 57.5% in 2006 the fastest since services were first introduced in the late 1990s. This trend looks set to continue in 2007, with the number of net additions in Q107 more than doubling over Q106. The market grew by 61.3% y-o-y and 12.0% q-o-q in Q107, compared with rates of 39.3% and 9.1%, respectively, for the same period in 2006. Penetration had reached 34.1% by Q107 with over 9.8mn subscribers, just over 1mn of which were added in Q1 alone.

Second-ranked Claro has said it expects mobile penetration will double between 2006 and 2008, to around 60%, an indication that the company has no short-term plans to reverse the prepaid focus. Although BMI feels this is overly ambitious, we have raised forecasts for 2007-9 in light of the stronger than expected Q107 growth, although we continue to believe penetration will be no higher than 89% by 2011. We now expect penetration will hit 45% at YE07, rising to 57-58% at YE08, above our earlier expectations of 55%. Growth rates will slow but will continue to be significantly above average for the region.