Peru Telecommunications Report Q3 2008

Reports of Peru's remarkable mobile growth in 2007 were confirmed by the strong showing from Amrica Mvil's Claro and Telefnica's Movistar in the second half of the year. However, the regulator's claim of 15.55mn subscribers is higher than data provided by the operators, giving a y-o-y growth rate of 59.6% rather than the 77% claimed by Osiptel. Regardless of this disagreement, the market grew faster than in 2006 which showed a y-o-y growth rate of 57.1%. Claro continues to see its market share creep upwards at the expense of both Movistar and Nextel. Both saw their market share fall in 2007 although Claro's share changed considerably over the year, reaching a high of 39.4% in Q207 before falling back to 39.0% in Q407. Nextel continues to lose market share as Movistar and Claro target the prepaid market in order to gain market share. Claro has seen its prepaid subscriber base stabilise at around 89% while Movistar has seen the proportion of prepaid subscribers in its network increase considerably, although it maintains a smaller share in comparison to Claro. Claro was the first operator to offer 3G services in Peru launching in April 2008.

BMI has revised and updated forecasts for the telecoms markets, due to the latest data regarding market growth, seeing mobile rise in double figures until 2011, and the country's mobile penetration rate reaching 90% by the end of 2012. The broadband market is also continuing to show signs of solid growth with BMI anticipating market growth of around 20% in 2008, and 1mn subscribers to be reached by 2011. The increasing incidence of fixed-wireless services will help to counter any restrictions on broadband growth as a result of the low fixed-line penetration in the country. However, we do expect the fixed-line market to continue to exhibit good growth, which will aid the expansion of the broadband market.

Telefnica del Per (TdP) continues to dominate both the fixed-line and broadband market facing little competition in the latter. However more competition may enter the broadband market in the near future as the cost of interconnecting with TdP will be reduced considerably with operators required to interconnect with just three points of presence, rather than the 34 interconnections previously required. This follows an order from Osiptel which is intended to extend the reach of alternative operators into more cities; at present the majority of operators compete with TdP in Lima given the difficulty in offering services outside the capital.