An overview of the Latin American Telecom Market

Telefónica Latinoamérica
José María Álvarez-Pallete
CEO & Chairman Telefónica Latinoamérica

1
1.
Latin America: a growth opportunity

2.
Trends in the Telecom sector: the race for
transformation

3.
Final remarks

2
Past global economic and financial crises have
curtailed Latin America’s growth prospects
Real GDP per capita (1980 = 1)
In 1983 most of Latin America fell into a perverse dynamic of poor growth
Real GDP per Capita (1980=1) Global recession in the beginning of
1.9
the 80’s had a strong long lasting
effect in Latam
After many
1.7
years of poor
For two decades, Latam and the growth, in
1.5
OECD grew at the same pace
2002 the
1.3 future
appeared
1.1
gloomy for
0.9 Latin America
…
0.7

0.5
1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010
OECD Latin America & Caribbean
Source : Javier Santiso, OCDE : “Latin America, a key driver for UK and Spain” Feb 2010 

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But since 2002, Latin America has shown higher growth
rates than most OCDE countries
Latin America escaped Real GDP per capita (1980 = 1)
the trap, and went back to a sustainable high-growth
path
Real GDP per Capita (1980=1)
1.9

1.7

+27%1
1.5 In the period from 2002
until 2009, Latin America’s
1.3 population grew in almost
1.1
50 million people2 and its
GDP per capita grew 39%1
0.9
+39%1

0.7

0.5
1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010
OECD Latin America & Caribbean

Source : Javier Santiso, OCDE : “Latin America, a key driver for UK and Spain” Feb 2010
(1) GDP per capita PPP 2002‐2009 FMI Developed Countries vs Western Hemisphere (Latin America ¬ Carribean) 
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(2) Source IMF Western Hemisphere Population 2002‐2009
Likewise, Latin America is recovering faster than advanced
economies from the recent world financial crisis
>70% Latam GDP “Investment Grade1”

GDP Growth (% , Constant Prices)(2)

Brazilian jobs figures

point to swift recovery
September, 17, 2009

Brazil last month recorded the biggest

monthly jump in new jobs providing
further evidence that it is emerging
from a short recession and may
return to growth as early as
Indicators already show
next year.
¾ Less dependence of the US
positive trends Figures from the employment ministry
¾ Improvement of solvency rates showed a net 242,126 formal jobs were
¾ Currency Rates created in August.
¾ Fiscal & current accounts surplus
¾ Country Risk
¾ Better financial stance than
other emerging economies ¾ Capital Inflows

(1) Standard & Poors Rating: Long Term Debt in Foreign Currency
(2) Source: IMF 5
 The region is also building a solid social structure
Since 2002, more than 50 million people in Latin America have
lifted themselves out of poverty

Economic • >5% GDP growth in the last four years Population

growth gave Millions 729
way to human • Unemployment reduced from 11% to
development 7.5% since 2002

• Stable unemployment rate + 140 MM

During the
crisis, real • Strength of a growing middle class
economy has
remained • Better performance of consumption rates
strong than in previous crises
Dec-10E Dec-50E
Source: UN

80% of urban population. In Brazil, the upper and

28% of population < 14
5 of the biggest cities in the middle income class surpass
years old
world the low income in number

1.- Minimum for the development of the middle class

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Access to information and communication technologies
has improved dramatically…

Mobile Penetration rates Fixed Broadband

Accesses / Pop Accesses / Household

100%

25%

Latam
Average
Latam
average

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… transforming Latin America in one of the most
dynamic societies in the internet
179 million internet users in Latam(*)
30,5% of population

73% use
messenger

More than half of all 55% upload videos and

internet users access photos to the web
the web every day
82% use
webmail

60% belong to a
social network
Latin America is
“addicted to the web”

(*) Fuente: Internet World Statistics 2009

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Latin America offers thus a solid base to build the
future of the telecom industry

The region’s growth will be driven by The fixed line business will evolve
mobile towards BB.

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MBB in particular will grow rapidly throughout the
region, especially in Brazil, Chile and Argentina

Mobile Broadband penetration per head of the population

2009 (Caribbean and Latin America 2009-2014 (1)
What is the 10%
2014

potential of 8%

mobile 6%

broadband in 4%

Latinamerica? 2%

0%
Brazil Chile Argentina Average Venezuela Colombia Mexico Peru

(1) Source: Analysys Mason

In 2009, there were 5

The MBB penetration million MBB connections The MBB market will
rate will increase from in CALA. By 2014, that generate almost 5 Billion€
0,9% in 2009 to 5,4% of figure will increase to 34 in 2014
the population in 2014 million.

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… and Telefonica is ready to take the challenge
Telefónica´s distinctive assets in Latin America place us in a privileged position
to take advantage of the opportunities that this new scenario will offer

Fixed market ranking

Mobile market ranking
2
9 268 Million accesses
worldwide, 164 of which are
2
2
in Latin America (*)
1 2
9 Key integrated operator in the
2 region
2 1
9 More than 40 connected
1 1 countries
Sept. 2009 9 45.0000 Km of optical fiber
25.1 MM Fixed lines
1
and 7 data centers
129,3 MM Mobiles 1 1 9 88 Billion Euros invested in
7.6 MM Internet 1 2 Latam since 1990
1,7 MM TV

(*) Includes fixed line, FW, internet, mobile, TV and wholesale

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1.
Latin America: a growth opportunity

2.
Trends in the Telecom sector: the race for
transformation

3.
Final remarks

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The pace of transformation of the Telecom sector is
faster every day…

Years to reach the first 150 million customers

89 yrs 38 yrs 17 yrs 14 yrs 7 yrs 5 yrs

The growing speed of massif adoption of new

technologies has determined a new world order

Fuente: Forbes

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… so fast, we now are talking “seconds” instead of
“years”

1 1 1
day minute second

600,000 new 10 hours of 50 Million blogs

users every day new videos updated every
uploaded second!!!

Telefónica Latinoamérica
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Information technologies have transformed the way we
live, communicate and access services…
New devices Social Networks Internet 3.0

New services EBook Cloud computing

Telefónica Latinoamérica
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… and thus, the fundamentals of our business have
changed dramatically

1. 2.
Zetabytes/Year Digital Content Broadband
+2 Zetabytes 9 High speed 9 x4 Increase of BB capacity
growth of 9 Massif deployment of MBB
data traffic
9 New profile of usage: the
importance of upload
capacity vs download

3. New devices 4. Applications

9New bigger more 9 All you need
versatile screens available from
9New mobile any device at
terminals anytime

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 The mobile industry will be particularly dynamic:
internet is shifting the ground rules of the business

Mobile data revenues

USD billions Players of the mobile data business

40% CAGR
2003 Vs2007

Today Telecom operators …but the ground rules are

control most of the mobile changing and we have an
data business… unparallel opportunity to
grow
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The challenge for a Telecom operator is to take
advantage of this new scenario…
Open innovation is the key to success

Regional
Nodes

Application developers,
• Telefónica has pioneering start-ups and
launched a small software
unique and companies will be able to
offer their ground-
integrated breaking applications and
platform services to more than 160 SDP
mill. customers. T-Latam
&
Huawei

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…because there will be plenty of growth opportunities
in our sector…
M2M markets Telecom operators roles

Automation & monitoring

„ Providing the connection to

Security remote devices

Automotive
„ Managing data transmission
through GSM, GPRS, EDGE and
Transportation & logistics
RFID

Payments & POs

„ M2M platform development
Healthcare

Telecom sector analysts forcast more than 250 million M2M lines in 2012.

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…and smart grid devices will further broaden this
landscape of opportunities…
Automation & monitoring
1 Consumer Applications
„ In-home display with real-
time usage/ pricing
statistics
„ Usage aware appliances
„ Home security &
automation
Smart grid devices rationalize the use of
energy adjusting it to each customer´s
consumption patterns and making supply
more reliable. They can help reduce energy
consumption up to 15%
2 Grid Applications and 3 Electric vehicle
data analytics/
management „ Charging connectivity
„ Automation of the grid, remote (home and public)
monitoring and loss reduction „ Optimization of charge
timing
„ Real time outage notification
„ Remote disconnection
„ Operational improvements for
distribution companies
PowerCo
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…and smart grid devices will further broaden this
landscape of opportunities…
Automation & monitoring
Telecom operators
1 Consumer Applications
will enable
„ In-home display with real-
time usage/ pricing
statistics
„ Usage aware appliances
„ Home security &
automation
Smart grid devices rationalize the use of
energy adjusting it to each customer´s
consumption patterns and making supply
more reliable. They can reduce energy
consumption up to 15%
Grid Applicationstheand use
2 3 Electric vehicle
of M2M management
devices
data analytics/
„ Charging connectivity
„ providing
Automation of the grid, remote
monitoring and loss reduction
(home and public)
„ Optimization of charge
communication
Real time outage notification
„
Remote disconnection
„
timing
„
services.
Operational improvements for
distribution companies
PowerCo
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1.
Latin America: a growth opportunity

2.
Trends in the Telecom sector: the race for
transformation

3.
Final remarks

22
In summary:
ƒ Information and communication technologies have dramatically changed the
way we live in a very short period of time.

ƒ Telecom operators need to quickly transform their business strategies

accordingly to meet growing consumer needs and take full advantage of the
opportunities that this new scenario offers.

ƒ The mobile business is particularly dynamic. Mobile broadband will bring

about the next wave of growth.

ƒ We expect Latin America’s telecom industry to grow fast in the near future:
the region is building a solid social structure, is recovering fast from the recent
financial crisis and has a vigorous society in the internet.

ƒ Telefonica is best placed to take full advantage of the next wave of growth of
the Telecom Industry, specially in Latin America where it has unique assets.

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