Cellular backhaul and in-flight connectivity are two key markets for satellite players, and there are good prospects for both areas in Latin America. Euroconsult, the French-based consulting firm, has recently released new reports on both topics giving some interesting indications as to what will happen in the Latin American market.
Cellular Backhaul
According to Euroconsult’s latest research, satellite capacity revenues stood at around $95 million in Latin America in 2012 for cellular backhaul. Its estimates correspond to a high single-digit Compound Annual Growth Rate (CAGR) over the next 10 years, expected to reach more than $200 million by 2023.
In its “Prospects for Cellular Backhaul in Fast-Growing Economies” report, Euroconsult gives forecasts all across the cellular backhaul market. The report states that there were approximately 1,400 Base Transceiver Sites (BTS) sites in Latin America back in 2008 and that the number of cell sites backhauled over satellite has grown at double-digit rates in the past four years. This number was boosted primarily by Universal Service Obligations (USO) mandating cellular operators to expand their network to rural and semi urban areas, according to Euroconsult’s research.
The research identifies Latin America as the third largest market following Sub Saharan Africa and the region defined as “Rest of Asia” in its study (South East Asia & China) for satellite backhaul, both in terms of number of BTS sites backhauled over satellite and satellite capacity used.
Euroconsult also says Latin America has been a fast growing mobile market with growing usage of satellite as a means for backhauling voice and data traffic. Out of the 225,000 BTSs Euroconsult estimates were installed in 2012 in the region, approximately 3,000 are backhauled over satellite (i.e. 1.3 percent).
Unsurprisingly, Brazil is seen as the key market in the region for satellite backhaul. Euroconsult says the country has by far the largest number of BTS sites backhauled through satellite in Latin America with more than 800 units. It adds that the market has grown at a double-digit rate with all leading mobile operators expanding their networks.
Euroconsult identified difficult terrains with mountains, forests and flat to rolling plain lands, growing mobile data traffic, economic growth and the USO/government mandate pushing mobile coverage in rural and semi urban areas as key growth drivers. Additionally, Brazil presents a high growth potential in the future considering anticipated sustained growth in mobile subscriptions, mandate to improve coverage in rural white areas, and the wide roll out of 3G networks, according to Euroconsult.
However, the satellite backhaul market in Latin America is more than just Brazil. Euroconsult pinpoints Peru, Mexico, Bolivia, Argentina and Colombia as other major countries for satellite backhaul. But the company says growth in Peru – currently the second largest market in terms of sites – is estimated to have slowed down in recent years, the main reason being the extension of a national fiber backbone network.
In Flight Connectivity
Latin America could prove a tough market to crack in terms of in-flight connectivity. This is the view of Wei Li, a senior consultant at Euroconsult. He says the region will not see the take-up of services compared to Asia, for example.
“Asia-Pacific is expected to have the highest growth for in-flight connectivity, with a CAGR of 34 percent over the ten-year period, followed by Latin America. However, Latin America is currently the smallest region in terms of connected aircraft and is expected to remain in that position in the next ten years,” says Li. “The Middle East & Africa region, is expected to have a relatively high growth rate, driven especially by the Middle East region.”
Slow progress is expected in the next few months with airlines looking cautiously at the opportunities in terms of how they can monetize this market. “The general trend is that airline from all regions, nascent or established, will adopt the connectivity service sooner or later, while a longer time will be needed for the regions with strong regulatory barriers and difficult economic conditions. The Latin American market is still at its infancy stage for both in-flight connectivity and the commercial airline sector itself, and we do not expect the majority of the airlines to have the service in the next 12 months,” adds Li.
All eyes will be on companies like the LATAM Airlines Group, which is likely to be one of the first airlines to launch these types of services. “Providers are eying the market because the region has huge potential, and we believe a few more airlines will start to retrofit their current fleet and procure line fit connectivity with new planes. A typical way of conducting business is to have one or two aircraft in trial before the real launch of the service. To our knowledge, currently there’s only a small number of airlines performing this trial. In addition, we will not speculate whether those installations will happen in 2014 or 2015,” adds Li.