The Future of Connectivity in Latin America

Demand is driving innovation in a surging Latin American mobility market and wirelessly connecting the region with the rest of the world

It would be difficult to overstate the importance of mobile phone technology in Latin America. Hailed “the year of the smartphone in Latin America” by eMarketer, 2013 saw smartphone use grow by 45.3 percent in the region. In 2012, the mobile industry made up 3.7 percent of Latin America’s gross domestic product (GDP)—compared to 1.5 percent of GDP in the United States and 2.1 percent in Europe.

At the forefront of the booming mobile industry in Latin America stands Celistics, which uses a portfolio of intelligent logistics solutions to connect the mobile ecosystem. In 2013, the company moved 240 million units for clients such as Grupo América Móvil, Telefónica, BlackBerry, Samsung, and Motorola among others, with a key performance index greater than 98 percent.

Celistics CEO and chairman Jose Antonio Ríos, who has more than 30 years of experience in the industry, discusses trends in mobility and the expanding Latin American market.

The mobile phone market has grown rapidly during your time in the industry. Give us a picture of then and now.
Twenty years ago, I was one of the first users of cell phones. At that time, we used cell phones to make voice calls and were happy when we could understand the person on the other end. Now, making a voice call is the fifth reason that people buy a cell phone. Just a couple of years ago, the global average time for a voice call on a mobile phone was just over an hour. In the first quarter of this year, it was 12.5 minutes.

Mobile phones have merged two of the greatest technologies: wireless telecomunication and Internet. For Latin America, in particular, it’s very important we stay on the latest network and hitched to the latest technology to be competitive. It’s not like 30-40 years ago when things that didn’t work were sent to the developing world.

Specifically, where is the growth in Latin America booming?
Brazil makes up 40-50 percent of the Latin American market in every sector, and that definitely holds true in mobility. The population in Brazil is so widespread that you can be in one place in São Paolo that’s three hours from another place in the same city. Landlines never really got off the ground outside of São Paolo, so in Brazil the mobile telephone is as important to connecting
cities as it is to connecting countries.

If landlines weren’t successful in Brazil, why are mobile phones?
Because they allow people to communicate from anywhere, even sparsely populated areas. Fixed-line technology is over. No one is developing it any more. In the United States, in fact, both Verizon and AT&T asked the Federal Communications Commission permission to replace landline networks they had embedded in US soil.

What does that mean for consumers?
If you ask for a fixed line in your home, they’ll give it to you, but it won’t have a fixed cable coming to it. It will be a wireless number. That’s really the magic of the technology. Without wires, you can reach everyone, and everyone can reach you.

How does the adoption of landlines throughout Latin America compare to the adoption of mobile phones?
The fixed-line penetration in Brazil is 21 percent; in Latin America overall it’s 18 percent. Mobile penetration is 111 percent because people have more than one phone. I would dare to say 111 is moving toward 200 in the next 5-10 years because people tend to use one phone for business and one for personal.

How has mobile pervasiveness impacted Latin American business?
Today, 31.9 percent of the Latin American population goes online via mobile phone at least once a month. Out of those, more than 50 percent do so for business. For a business, this is an incredible tool. Our average cell phone has more computing power than the computer NASA had when man landed on the moon. For a company, that means employees don’t need to be tied to their desks. There isn’t a business that doesn’t benefit.

How will this make Latin America more competitive internationally?
Take a country like Chile or Argentina. They used to consider themselves very far away from the industrialized world. I was in Chile last week. People in Chile are operating exactly the same as they would in Dallas, Paris, or anywhere. There’s no time difference, no lag. Communication has reduced the distance.

How are the makers of cell phones and service providers responding to the increase in demand?
Manufacturers are constantly improving on their own, in part because of the gigantic competition among themselves (in Latin America Celistics deals in 20-30 brands and nearly 100 times more models of mobile phones). Carriers have the challenge of migrating old networks to the next generation. They’re talking about flexible 5G in Europe, and I was in a conversation the other day where people were talking about 6G.

What does that mean for a mobile carrier?
They can no longer operate multiple networks in parallel. It’s way too expensive. 4G has substantial potential for the consumer because it can transfer twice the data about 100 times faster than 2G, but it also benefits operators because the cost of operating a 4G network is less than half of operating a 2G network. Many people don’t realize that.

The pending spectrum auction in Brazil, which would open up the 700MHz frequency, seems to indicate migration is a task that will require more than just the private sector to progress. Do you see this continuing in Latin America?
These auctions will continue to happen. Countries constantly need to free their airwaves, so there is more infrastructure for mobile phone and wireless device traffic. The amount of data being transmitted through airwaves has multiplied exponentially in the last 10 years. That puts pressure on the frequencies. The airways get filled like highways. It’s like multiplying the number of cars by two without increasing the size or number of roads.

Is it the growing number of subscribers that’s driving the growth in traffic, or are there other factors?
I don’t see the increase of traffic plateauing soon, but it is not proportional to the number of subscribers. If I’m a single subscriber, two years ago I got my news by text message. Now I want to see the same piece of news with a video clip, so I consume 100 times more data than I did a year ago, but I’m still just one subscriber. The relevant numbers today are not subscribers but how many smartphones are in use. That’s the border between huge data and little data.

What are your predictions about the continued adoption of smartphones in Latin America?
We believe in the next three to four years, more than 50 percent of subscribers in Latin America will have smartphones. The data consumed per phone has multiplied by 10. What you want to do as an operator is eliminate the small and very expensive network that can only handle text and voice. You want to implement and evolve the network that can handle it all for the consumer.