With 18 5G trials across the region to-date and a live 5G-ready network (Fixed Wireless Access) in Uruguay there is a fair amount of 5G activity in Latin America (LatAm). Despite these developments, the reality remains that LatAm will lag behind most regions in the world with a conservative 8 per cent adoption rate by 2025 (see chart above right, click to enlarge. Source: GSMA Intelligence. *Developing APAC excludes China).

LatAm is a large region with a mix of developing and developed markets that can behave as highly volatile economies. Thus, the future of 5G in this region will predominantly lie in the hands of its macroeconomic trends, the life that is still in 4G and the policies its governments set out to create opportunities for investment.

Macro impacts versus 4G
Stagnating economies and hyperinflation make it difficult to justify 5G investment.

Argentina saw a 27-year high inflation rate reaching 47.6 per cent in 2018, while in Venezuela hyperinflation will likely reach 10 million per cent by year-end 2019. Brazil seemed to be the poster boy for LatAm in the early noughties as a fast growing developing market, leading to a boom in foreign investments in the market. But limited progress in adoption of economic reforms caused a deceleration in the economy and slowdown in foreign investments.

These developments, together with mobile service and device taxation, represent a fair indication of consumer purchasing power. Income levels and affordability of newer (and 5G) devices will be likely hampered as a result. Current mobile device pricing as a percentage of GDP per capita is already high across the region, not only in the expected smaller countries but also in the larger economies. Whereas device cost as a percentage of GDP per capita lies at 0.1 per cent in UK and US for instance, it is 2 per cent in Bolivia and Brazil, and 1 per cent in Argentina.

There is still a lot of life in 4G – this is good news!

Whilst those macro impacts have partially resulted in slow LTE growth to-date (44 per cent adoption rate, Q2 2019), MNOs in LatAm are still working on network performance and deployment of 4G and 4.5G.

With 4G still growing, it will remain the dominant technology in the long-term (67 per cent by 2025) and until after 5G is launched. There is a gap of >10 percentage points between smartphone adoption versus 4G adoption rates (2019). This creates an upsell opportunity to operators especially now that 3G pricing has completely vanished from LatAm, allowing for 4G investments to be recouped over the next few years.

Spectrum, spectrum, spectrum – yes we need to talk about it!  
Ok, so 4G still has a lot going for it but we need more spectrum. With consumer readiness in place – nearly 90 per cent of mobile subscribers are mobile internet users – what is lacking is sufficient spectrum dividend per operator i.e. volume of MHz per operator. This remains low in LatAm, impacting network performance (up/download speeds).

With the ignition of 5G, governments and policy makers have the chance to reform policies and help foster investment and innovation in their markets.

To take an example from the largest economy in LatAm, spectrum dividend fares very low in Brazil with almost no change over the last four to five years, according to the Mobile Connectivity Index (MCI). This has impacted network performance over time, keeping Brazil at an “emerging” market level in this category. Any upcoming auction will need to allow for sufficient spectrum dividend as well as consider auction fees and coverage obligations.

Vendors seek opportunities in Brazil
Brazil’s upcoming spectrum auction could potentially become the largest in the world: the national regulator (Anatel) is currently consulting on the 2.3GHz, 3.5GHz frequency tenders next March. There is speculation amongst vendors that 26GHz and 700MHz could be added to the same auction, making it the world’s biggest 5G auction to come. This not only would attract all eyes on Brazil but also could provide higher spectrum dividend per operator, allowing network performance improvements. Further testimony to vendor optimism is Huawei’s plan to invest in an $800-million-dollar factory in Brazil for the rollout of 5G.

With Brazil the obvious foster child, where else in the region can we turn to for opportunities?

Outside of the larger economies, in Peru 4G adoption rate is forecast to reach 73 per cent by 2025 and 4G availability[1], measured by Open signal, shows an impressive reach in excess of 80 per cent. GSMA Intelligence forecasts show a fair growth for 5G by 2025 with 6 per cent adoption (with affordability of mobile services, relevance and availability of local content all faring well in Peru). Further, with growing competition operators have started investing in LTE-Advanced and the majority of upgrade deployments took place across 2018.

But where will 5G use case opportunities sit for LatAm?

5G use cases remain a significant discussion point across many major markets, with the top use cases evolving around enterprise, enhanced Mobile BroadBand (eMBB) and Fixed Wireless Access (FWA) in Europe, US, and China. In LatAm, two in particular could become successful.

Considering low fixed broadband penetration rates, FWA could take up well as it poses an opportunity to replace low bandwidth xDSL and in smaller range spaces, e.g. production plants and hot spots, as well as reach the unconnected.

Further, eMBB could make a good use case considering the high number of mobile internet users in the region as percentage of mobile subscribers, as discussed earlier. Additionally, per smartphone, Ericsson forecasts mobile data traffic growth of 481 per cent in LatAm to year 2024, reaching 18GB per month.

But what is indisputable for 5G success in LatAm is the need for adequate infrastructure, which includes sufficient spectrum as well as tax reforms to support 5G New Radio. Without that, 5G will be a 4G déjà vu.

– Armita Satari, Analyst – Core Mobile Research, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] This is not equivalent to population penetration. Instead, Opensignal measures the real-world experience of consumers on mobile networks.