Pre-paid wireless packs a punch in Latin America

The growing popularity of pre-paid wireless calling plans in Latin America has one research firm predicting a dramatic upswing in cellular use in the region over the next five years, and a corresponding boost in revenue for the region’s operators.

Low cost cellular kits including phones and reusable calling cards have been driving wireless use in Latin America into lower income groups, according to San Jose, Calif. based Frost & Sullivan Inc. In a report Wednesday, the research company predicted that the cellular market in Latin America could generate US$39.2 billion in revenue by 2006, up from $15.5 billion in 2000.

The study looked at the top cellular and PCS operators in six countries that it feels are driving wireless technology in the region – Brazil, Mexico, Argentina, Venezuela, Columbia and Chile. The research company concluded that, while there may be bumps along the way, many people in the region would encounter the Internet for the first time through a Web-enabled cellular phone. As reasons for this, the researchers cited lower levels of both income and Internet penetration compared with Europe and the United States.

“The upper income market is pretty saturated in Latin America,” said Carles Ferreiro, a research analyst at Frost & Sullivan. “But, usage of pre-paid calling plans is showing a pretty dramatic increase in the Tier two and three income levels. It is really the only way that those people can be tapped in.”

In some markets, more than 90 per cent of new wireless users signed up for pre-paid plans in 2000, a marked increase from previous years, the company said.

For the carriers, more pre-paid plans means less average revenue per user, although increasing numbers of users and the potential to offer more advanced services could mean greater revenue in the longer term. Latin Americans appear eager to adopt new technologies, making investments in wireless attractive, Ferreiro added.

He expects Brazil to continue its role as a leader in wireless technology over the next few years, but sees countries with large urban populations, such as Venezuela, also showing strong growth.

Despite the surge in cellular use, Ferreiro does not expect the Latin American market to catch up with Europe, Asia or the United States. Frost & Sullivan expects there to be about 124 million cellular users in Latin America by 2006.

Frost & Sullivan, based in San Jose, Calif., can be reached at