The Latin American telecom sector played a crucial role during the COVID-19 pandemic by keeping people connected via the Internet. In a region with 650 million inhabitants, the networks experienced a significant increase in traffic of approximately 20-50%. They handled this surge without any major issues.
Investors might want to consider the telecom sector in Latin America due to the potential of 5G implementation in the coming years and high mobile penetration rates. Telecom operators play a crucial role in the Fourth Industrial Revolution and benefit significantly from digital advancements.
The sector functions as the backbone of information flows between people and businesses through an infrastructure of phone, internet, airwaves, cables, or wireless connections. This article will explore the leading telecom companies in Latin America for potential investment opportunities.
Considerations for Investing in Latin American Telecom Stocks
The telecommunication sector plays a crucial role in our daily lives by keeping us connected. Digital services have become so integral that they are often considered as essential as utilities. Although telecom is not typically known for high earnings or revenue growth, wireless and broadband services are essential for Latin American consumers.
Stock prices often surge on merger and acquisition speculation, while stricter regulations can pose concerns. Large-cap telecom stocks frequently offer attractive dividends and are sometimes seen as a haven during market volatility.
Telecom stocks have faced pressure for some time, with leading Latin American telecom-focused stocks underperforming over the last five years. The sector is reinventing itself to become competitive again stimulated by the newest 5G developments.
Mass Mobile Adoption in Latin America and the Promise of 5G
By the end of 2023, 418 million people in Latin America used mobile internet. This represents 65% of the population. It also marks a 75 million increase over the past five years. Despite recent rapid growth, further progress will be complex. Some countries are nearing connectivity limits under current market conditions, necessitating reforms. Mobile technologies and services contributed 8% of Latin America’s GDP ($520 billion) in 2023. They supported around 2 million jobs and generated $50 billion in public sector funding through taxation.
Mobile technologies and services contributed 8% to Latin America’s GDP, amounting to $520 billion in economic value. The primary benefits, totaling $420 billion, stemmed from economic productivity gains due to mobile service usage. The direct contribution of the mobile ecosystem was also significant.
As of April 2024, 29 operators across 10 Latin American countries had launched commercial 5G services. Several others are planning to roll out services in the coming years. For the pioneering operators, 5G adoption is nearing mass-market levels. 5G is still in its early stages in Latin America, with the current adoption rate at around 5% of total connections.
It is expected to grow to 14% by 2025, with 5G making up a double-digit share of total connections in Argentina, Brazil, Chile, Mexico, Guatemala, and Uruguay. In the latter half of the decade, 5G adoption will accelerate rapidly as new markets launch 5G services and existing networks expand into new regions.
Top Telecommunications Stocks in Latin America
Investing in Latin American telecom stocks presents an opportunity to capitalize on the region’s burgeoning 5G rollout and expanding digital connectivity. Telecom companies often enjoy stable cash flows like utilities, driven by consistent demand for essential mobile and internet connectivity services. The following telecommunications companies are based in a LatAm country or operate within the region.
Telecom Argentina S.A.
Telecom Argentina S.A. is the leading telecommunications provider in Argentina with 21.000 employees, offering both fixed and mobile high-speed internet, along with a comprehensive platform featuring a wide range of on-demand content including music, videos, films, gaming, and TV. It serves 30 million customers in Argentina alone and operates in Paraguay and Uruguay.
In a sector with quick digital innovation, Telecom Argentina proactively invests to make the company more competitive and face the challenges of continued change. The company collaborated with Nokia to implement Nokia’s Network-as-Code platform, enabling developers to create new applications for consumer, enterprise, and industrial markets in Latin America. The agreement enables Telecom Argentina to rapidly test and develop new services in Argentina, Paraguay, and Uruguay.
Furthermore, a $500M investment plan has been set up to expand its 5G network. The company focuses on large metropolitan areas like Buenos Aires, Rosario, and Córdoba, and plans to test 5G Fixed Wireless Access in Buenos Aires. It aims to end 2024 with 260 5G sites nationwide, up from 60 last year.
Telefonica Brasil SA (NYSE: VIV)
Telefônica Brasil S.A. is the largest telecommunications company in Brazil, employing 33,000 people directly and collaborating with 96,000 service providers and contractors. It operates under the Vivo brand, boasting 113 million accesses in mobile and fixed operations. Its comprehensive services and solutions cater to both B2C and B2B clients, spanning entertainment, cybersecurity, finance, health, and education.
Vivo leads the mobile segment with 99.7 million active lines, representing 38.6% of the total active lines in Brazil. The 4G network covers 96.4% of the population, and the 4.5G network covers 89.9%, ensuring a competitive edge. Their mission, “Digitalize to Bring [people, businesses, and society] Closer,” aims to create a more connected nation and transform lives by offering increased autonomy, personalization, and real-time choices for their customers.
The controlling shareholder is the Telefónica Group, a major global telecommunications conglomerate operating in 12 countries across Europe and Latin America.
America Movil S.A. (NYSE: AMX)
The Mexican telecommunication company, América Móvil S.A., is the largest telecom company in Latin America with services in 22 countries. Its largest operations are in Mexico and Brazil, accounting for half of the Revenue Generating Units (RGUs) with the remainder deriving from 15 countries in the Americas and seven in Central and Eastern Europe.
América Móvil’s diversified services include wireless, fixed-line, broadband, and digital TV, making it a dominant player in the region. Its significant market share and extensive infrastructure investment position it well to capitalize on the growing demand for connectivity and data services.
América Móvil’s largest market is Mexico, where it faces limited growth opportunities and regulatory challenges. Therefore, it is shifting focus to Brazil planning to invest up to US$ 7.7 billion in Claro from 2024 to 2029 to enhance infrastructure and services. Brazil’s advantageous regulatory environment and economic growth promise greater returns, demonstrated by a 19.78% revenue growth over five years, compared to Mexico’s 14.77%.
Grupo Televisa S.A.B. (NYSE: TV)
Grupo Televisa S.A.B. is a leading telecommunications company in Mexico, owning a large cable company and a top direct-to-home satellite TV system. Its cable business provides video, high-speed data, and voice services to residential and commercial customers. Televisa also holds a majority stake of 58,7% in Sky, serving Mexico, the Dominican Republic, and Central America.
Televisa has government concessions to broadcast through its TV stations, carrying TelevisaUnivision, Inc. signals. It is the largest shareholder of TelevisaUnivision, producing and distributing Spanish-speaking content across Mexico, the US, and over 50 countries via TV networks, cable, and OTT services.
Televisa is a dominant force in media and telecommunications, leveraging its cable, satellite, and broadcasting assets to offer comprehensive services. Its strategic investments ensure a strong market presence and broad influence, both domestically and internationally.
Millicom International Cellular S.A. (Nasdaq: TIGO)
Millicom International Cellular S.A. operates under the Tigo brand in Latin America and provides a wide range of digital services in nine Latin America. countries, including high-speed data, cable TV, and direct-to-home satellite TV. The company used to be active in Africa but has divested all its operations there to reinvest and focus on Latin America.
Its Latin American infrastructure portfolio includes about 9,300 towers, 12 Tier III data centers, and nearly 196,000 kilometers of fiber. In 2022, it started carving out its tower operations, and in 2023, it created a wholly-owned tower infrastructure company, “Lati,” to transfer these assets. TIGO services 40.7 million mobile customers and 4.4 million fixed-service subscribers.
Liberty Latin America Ltd. (Nasdaq: LILA)
Liberty Latin America is a leading communications company operating in over 20 countries across Latin America and the Caribbean under the consumer brands BTC, Flow, Liberty, and Más Móvil, as well as through ClaroVTR, the joint venture in Chile. It offers a wide range of communications and entertainment services to residential and business customers, including digital video, broadband internet, telephony, and mobile services.
Its business products and services are customized for small and medium-sized enterprises, multinational corporations, and government agencies. These offerings include enterprise-grade connectivity, data center services, hosting and managed solutions, and information technology solutions, ensuring robust and reliable support for various business needs.
Additionally, Liberty Latin America operates an extensive network infrastructure to support its comprehensive service portfolio, enhancing connectivity and communication capabilities throughout the region.
