Negotiating Mobile Communications Services in Latin America

Spend Matters welcomes this guest article by Ana Gomez of GEP.

For many organizations, the mobile service is starting to be an important tool for their employees. Like the rest of the world, Latin America is turning increasingly toward mobile solutions and away from the traditional telephony. The mobile penetration in the region has reached an estimated 115% against the global rate of 96%. America Movil is the leader, followed by Telefonica. America Movil and Telefonica had competed in most of the Latin America countries. There are other competitors in the region, but between these 2 companies, they serve around the 61% of the region’s mobile users.

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There has been a late start for new MVNO (Mobile Virtual Network Operators) compared with other regions. Government regulators have seen the Mobile virtual network operators as a way to increase the competition and rivalry in the region, but they have to negotiate with the current dominant operators in order to lease the infrastructure and the companies don’t like the competition.

New operators are trying to increase their presence in the region. For example, in Mexico, AT&T – one of the largest telephone operators in the US ­– recently bought 2 operators that were trying to compete with Telmex, America Movil’s brand in Mexico. With this purchase, AT&T has gained around 11.4 million users, 11.10% of the market share and a 90% of geographic coverage, which gives AT&T an opportunity to compete strong with Telmex. AT&T also has plans to invest in Brazil and consolidate its growth in the region.

The market rivalry and industry spend is growing and results in an opportunity for the companies to explore other vendors in the market and leverage their negotiation power with their incumbents suppliers.

However, to leverage the savings opportunities in this category, it is important to consider the following key levers and value drivers:

  • Define of formal policies that clearly state that the use of the cell phone as a work tool, avoiding the personal use and clearly define the monthly allowance according the different users profiles.
  • Define different users’ profiles according their needs of use the mobile and negotiate with the operator plans according the usage of these users.
  • Negotiate cost per minute for long-distance calls, and roaming cost, in case the monthly plans are opened.
  • Negotiate data services in the plans and adjust them according to the needs of the users. If there are profiles that are not needed, it is important to lock the contract to avoid any additional cost. If the 3PL growth will continue in the next years, and more strategic activities will be outsourced to this kind of suppliers, it is important to see the selection of the new supplier as a strategic process where all the key areas including procurement should be involved.

The mobile phone service is becoming vital in organizations as a work tool. Companies must watch their expenses in this service and leverage their buying power taking advantage of the high rivalry in the market and define clear rules inside the organization that controls the usage of the mobile phone services.

For more interesting thinking on procurement, visit the GEP Knowledge Bank.

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