Colombia: Broad expectations for 4G auction
Despite a lack of physical infrastructure, Colombia’s telecoms sector is poised for a period of unprecedented growth on the back of an eagerly anticipated 4G-spectrum auction.
The number of people with access to the internet in Colombia topped 6m in 2012, marking a milestone, although both government officials and industry players agree that the potential for further development is huge. The launch of 4G is expected to give internet penetration a major boost, although the government will be keen to ensure delays, which have beset the process to date, are stemmed.
The current telecoms infrastructure is considered to be in the mid-level range, according to a study by the Development Bank of Latin America (CAF), while the overall penetration of 95.39% is seen as low compared to other countries in the region such as Uruguay and Argentina, where the index tops 133%.
The plan to launch a 4G-spectrum auction, which was announced by the Minister of Information Technologies and Communications, Diego Molano Vega, in October, forms a major part of the government’s ambitious bid to expand the sector. Since the announcement, the auction has become a key talking point among Colombia’s telecoms operators, with much of the discussion focusing on the issue of monopoly. A study by the Organisation for Economic Cooperation and Development (OECD) released in February found that Colombia had the third-highest level of concentration in the telecoms sector among member states, behind Mexico and Brazil.
The Mexican telecoms giant Claro has dominated Colombia’s telecoms sector since acquiring the mobile communications operator Comcel and the internet and television provider Telmex in June 2012. The firm currently controls 60% of the Colombian market, giving it an estimated 30m customers. Following heavy criticism that Claro’s dominant position in the market gave it an unfair advantage, Colombia’s regulator announced in November that the telecoms giant would be allowed to apply only for the 2.5-GHz band in the 4G-spectrum auction.
The government expects the auction to bring in at least $480m, although more detailed estimates are likely to be given once the rules of participation are published on March 14, ahead of the bidding process, which is scheduled for June 11.
However, there is speculation that the initiative, which has already been hit by delays, could be put back further. Most recently, the government halted the process following an announcement by Luxembourg-based telecoms firm Millicom, which owns 50% of local phone services provider Tigo, that it was negotiating a merger with UNE Telecommunications Company, owned by Empresas Públicas de Medellín (EPM).
Since the total spectrum held by a new conglomerate made up of Millicom and UNE would exceed the 85-megahertz maximum cap permitted under Colombian regulations, the minister immediately announced that a revision of the 4G auctions would be required. If formed, the conglomerate would have to return and negotiate additional spectrum to continue participating in the auction, he said. The companies are expected to reach an agreement during the first half of 2013.
In the meantime, the door remains open for new entrants to take part in the auction. Molano said in November that he expected the auction to award five 4G licences, although mounting interest from new telecom operators has fuelled speculation that the number of competitors could be higher.
One possible participant, the satellite television provider Direct TV, has confirmed its interest in the auction process, with Martín Andrés Solé, vice-president of development, saying that while the internet was the company’s first market of interest, it would not rule out a possible entry into the mobile phone business.
Jorge Andrés Palacio, president of Mexico-based telecoms company Avantel, which is also considering taking part in the auction, suggested that once more details were known, there could be potential to form alliances with other companies.
With the auction drawing nearer, speculating has been mounting in the local media about which regional operators are likely to be interested in participating. Names mentioned include the Brazilian giant Oi, Chile’s Entel, the US company Nextel and Mexico’s Azteca. Colombian public operators ETB and Emcali have also been suggested, together with public telecommunications companies based in Bogotá and Cali.
The government has remained tight-lipped on the press reports, confirming only that it has so far received interest from 13 companies, both local and international. However, with expectations running high that the auction will greatly impact the development of technological infrastructure, contributing to increased browsing and download speed, speculation, together with anticipation, is likely to gather even greater momentum over the next few weeks.