Colombia telecoms market
Colombia’s telecoms sector has witnessed a rapid increase in infrastructure investment in recent years, opening up significant potential for economic growth from technological advancements.
Carriers have been keen to invest in Colombia, which is emerging as a gateway to Latin America through a host of new subsea cable projects landing into the country.
Among these is América Móvil’s $1.1 billion AMX-1 subsea cable, while also in the pipeline for late 2014 is a new system linking Colombia, Ecuador, Panama, British Virgin Islands and Puerto Rico to the US. The 6,000km, 80Tbps capacity Pacific Caribbean Cable System (PCCS) is backed by Telefónica, Cable & Wireless, Setar, UTS and Telconet.
The big announcement this year, however, came from Level 3 Communications in March, which is planning to construct Colombia’s first Pacific cable. All six cables currently landing in Colombia run through the Caribbean, as will AMX-1 and PCCS. Gabriel Holgado, SVP of wholesale services at Level 3, believes the new Pacific route will revolutionise Colombia’s connectivity.
“Our value proposition is to bring the only international connectivity from the Pacific side, offering the country a new level of security and redundancy,” he says. “It will also help link Colombia to other markets on the Pacific side, providing access through LA to Asia without the need of going through US terrestrial routes.”
The cable will land in Cali in Colombia, where the company will also deploy a terrestrial link in partnership with state-owned utilities services company EMCALI (Empresas Municipales de Cali).
Market watchers believe Cali could serve as a regional hub, particularly as it serves as an inland city with direct connectivity via the new undersea cable. The project has attracted the support of the government: “The Colombian government is conscious of the impact of telecoms on the business environment. And all the cables going through the Caribbean was a concern to them,” adds Holgado.
By the end of this year, the Colombian government will have invested $2.45 billion in the Vive Digital project, an initiative intended to stimulate Colombia’s digital ecosystem, expand infrastructure and foster the popular uptake and use of technology. By building a national backbone, this initiative was an important factor in improving the country’s limited network infrastructure.
According to the Colombia’s ICT ministry (Mintic), between 2010 and 2013, 7 million people were provided with internet connections and a total of 15,000 km of fibre cable was rolled out. The mobile market in Colombia is one of the fastest growing in Latin America. According to research firm TeleGeography, by the end of 2013 the country had 49.9 million mobile subscribers.
The Colombian mobile sector has generated a lot of competition, with four operators providing mobile services and the recent entry of six mobile virtual network operators (MVNOs). The fiercely-fought sector has led to one of the highest mobile customer churn rates in the world, which stands at about 4%. 4G networks are expected to be an increased source of revenue for network providers this year. According to the latest quarterly report from Colombia’s ICT ministry, Colombia ended 2013 with 4.46 million mobile internet subscribers and 4.49 million fixed internet subscribers.
Colombia’s ICT ministry awarded five 4G licences in a spectrum tender in June. Until then, state-backed UNE-EPM was the only company to offer 4G, which it launched in mid-2012. Movistar and Tigo launched 4G networks in December, while Claro became the fourth provider in February this year. Local operator Avantel has announced plans to invest $250 million in LTE in 2014, selecting Nokia Solutions and Networks (NSN) to supply the infrastructure.
The government has a strong regulatory framework that encourages mobile segment competition, resisting the regional dominance of América Móvil and Telefónica. In August 2013, the country’s constitutional court ruled that Claro (backed by América Móvil) and Movistar (backed by Telefónica) must hand their telecoms infrastructure in the country over to the government when their concessions expire in March 2014.
The two companies have together invested over $3.6 billion in their Colombian operations to date, but must acquire new spectrum licences and sign infrastructure deals next year. Rivals Tigo and UNE-EPM will not have to return their infrastructure to the government, which could lead to a market shake-up during 2015.