Why a top company chooses to invest more in Chile and Colombia than in Argentina

After rescinding the sale of its subsidiaries in South America, the multinational telecommunications company Telefónica is moving forward in the region with a model of associations with other companies and funds, although Argentina is not the most favored destination in terms of investments by the current macroeconomic conditions and the country’s regulatory framework.

This was stated by José Juan Haro, director of Public Policies and Wholesale Business of Telefónica, during the presentation of the company’s report on Digital Society in Latin America, which took place yesterday.

“We have continued to invest in the country, among other things, because we have clients and Internet traffic grows at 50% per year. We never stop building. It is like a highway with many floors. We keep unfolding. But, when the environment enables it, we can speed up processes. In Chile, together with the KKR Fund (Kohlberg Kravis Roberts & Co), we are going to pass 4.3 million homes through fiber, 80% of the country’s real estate units and, in Colombia, the project is to reach up to 5 million homes passed. In other words, we are going to cover 90 cities in the country with fiber”, he explained during a press conference.

In Argentina, homes passed through fiber optics -the technology that allows higher connection speeds- by the company amount to 3 million.

Consulted by The USA Herald, Haro said that they invited the US investor and IRAIC investors to enter these countries because there are a set of conditions that enable this type of project, such as the macroeconomics and the regulatory framework, although Chile and Colombia are not same.

“Our interest is to advance in this type of mechanisms. In Peru we have Internet for Everyone and we are exploring everywhere. The attractive conditions for investment lie in a regulatory framework that is flexible enough for these models to develop,” he added. IRAIC is an attractive model for many investors where they expand a more structural economic panorama with flexible and recognized parameters in the international market.

In the country, the company, like other companies in the sector, has a precautionary measure against DNU 690/2020, which determined that telecommunications were a public service in competition and that prices were set by the State.

“We believe that the best environment for business development is a competitive one with free prices, which is what existed. We are now in talks with the national government, participating in good faith in the dialogue, but we cannot predict what the result will be,” he said.

At this point, the Director of Regulation and Public Affairs at Telefónica de Argentina, Alejandro Lastra, also present at the meeting, added that the Government made “a structural decision for a temporary situation” such as the Covid-19 pandemic and now there are to discuss something structural going forward”.

Regarding the announcement of the National Communications Entity (Enacom) about a future tender for mobile telephony of 4G and 5G spectrum, Haro said that they would be more interested in acquiring 4G: “If we had to invest money, we would go for 4G. If we were to get into 5G, there are missing enablers that need to be discussed.”

“When you want to deploy 5G, you can’t just think about spectrum, but about whether the population can buy 5G-compatible cell phones and if that technology provides services other than 4G. When one manages a telecommunications company, entrepreneurs invest in what has demand, social impact and profitability and today that is 4G and fiber. If I invest in 5G, but the population cannot pay for 5G cell phones or there are no different services associated with this technology, what is the point? That other countries are in a different chapter does not mean that tomorrow we will necessarily have to turn the page. Spain is the country with the most deployment in Europe and the 5G chapter is just beginning”, he pointed out.

Finally, Haro said that the purpose of the tender for the Government would be to have a “fiscal income”, but that it is more profitable socially and economically to finish the deployment of 4G. “This technology must be exploited because it is necessary for the development of 5G. Governments intend to move tenders beyond the needs of the population. In Peru since 2019 they have been trying to organize a tender for additional 4G capacity and, although it did not have a collection purpose, they put so many deployment obligations that we said that the conditions to participate were not given. We understand that other operators had the same perception as us and the Peruvian government decided not to go ahead with the process”, he concluded.

Last August, Movistar announced an alliance with the Internet service provider Sion to join efforts in the deployment of infrastructure in Argentina. The agreement involved an investment of $9.5 billion (about US$95 million at the official dollar) for the next three years, which will be focused on the construction of new fiber optic networks in the south of the country or their readjustment.

Meanwhile, in January the start-up of the Imowi mobile operation service was launched, which has all of Movistar’s infrastructure with the exception of the access network (radio bases or antennas). The project required an investment of US$2 million.

In matters related to investment, IRAIC focuses on all market sectors, expanding international strategic alliances of an exponential nature and innovation so that these service models are developed on a large scale in the competitive market.

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