Spain’s Telefónica faces a major challenge to its Peru-based Movistar operations as the government is evaluating the renewal of three of its operating licenses. Movistar is the largest telecom group in the country, holding about 60% of country’s wireless market share.
Peru’s Minister of Transport and Communications, Carlos Paredes Rodriguez, announced earlier this week that following an assessment report by regulatory agency OSIPTEL, the ministry has decided to start negotiating new terms and conditions for the three expired contracts with Telefónica Móviles.
Movistar’s 20-year licenses with the cities of Lima and Callao expired last year. The previous government in Peru had started the renewal process; however, when Peru’s 2011 presidential elections began, the process stopped. Meanwhile the licenses in others cities also expired. After the April 2011 elections, the new administration under President Ollanta Humala resumed negotiations.
“We will start the negotiation of new terms and conditions with the company Telefónica Móviles. If following these negotiations, the terms are not accepted, the government will convene an international tender,” Rodriquez said in a statement.
Among the items under negotiation are: a social tariff plan designed to benefit a larger number of the country’s rural areas and measures to boost mobile phone coverage and/or Internet access in areas with few resources.
The ministry said it will also take service quality into account. It amended the regulatory framework which sets quality indicators that can be verified, as well as penalties, in case of default by the carrier.
The ministry’s decision is expected by the end of August. There are three possibilities: the licenses will be renewed automatically; the licenses will be renewed with further negotiations; or the government will call an international tender in which carriers can bid to offer mobile services, including Telefónica.
According to the ministry’s most recent numbers from the first quarter of 2011, Peru has 29.1 million mobile lines, of which Movistar accounted for nearly 18.1 million; América Móvil’s Claro had more than 9.8 million; and Nextel served just over 1.2 million. The most recent entry into the market, Viettel, is set to launch operations in Peru next year. Viettel, which is Vietnam’s largest mobile operator, picked up more spectrum bands at this week’s auction in Peru. The carrier will pay a total of $48.43 million to secure four bands in the 900 MHz spectrum band.