Last week was a busy one for Latin American carriers. While U.S.-based NII Holdings announced it is exiting Peru by selling its Nextel operations to Entel, Virgin Mobile announced the soft launch of its mobile virtual network operator in Colombia. Also in Colombia, Millicom’s Tigo and UNE EPM Telecomunicaciones are moving forward with a merger.
In Mexico, Movistar announced it plans to invest approximately $245 million in LTE services during 2013. The Mexican antitrust agency ruled that América Móvil’s Telcel is the dominant player in the Mexican market, and the agency may apply asymmetric regulation.
Several Latin American counties were cited by the Office of the United States Trade Representative in its annual review of telecom trade agreements. The report highlights concerns over the growing use of local content requirements in countries such as Brazil, India and Indonesia and notes competition problems telecommunications carriers are encountering in China, Colombia and Mexico.
NII exits Peru
NII Holdings, which operates under the Nextel brand in Latin America, agreed to sell its Peruvian operations to Entel (Empresa Nacional de Telecomunicaciones S.A.) for approximately $400 million. The move was expected since NII already announced it would focus on its largest markets in the region: Mexico and Brazil.
In February, when presenting its preliminary fourth quarter and full year results for 2012, which were below market expectations, NII Holdings said it would continue to support its operations in Peru, Chile and Argentina, while also exploring strategic options for these markets, such as partnerships, service arrangements and asset sales to maximize the value of those businesses and generate additional liquidity.
“The sale of Nextel Peru is an important step in the evolution of our business and aligns with our strategic goal of increasing value for stockholders through focused investments on our new next generation network deployments,” Steve Shindler, NII’s chairman and interim CEO, said in a statement. “The proceeds that we generate through this sale allow us to prioritize investments in our largest markets that offer the greatest opportunity for strong, long-term returns.”
Since there were earlier reports of a potential sale, the announcement was not a huge surprise. However, the price was less than the expected $500 million. “We view this as a significant positive for the shares as it offers the first tangible evidence that—under this new management team—it is accomplishing the goals laid out earlier in the year: to divest non-core assets and focus on its two key markets,” said Jennifer Fritzsche, senior analyst at Wells Fargo.
NII said that the proceeds received from this sale will provide additional liquidity as the company continues to invest in the deployment of its next generation networks in Mexico and Brazil. NII believes the next generation networks will enable it to provide the “highest quality wireless experience to high value customers in those markets.”
Macquarie Capital analysts Kevin Smithen and Zach Hora found that new CEO Steve Shindler and CFO Juan Figueroa are re-establishing credibility. “While this process is going to take many quarters and will need to include operational and financial improvements in Mexico and Brazil, today’s announcement was the first bit of good news out of NIHD in over a year,” Smithen and Hora wrote in a market report.
Virgin Mobile’s soft launch
Virgin Mobile started its MVNO services in Colombia with a soft launch, making Colombia the second Latin American market where the British company has a presence. Last year, Virgin Mobile launched services in Chile where the telecom operator currently has approximately 1% of the market.
According to Virgin Mobile’s public relations team, the soft launch is taking place while the carrier is preparing its full retail services and building its website with its payment per second proposition. The formal launch of full retail services is targeted for the end of April or the beginning of May.
In February, Virgin Mobile secured an additional $20 million in funding, following a debt funding agreement of up to $14 million with the IFC, a member of the World Bank Group.
United States Trade Representative’s complaints
Acting United States Trade Representative, Demetrios Marantis, outlined the key barriers faced by U.S. telecommunications service and equipment suppliers, and identified specific telecommunications-related issues on which USTR will focus its monitoring and enforcement efforts this year.
The USTR’s annual report which reviews telecom trade agreement compliance highlights concerns over the growing use of local content requirements in countries such as Brazil, India, and Indonesia. Marantis expressed concern that U.S. equipment manufacturers may be disadvantaged by these requirements. The report also specifically notes telecom competition problems in China, Colombia, and Mexico.
The ambassador said that localization barriers to trade are designed to protect, favor or stimulate domestic industries, service providers or intellectual property at the expense of imported goods, services, or foreign-owned or developed intellectual property.
Other Latin American market news:
- The Mexican unit of Movistar announced plans to invest approximately $245 million in LTE services during 2013. The planned expansion aims to reach the cities of Guascalientes, León, Querétaro, Saltillo, San Luis Potosí, Toluca and Torreón. Movistar is the only carrier that provides LTE service in Mexico, launching services last September.
- Mexico’s Federal Competition Commission (CFC) has declared Telcel to be the dominant player in the national mobile phone market. The Ministry of Communications and Transport (SCT) and the Federal Telecommunications Commission (Cofetel) will determine penalties for Telcel, the primary company of billionaire Carlos Slim, which has approximately 70 million customers.
- Millicom’s Tigo and UNE EPM Telecomunicaciones are moving forward with a merger. The companies hosted a press event with Tigo president Esteban Iriarte to discuss the impacts and importance of the merger. In addition, a council will discuss the proposal’s strategic synergies and benefits this week.
- Cable & Wireless Communications, which trades in Dominica as “LIME,” announced it is improving the performance of Internet services in the country by working to establish a local Internet Exchange Point. Dominica has a population of 70,000 people and an Internet penetration of around 11%.
- Mexico’s Iusacell has signed an agreement with Vantrix, a provider of mobile content optimization and policy enforcement solutions, to use Vantrix’s video and Web optimization for Iusacell’s network.
- The ICT consulting firm Indra has signed a contract with Telebras, the Brazilian state telecommunications company, to implement the technological platform designed to provide integrated support for the management of its business processes. The project, which will cost nearly $10 million, includes the complete cycle for implementing SAP’s ERP.
- Paulo Bernardo, Brazil’s minister of communications, told members of the press that the launch of LTE services should not be delayed, and carriers will release the next generation of telecommunications services by April 30 in the cities of Brasília, Rio de Janeiro, Belo Horizonte, Fortaleza, Salvador and Recife.
- Telefónica has moved its Latin American headquarters from Madrid to São Paulo. Approximately 200 people are already working at Telefónica’s new office.
Be sure not to miss what’s happening in Latin America’s wireless markets. Check out RCR Wireless News wrap ups.
