A stronger market: The recent 4G spectrum tender is changing the mobile internet landscape

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Mobile internet services have undergone significant improvement as the government recently awarded five 4G licences, including advanced wireless services (AWS), 2500-MHz and 1900-MHz bands. The event took place on June 26, 2013 and the government raised a total of COP770.5bn ($462.3m). Despite not attracting as many operators as originally intended, the auction has raised a significant amount for the government and will result in, once the infrastructure is built by the end of 2013, a clear evolution in terms of network quality.

CHANGING MARKET: Five operators succeeded in taking over a portion of the 4G spectrum: América Móvil’s Claro; Telefonica’s Movistar; Millicom’s Tigo, which participated in joint venture with Bogotá-based company ETB; and new mobile internet players DirectTV and Avantel. The only operator that applied for a 4G band and did not get one was Mexican operator Azteca.

The five new 4G operators will join UNE, owned by Empresas Públicas de Medellín, which had already adopted 4G. While the possibility of a merger between Tigo and UNE could have delayed the process, as the newly formed company would exceed the 85-MHz cap under Colombian regulations, UNE decided not to participate, allowing Tigo, in partnership with ETB, to bid. Consequently, Colombia has gone from having three operators competing within the 3G spectrum to six companies offering 4G mobile internet, a move that is expected to bring about a reduction in prices.

MORE COMPETITION: Due to Claro’s dominance, the Ministry of Communication and Information Technology (Ministro de Tecnologías de la Información y las Comunicaciones, MTIC) and the Commission for the Regulation of Communications (Comisión de Regulación de Comunicaciones, CRC) decided the operator should be prohibited from applying for spectrum in the AWS band. The second- and third-largest operators, Movistar and Tigo, also faced restrictions as they were limited to bidding for between 1700 MHz and 2100 MHz.

Following the auction, 225 MHz of 4G spectrum have been distributed among five operators: Claro acquired 30 MHz at 2500 MHz; US-based DirectTV acquired one segment of 30 MHz and one of 40 MHz also in the highest frequency; and Movistar, the ETB-Tigo alliance and Avantel each acquired a frequency of AWS band, between 1700 and 2100 MHz.

“The 4G network represents not only a huge step forward for customers and the services available, but it also has a knock-on effect for the entire economy,”

Jorge Andrés Palacio, the president of Avantel, told OBG.

The correlation between the expansion of telecoms services and its impact on the wider economy has been well documented in recent years by the World Bank and numerous other institutions. A 2010 World Bank study found that every 10% increment in broadband penetration corresponds to a 1.38% increase in GDP growth.

PLANNING FOR THE FUTURE: The government has prioritised the development of the sector as it seeks to modernise the country’s technological capacity. As part of the government’s wider Vive Digital plan, which targets the overall improvement of telecommunications connectivity, the MTIC has announced its goal to have 3G services available in all municipal capitals, with at least 50% boasting 4G services, by the end of 2014.

In addition, the auction’s positive outcome will directly benefit Vive Digital, which will see its budget increase considerably. “We raised 70% more than we expected in the 4G auction, and we will use the surplus for the realisation of Vive Digital’s social programmes,” Diego Molano Vega, the head of the MTIC, told local press during the closing ceremony.

The five companies with winning bids are expected to launch 4G services in all major cities by June 2014.

Participants are required to commit to internet coverage in all municipalities, provide tablets for public educational institutions and maintain 4G services for the military forces’ communications network. The military currently uses a limited form of 4G service and part of the terms of the auction was to ensure that the winning bidders, now responsible for all 4G services in the country, will provide exclusive facilities for the military.


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The Report: Colombia 2013

ICT chapter from The Report: Colombia 2013

The Report

This article is from the ICT chapter of The Report: Colombia 2013. Explore other chapters from this report.

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