After a strong performance last year, Colombia?s telecoms industry is looking for further growth in 2015, supported by the government?s promotion of web and mobile connectivity. The regulatory authorities meanwhile are seeking greater competition to ensure that operators widen their coverage of national territory.

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According to private sector estimates, Colombian telecoms revenues reached $11.4bn in 2013 and are on track to hit nearly $15bn by 2019 as the government pushes for higher online and mobile connectivity. Between 2010 and 2014, the number of internet connections quadrupled to around 8.8m ? a number which the Ministry for Information and Communications Technology (MinTIC) hopes to more than triple to 27m over the next four years under the national ICT strategy. Colombia is also aiming to quadruple mobile internet connections and to?double fix the connections.

The rapid expansion of data-friendly technologies such as 3G, 4G, fibre-to-the-home and LTE will help support the sector?s growth, according to US research group Frost & Sullivan?s Gina S?nchez. ?Growth will gather momentum as competition to provide triple, quadruple and quintuple play bundles heats up,? she noted.

Regulatory concerns

As operators rush to capture their share of the expanding market, the government is seeking to ensure a level playing field. The dominant player is Claro, controlled by Mexico-based Am?rica M?vil, whose market share has shrunk from 62% in 2012 to a current 56%, followed by Movistar ? owned by Spain?s Telef?nica ? with a near 24% share and Millicom?s Tigo in third position with just over 15%.

As Claro?s share has receded, new entrants have come to the market. Tigo and fixed line operator Une-Empresas P?blicas de Medell?n (Une-EPM) merged in 2014 with the latter maintaining majority control and global telecoms player Millicom running the operations of the merged company. A number of small mobile virtual network operators (MVNOs) such as Virgin Mobile, Uff M?vil, ?xito and ETB have also launched services while Satellite TV provider, DirecTV, started a 4G LTE service in July 2014.

Holding the ring between these forces is the regulator, the Comisi?n de Regulaci?n de Comunicaciones (CRC), which gave the green light for the Tigo-Une-EPM merger on the condition that the new company give back 50MHz of spectrum in the 2,500MHz band.

More significantly, CRC said in early January it would continue with its policy of imposing descending but ?asymmetric? interconnection rates, which means that Claro pays more than its smaller competitors. At the end of 2014 Claro was paying nearly 57 pesos a minute in interconnection fees, while Tigo and Movistar were paying 46 pesos a minute.

Some relief will come this year though. According to CRC, average interconnection rates are to fall from 56.9 to 32.9 pesos per minute, with further reductions taking them down to 10.9 pesos by 2017. It noted that average interconnection rates have fallen 42% over the past four years. Along with other regulatory requirements, the net result was a saving of COP535bn ($222m) for users.

CRC went ahead with the announcement of the new rates despite a strong appeal from Claro that argued unjust subsidisation to established operators like Movistar and Tigo, while penalising Claro with asymmetric rates since 2012.

More spectrum

In October, MinTIC and the national spectrum agency (Agencia Nacional del Espectro, ANE) published a draft paper suggesting a total 25 MHz to be auctioned in 2015 consisting of 20MHz in the 900MHz band and 5MHz in the 1900MHz band for mobile broadband services.

According to the paper, operators bidding for these segments would need to meet certain conditions relating to the provision of national roaming services and infrastructure sharing, as well as providing coverage in up to 50 hard-to-reach areas of the country. Further discussions with operators are scheduled for January, with the auction expected in the second or third quarter of 2015, according to MinTIC officials.

While Colombia?s telecoms sector continues to be attractive to investors, rising penetration rates will push back growth rates and profitability in some areas. The majority of subscribers, or nearly 80%, are using pre-paid phones and have relatively low ARPUs (average revenue per user) while the mobile phone penetration rate in 2014 is estimated at 104%.

As in other international markets, operators are seeking higher ARPUs among smartphone and more data-intensive users. According to Frost & Sullivan, the key challenge for the Colombian industry is the ?commoditisation? of certain services such as voice, mainly due to the impact of VoIP, which is reducing profitability. ?The entry of more participants will also lower prices and force operators to deliver additional content, value added services and revolutionary technologies to retain users,? said S?nchez, the report?s author.

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