Asset Recapturing Undermines Competition Aims

Senator Juan Mario Laserna has submitted a proposal in Congress which would give the Colombian state a greater role in the governance of the telecoms sector. Among the initiatives under discussion is the possibility of creating a state-owned mobile network, by recapturing the infrastructure and spectrum from current operators Claro and Movistar when their licences expire in 2014. BMI feels that the decision to increase competition and quality in the mobile market is much-needed, however, we caution that recapturing Claro and Movistar's networks goes too far and will be met with serious opposition.

Colombia's Constitutional Court ruled in August 2013, that the contracts signed by the six com panies in March 1994 and which will expire in March 2014, are subject to a full 'reversal' clause. These six companies have since merged into Claro (subsidiary of América Móvil ) and Movistar ( Telefónica ), the two largest players in the mobile market which account for around 80 % of the mobile market between them. With extensive financial backing from their parents companies, it is estimated that the two have combined to invest around US$3.6bn in Colombia.

The 'reversal' clause means that all equipment used by the operators for the provision of mobile services must be returned to the state once the licence expires and is not renewed. This includes wireless spectrum, but also antennas, switches, buildings, towers, computers and base stations, for example. Spectrum is generally considered a natural resource that is the property of the government and rented out to operators for a contracted period of time and it is not unusual that the state would take this resource back once a licence expires. The contracts signed in 1994 allowed the use of equipment and infrastructure inherited from the state-owned former monopoly, as opposed to networks built from scratch by Tigo and Une-EPM , which the court confirmed are not subject to the reversal clause.

Lack Of Competition Stunts Growth
Mobile Penetration (%), 2007-2017

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This article is tagged to:
Sector: Telecommunications
Geography: Brazil, Colombia, Colombia

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