Risk Of Expropriation Could Limit Foreign Investment

Bolivian President Evo Morales is reported to have issued a warning to mobile operators Tigo and Viva , threatening nationalisation if they refuse to cooperate in criminal investigations. The two privately-owned companies have been accused of failing to provide the Bolivian police with information required in a series of criminal investigations in a timely manner , whereas the response from state-owned Entel Movil has been immediate . BMI is concerned that these threats could materialise into tangible action, given Bolivia's recent history of expropriations and policy continuity over the long-term.

President Morales suggested that criminals were taking advantage of the slow response times of Viva and Tigo, in order to carry out their activities. The president acknowledged that the companies w ere not complicit in the crimes; however, nationalising the two would force them to meet their obligations to offer immediate assistance to the authorities. Much of this relates to the large number of inactive subscriptions in the country, believed to be around 4.4mn according to official data for the year to date. At the end of 2012, there were 9.3mn active subscriptions, for a penetration rate of 86%. However, the government believes there to be just under 14mn total subscriptions, indicating that a large number of these are inactive or the result of multiple SIM use. President Morales believes these unregistered SIMs have been used by criminals to facilitate robberies, kidnapping and terrorist attacks.

These problems are particularly important in heavily prepaid-based mobile markets and mobile registration was introduced in December 2009 in an attempt to curb this. The Bolivian regulator, La Autoridad de Telecomunicaciones y Transportes (ATT), set a registration deadline of May 31 2010, and reported that 95% of users had successfully registered their phones by this date. The remainder would have their service cut off. Given that this process occurred over three years ago, and the reported prevalence of inactive subscriptions, it might be advisable to start another round of registration before nationalisation is considered.

Mobile Growth At Risk Over Long-Term
Active Subscriptions (LHS) & Penetration (RHS), 2005-2012

Bolivian President Evo Morales is reported to have issued a warning to mobile operators Tigo and Viva , threatening nationalisation if they refuse to cooperate in criminal investigations. The two privately-owned companies have been accused of failing to provide the Bolivian police with information required in a series of criminal investigations in a timely manner , whereas the response from state-owned Entel Movil has been immediate . BMI is concerned that these threats could materialise into tangible action, given Bolivia's recent history of expropriations and policy continuity over the long-term.

Mobile Growth At Risk Over Long-Term
Active Subscriptions (LHS) & Penetration (RHS), 2005-2012

President Morales suggested that criminals were taking advantage of the slow response times of Viva and Tigo, in order to carry out their activities. The president acknowledged that the companies w ere not complicit in the crimes; however, nationalising the two would force them to meet their obligations to offer immediate assistance to the authorities. Much of this relates to the large number of inactive subscriptions in the country, believed to be around 4.4mn according to official data for the year to date. At the end of 2012, there were 9.3mn active subscriptions, for a penetration rate of 86%. However, the government believes there to be just under 14mn total subscriptions, indicating that a large number of these are inactive or the result of multiple SIM use. President Morales believes these unregistered SIMs have been used by criminals to facilitate robberies, kidnapping and terrorist attacks.

These problems are particularly important in heavily prepaid-based mobile markets and mobile registration was introduced in December 2009 in an attempt to curb this. The Bolivian regulator, La Autoridad de Telecomunicaciones y Transportes (ATT), set a registration deadline of May 31 2010, and reported that 95% of users had successfully registered their phones by this date. The remainder would have their service cut off. Given that this process occurred over three years ago, and the reported prevalence of inactive subscriptions, it might be advisable to start another round of registration before nationalisation is considered.

President Morales' threat of nationalisation could simply be a motivator in order to push the mobile companies into better response with authorities. However, BMI notes that the uneven business environment of Bolivia has seen a string of nationalisations in other industries. For example, the energy sector saw assets owned by Iberdrola and Red Electrica nationalised during 2012 and more recently airport operator SABSA in February 2013. The telecoms sector has not been immune either, as the government bought out the 50% share in incumbent telephone operator Entel from Telecom Italia for US$100mn in 2007, and revoked the licence of satellite TV provider Imagen de Televisión Satelital ( ITS ) in January 2012.

Left-leaning Morales has sought this policy as a means to redistribute wealth and curry popular favour, but the risk of expropriation in Bolivia means that foreign companies will be less likely to invest. While the government would point to strong growth in the mobile sector following the nationalisation of Entel, backed by government subsidies, our longer term outlook is less optimistic ( see 'Entel's Investment Offers Short-Term Benefits', January 2013 ). Tigo's parent company Millicom International Cellular announced plans to invest more than US$130mn in its Bolivian operations for 2013, used to support the launch of LTE and deployment of fibre infrastructure. These plans may no longer come to bear, if the threat of nationalisation remains. With presidential elections scheduled for December 2014 and Evo Morales as the strong favourite to win a third term, we can therefore expect policy continuity in this respect, maintaining the risk of expropriation and negatively impacting the telecoms industry.

Read the full article

This article is tagged to:
Sector: Telecommunications
Geography: Bolivia
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.