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Argentina - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. In the early-2000s, Argentina's telecommunications market was battling against a severely weakened domestic economy, itself overshadowed by the general global economic slowdown and the melt-down of the broader telecommunications industry in the wake of bankruptcies and waning confidence on the part of banks and other investors in telecommunications companies. Incumbent operators Telecom Argentina and Telefónica de Argentina SA (TASA) were relatively well-insulated from the broader threat, although their parent companies (Telecom Italia and Telefónica SA) were saddled with massive debt burdens and divested core and non-core assets in order to generate short-term cash in order to reduce debts and allay shareholders' and creditors' concerns about overspending. Indeed, the primary reason for France Telecom's withdrawal from Telecom Argentina in 2003 was to help it reduce debt. However, the situation has quickly improved across the board. Both incumbent fixed operators reversed declining numbers of fixed lines in service during 2004, although at the end of 2004, the number of Telecom Argentina lines in service was still below the level reached before the economic crisis in December 2001. Nevertheless, the trend seems to be continuing, with both operators putting large numbers of lines into service during 2005 and the first quarter of 2006. Efforts to concentrate resources on higher-yield advanced services such as ADSL also seem to be showing good results. The two operators put approximately 212,000 ADSL lines into service in the year to December 31, 2005, the majority of which (over 113,000) were TASA customers. This trend intensified in 2006, with the two operators adding 444,000 new ADSL lines, in roughly equal proportions. Perhaps the biggest sign of recovery is in the mobile market, where some 5.6 million new subscribers were signed up during 2004 and 8.0 million customers were added in 2005. A further 8.6 million were added during 2006, and the present boom seems to be continuing unabated, with nearly 2.4 million new customers signed up in the first quarter of 2007 alone. Operators have put resources into the development of GSM networks to bring services to under-served parts of the country and enable them to offer value-added services to customers, a strategy which has clearly paid off. Although liberalisation came early to Argentina, with legislation establishing the conditions for the liberalisation of the fixed market published in January 1997, there has been little effective competition to Telecom Argentina and TASA. Although two fixed licences were made available in November 1999, they were awarded to the mobile operators CTI and Móvicom, neither of which made any great strides into the fixed market as they preferred to concentrate on the provision of mobile services (nevertheless, CTI launched its fixed-line service in 2005). At the same time, the incumbents were allowed to operate in each other's markets (Telecom Argentina in the north and TASA in the south). With their resources, the two incumbents began building out infrastructure in their new operating areas, another deterrent to any potential new entrants. The high number of licences issued - over 3,200 as of January 2007 - disguises the fact that many operators hold multiple licences (either for different services or different regions) and many licences have been issued to small regional players for specific geographic areas which have little or no impact on the broader market. Not all of the licences have been acted upon, and the economic crisis prompted some operators to scale back, put on hold, or even abandon their network development plans. It is likely that some of the licences will never be put into operation. Another hindrance to competition has been the curious reluctance or inability on the part of Argentina's regulatory authorities to establish unbundled local loop regulations, meaning that new entrants cannot cost-effectively access the incumbents' extensive national networks, effectively stifling competition and innovation. There has been consolidation in both the fixed and mobile markets. In January 2005, Telefónica Móviles, the parent company of Telefónica Comunicaciones Personales SA (TCP, which operated as Unifón), completed its acquisition of BellSouth's Latin American mobile operations, including BellSouth Argentina (also known as Compañía de Radiocomunicaciones Móviles (CRM) or Movicom). The two smallest mobile operators in Argentina, now merged and known as Movistar Argentina, had 11.7 million subscribers as of March 31, 2007, a market share of 36.6%. Mexico's incumbent operator Telmex has become the third largest fixed operator in Argentina through its acquisitions of AT&T Latin America (with operations in Argentina) in February 2004, Techtel (April 2004), and Metrored (June 2004), giving it a significant long-distance network, supplemented by a wireless LMDS network, a fibre-optical MAN in Buenos Aires, and a data centre, also in the capital. Telmex Argentina is also affiliated with wireless operator CTI Móvil through their parent companies, as Mexican businessman Carlos Slim Helu has a significant stake in Telmex and also controls América Móvil, CTI's parent.
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