On June 26, Colombia concluded its highly anticipated 4G auction. Five of the six bidders; Claro, Movistar, Avantel, DirecTV, and a partnership of ETB and Tigo, acquired licenses. Azteca Communications did not win any spectrum.
The Ministry for Information Technology and Communications was expecting to receive US$235 million in license fees, but the winning bids totaled US$400 million, 70 percent more than expected. According to Diego Molano Vega, the minister of information technology and communications, most of the proceeds will go toward Vive Digital, a fund for universal provision of communications services in Colombia.
According to Ari Lopes, principal analyst for Latin America at Informa Telecoms & Media, the auction met all goals set by Colombian authorities. “The proceeds from the auction will not only increase the resources of Vive Digital, Colombia’s program for providing universal access to communications services, but will also bring more competition to the mobile market in Colombia,” Lopes said. “The country’s market is highly concentrated, ranking 18th among the 40 markets monitored in Latin America in terms of Herfindahl-Hirschman Index, a measure of market concentration, which varies inversely with a market’s level of competition, with a figure of 47 percent, almost twice Brazil’s 25 percent. Claro has 60 percent market share in Colombia.”
Until now, UNE was the only operator offering 4G services in Colombia. The auction brought another five companies to the market, among them two new entrants: DirecTV and Avantel. The first is one of the largest pay TV operators in Latin America, and the second offers trunking services in Colombia. Both companies will be able to use 4G to complement their existing portfolios with mobile broadband.
Claro, the market leader in Colombia, was able to secure spectrum in the 2.5GHz band, enabling it to launch 4G services. According to Lopes, Claro should celebrate this outcome. “For months, Claro was at risk of being blocked from bidding at the auction,” he said. “Ultimately, it was able to bid for, and win, spectrum in the less attractive 2.5GHz band. This is a more positive outcome than being left without any 4G spectrum.” On the downside, due to its high market share, Claro will have to spend more than its competitors to have the same coverage, and it will face higher costs for universalization requirements attached to the licenses, such as buying more tablets for public schools and bringing network coverage to more cities, Lopes says. On the upside, Claro will be able to advertise that it covers more cities than its competitors.
Movistar was also able to secure spectrum, in this case in the most sought-after AWS band. Movistar can also celebrate this outcome, Lopes says, since the company – which already has the lead in the mobile internet market in Colombia – has secured the spectrum that it needed to sustain its growth. Another contender, a consortium of ETB and Tigo, will require some careful analysis from the authorities in Colombia, as it – along with the other two top operators in Colombia – has reached the 85MHz spectrum limit defined by the government, Lopes says. In addition, Tigo is in a merging process with UNE, and the combined company would hold 135MHz, including the 30MHz Tigo acquired in partnership with ETB.
Colombia has almost doubled the amount of spectrum available in the market. “Among the biggest countries in Latin America, it is behind only Brazil in terms of available spectrum, giving both new entrants and incumbents plenty of room to grow in the coming years without the need for additional resources,” Lopes says.
These favorable conditions, coupled with the increase in competition and additional investment in the government’s Vive Digital program, set the stage for a fast development of Colombia’s mobile broadband market.