BUENOS AIRES, Argentina-Chile, which became the first country in Latin America in 1998 to implement PCS, has just felt the tremor of three new events in its market that could impact growth and market positioning.
Calling party pays (CPP) was introduced 23 February, BellSouth bought Entel’s cellular license and Leap Wireless International signed an agreement to increase its ownership in Chilesat PCS. These incidents have taken place within a frame of high spirits in a sector that grew almost 100 percent during 1998.
Calling party pays
Chile’s Minister of Transport and Communications Claudio Hohmann has said that with the introduction of CPP it is probable the number of cellular and PCS users will double from 800,000 in late 1998 to 1.6 million by the end of this year. The minister also estimated user fees will be reduced by approximately 40 percent because of CPP.
Not everyone is that optimistic. BellSouth Chile spokeswoman Maia Seeger said the carrier has more than 200,000 cellular subscribers and expects growth of 50 percent to 60 percent this year. The company operates a TDMA network with equipment from Nortel Networks.
BellSouth acquisition
BellSouth paid US$90 million for Entel’s cellular license, hoping to expand its TDMA network beyond Santiago and region 5-including Valparaiso, Vina del Mar and the cities to the west of Santiago-to the rest of the country. Entel, owned by Telecom Italia and local partner Chilquinta, has not yet deployed a digital system on its network and has an estimated 30,000 analog AMPS customers. The license sale did not include infrastructure or the analog customers.
BellSouth plans to launch service to its new serving area on 1 December.
The company has wireless holdings in nine Latin American countries. According to Mauricio Wior, executive vice president of BellSouth International, BellSouth’s objective is “to achieve a continental network, which would mean a competitive advantage in the future deregulated market.”
With the BellSouth acquisition, Entel now plans to prioritize efforts on its GSM-based PCS operation, Entel PCS, which has 195,000 subscribers. Entel hopes the 30,000 analog customers will migrate to its PCS system before the end of the year.
Leap acquisition
The other purchase that shook the market recently came from Leap Wireless International, which increased its participation in CDMA operator Chilesat PCS from 50 percent to 100 percent-a transaction valued at US$50 million.
Chilesat PCS, which began offering its services in September 1998, has 28,000 subscribers.
“Leap’s marketing, financial and operational strengths will enable us to meet the market demand for high-quality wireless services in Chile,” said Richard Sutherland, general manager of Chilesat PCS.
The fourth company operating in the wireless market, CTC Startel, has 560,000 clients on its AMPS/TDMA network, and it is the only one that has not witnessed any ownership changes or acquisitions in the last few months.
However, it is important to note that CTC, owned by Telefonica International, concentrates 90 percent of the country’s local fixed-telephony traffic. Therefore, it is suffering the effects of the CPP implementation the most since its subscribers are the ones who will have to pay for all of the calls they make to cellular phones.
