ADSL`s expansion in 2004 and 2005 positioned Telefónica`s Speedy as its most dynamic business. In June, Internet access lines grew by 104.7% compared to the first quarter in 2004. The same tendency was observed within quarter earnings that increased by 32.7%.

Although ADSL`s contribution, the company’s operative revenues decreased by 1.5% in the second quarter of 2005, compared to the same period the previous year. It registered US$ 256.9 million against US$ 260.6 million in 2004. Telefónica stated that they attribute the fall to “regulatory decisions as well as aggressive and complex competition”. On the other hand, the company highlighted Osiptel`s 30 % fixed-mobile rate reduction and the application of the new 10.07% productivity factor.

Even though the company multiplied its broadband services it did not compensate the biannual decrease within local telephony (-7.6%), company communications (-18.9%) and long distance (-2.8%), contributed to cut down on the company’s finances. The segments` bad performance, coincide with ADSL`s abrupt growth which could end up marking a business tendency for Telefónica to advance in the future.

In the last four years, Telefónica in Peru invested US$ 132 million within the broadband business. In June 2004, it registered 134,925 lines in the service. In the same 2005 period, the company added 141,226 new subscribers registering 276,000 lines in service, and by year’s end, it seeks to have 320,000 clients.

Speedy`s actual capacity is of 300,000 ADSL lines, although it plans on deploying 60,000 new lines for December. The company’s goal is to have some 600,000 ADSL clients for 2008. At the moment there are some 20,000 new ADSL broadband connections incorporated per month (Speedy traditional, Speedy Business or Giga ADSL) and cable modem (Cablenet).

Cablenet is the cable modem service of Cable Mágico, Telefónica`s cable TV branch. The company registers 14,000 connection, compared to  Speedy`s 276,000, in which denotes its strategic broadband focus on ADSL. Moreover, Speedy does not have competitors within their segment, and Cablenet confronts competition from Súper Internet de Star Global Com service.

The service cost is a very important variant in Peru, since that out of the  2.7 million Internet users that are in the country, 2 million correspond to low income sectors. On the other hand, 52% of Speedy`s users are from lower income sectors.

In May, Telefónica invested US$ 3 million to migrate all of its clients to speeds higher than those from ADSL. Speedy offers speeds between 200 and 900 Kbps. For example, Speedy`s 200 Kbps, doubled its speed and maintained its costs of US$ 34 monthly, representing a 60% decrease in the last two years.

Another important factor for ADSL`s  development is the PCs penetration: only five out of 100 Peruvians have a computer. The PC Peru program implemented by the Government intends to change that situation, with the initiative, users` could acquire Celeron computers for US$ 399 or a Pentium IV for US$ 515. It is estimated that PC Peru will sell 140,000 PCs within the next two years.