Convergencia Research, Consultoría especializada en Latinoamérica y Caribe
Thursday, March 11, 2021

Colombia, towards ICT Mission 2022

The ambitions for this 2021 in the Colombian ICT sector are great, on the way to the "ICT Mission 2022", a project of the Government of Ivan Duque who seeks to convert the country into the Silicon Valley of Latin America and among other topics is intended to train about 100,000 programmers in the country. In this line, the 5G tender aimed to be made before the end of current government mandate in 2022 is enrolled.

Colombia is already taking the first steps towards the fifth mobile generation with 5G pilot tests in five cities of the country in the midst of the pandemic. The 5G plan is focused on industrial transformation and not just on providing higher speed services to users. There is awareness of the meaning of 5G as an opportunity for digital transformation of the production models that drive industry 4.0. With the 40 pilot tests that were performed in 2020, Bogotá is consolidated as one of the cities in Latin America to be an epicenter of 5G development. Anyway, so far, no operator gave a commercial deployment date for 5G.

Acceleration towards the Fifth Generation Network would aim to correct past mistakes, as the delay Colombia had at least four years ago with the 700 MHz band tender, compared to other countries of the region. Economic recovery can have a more strategic imprint if it is accompanied by investments that expand the technologies that build digital and knowledge economy.

2021 started with great movement in the sector, with the arrival of a new mobile operator, WOM, and with the declaration of Claro dominance in the mobile segment, after five years of complaints from the rest of the operators.

It is expected that WOM, which plans to conquer one million customers this year, mobilizes the competition scenario, although the impact of Avantel towards WOM transition will have to be seen in terms of offers for users. There are still no news in this regard due to the transition stage involving a merger. The need to mobilize competition in the country, due to the degree of market concentration highlighted by the Centro de Estudios Sobre Desarrollo Económico, Cede (Center for Studies on Economic Development), of the Faculty of Economic Sciences of the University Universidad de los Andes which ensured directly affects the country's digitalization and competitiveness processes, caused it to be forgotten the legal infractions it performed during the spectrum tender in December 2019, when it offered for a 700 MHz band ten times more than the average market value.

Connected Households. The goal of ICT Minister Karen Abudinen - which she highlights in each public exposition- is that by the end of this year, 62% of households are already connected to broadband, reaching 500,000 homes (currently they are 302,000 homes). It was also announced that for May this year she expects 954 localities in rural areas to have 4G mobile service, with Tigo and Claro upgrading their networks and moving from 2G (which are very few) and 3G to 4G to achieve the coverage of 3,658 rural localities in a maximum period of four years, this as a result of the spectrum awarded after the 2019 tender.

Also because of the disbursement that the ICT ministry expects to do this year, of US$267 million, the boost and development of networks will be greater. This reactivation package is made up of 11 programs: Credit line for MSMEs, Vende Digital, ICT Mission, Business Digital Transformation Centers, Media Digital Transformation Plan, MSMEs Digital Transformation Plan, Apps.Co, Domain.Co, Data Science, Connected Households and Last Mobile Mile Plan. The first one destined to SMEs, is developed with Bancardex banking institution and consists of enabling a US$26 million credit quota, intended for the delivery of soft credits, with favorable rates, with 36-month periods and grace periods of up to six months. The second one consists of a guarantee program, under the program Unidos por Colombia and administered by the National Warranty Fund.

In addition, through financial intermediaries (commercial banks, among others), microenterprises will be able to access a maximum amount of US$13,000, small companies of US$111,000 and medium-sized enterprises of US$195,000, with terms of up to 36 months and with up to six months of grace period. To access this line of credit, financial intermediaries may request different documents and conditions such as in the case of a MSMEs of the IT sector belonging to the stated activities, the basic data of the company and updated legal representation and financial information, among other requirements. 

Government disclosed that the obligations derived from the spectrum tender in the 700 MHz and 2,500 MHz bands performed in December 2019 will be followed-up. Tigo seems to be the most advanced: it has already activated more than 2,300 antennas in the 700 MHz band, eight times more than its competitors. Coverage of Tigo fourth generation networks increased 6,446 square kilometers nationwide. Coverage tripled in the rural zone. And with the 700 MHz network it covered more than 11,000 kilometers of road in the main routes of the country.

The rural project also gains relevance for the Duque Government if taken into account that in those areas 50% of households lack fixed or mobile access.  In last December, Claro and the Transient Union Unión Transitoria Centros Poblados were awarded the plan Centros Digitales (Digital Centers), which consists of installing 14,745 of these points in rural populated centers so that their inhabitants access free internet. For this year, Government will seek to promote the use of technologies not licensed in the 6 GHz band, which will contribute to the fact that large operators can provide Internet in rural areas.  

Claro Dominance. It will be necessary to analyze the impact of the Comisión de Regulación de Comunicaciones (CRC) on Claro and its confirmation of dominance in the mobile Internet market in Colombia. Although at the moment Government will not impose corrective measures, for the operator the decision "punishes and discourage Claro investments in the country". It is premature yet to talk about what will happen since the company announced that it will continue its battle with all legal resources "to defend its investments and the rights of users".

Tigo, Telefónica and Wom praised the decision of the CRC and considered it a positive progress that could balance market conditions. But for now, other measures of the Commission and possible changes in the competitive scenario during this year should be disregarded. For now, only monitoring is expected to correct market failures, where one of the competitors, from a privileged position, affects the rest of the actors. Claro will file a reversal appeal, an ordinary remedy against both administrative and judicial decisions so that these are assessed. In accordance with the reversal appeal, a decision can be reframed or revoked.

Meanwhile, Telefónica exit operation from the region (exept from Brazil) continues to have Liberty as one of the favorites because it may be interested in individually subsidiaries, and not all potential buyers are interested in less important zones. Negotiations seem to be restricted to the business of Chile, Colombia and Peru. Liberty Latin America in recent years took care of gaining ground in the region. In addition to Telefónica's assets in Costa Rica, for US$500 million, it also acquired operations in Puerto Rico and Virgin Islands from the former US AT&T monopoly.

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