The way of doing business and optimizing large investments demanded by the ICT industry is changing. Argentina is the scene of an "unprecedented" model of network unbundling. An SME, Sion, will articulate the impulse to a US$ 90 million investment project with state-of-the-art infrastructure that it will share with the global Movistar, whose clients will not be on its network but on that of a competitor who turns out to be an ally. The entente includes as actors a constellation of SME providers from small towns that will also digitize their networks. Apparently a model where everyone wins, and a future that supposes competition for creative and quality services between protagonists.
In November 2019, Telefónica had announced the start of a new stage for its operations in Spanish-speaking Latin America -the renowned Hispam-, which would include different types of associations, as part of a gradual divestment process in the region. In Brazil, Chile and Colombia it opted for the constitution of fiber companies, while for Argentina it built, together with Sion, an "unprecedented" model of network unbundling, according to what Luis Delamer, Movistar's Wholesale Director of Hispam, said during the presentation of the infrastructure sharing agreement between the Spanish company and Sion.
The disruption of the initiative for Tierra del Fuego, Chubut and Santa Cruz is based on the fact that there is only one case of disaggregation of HFC networks, in Belgium, and it was implemented by a regulatory obligation, as a result of a merger. "The novelty here is that it is voluntary between the parties," Delamer pointed out to Convergencialatina.
Besides, there are other tints of innovation in the Movistar + Sion experience. First, as a form of collaborative work, a style that seems to be installed as a true change of time. “Where we could both make a fiber, we chose to make one fiber and migrate our clients to it. Otherwise, in three years we would have had two less efficient networks. It was preferable to do it together, and pour our investments into AMBA and two or three other cities. We are focused on sharing and we are open to other models as wholesalers,” said Delamer.
The joint work lasted a year, to integrate computer systems so that Telefónica could manage a client that will not be on its own network. It was necessary to consider performance indicators (KPI) and approved networks. Luis Quinelli, Sion president, defined this case of collaboration as a process of vertical integration, “a new operating paradigm for our region,” between a multinational operator, an articulator such as Sion and a constellation of local operators (in reference to cable companies associated with Zion).
In a talk with Convergencialatina, Eduardo ap Iwan, Sion General Director, explained that there are no technical complications in setting up the sharing, but that the central problem is to decide to work together and stop competing: “In three years, the idea is to have all clients on a single network: Sion clients, new ones, Telefónica clients, and at the same time the network can be shared with others.”
The road map also entails the possibility of exporting the model to other Latin American countries. Following a scheme designed for "the interior of the Interior", Sion is already working with cable companies in South America and is evaluating replicating the agreement with Telefónica where the Spanish company operates, with which in 2022 similar announcements could be made outside Argentina.
The association scheme. The constitution of the association scheme is in itself disruptive, because it integrates an infrastructure sharing agreement into an existing association model that Sion maintains with cable operators throughout the country. The US$ 90 million investment that the Argentine company will contribute will thus be destined in three ways: the migration of 250,000 Telefónica customers who currently have ADSL, to cable modems and GPON, within a period of three years; the laying of fiber in places where it is necessary, to add new clients; and accompany the digitization of cable companies already associated with Sion (they have a total of 80,000 subscribers).
The action plan is specific for each locality: although the priorities will be Tierra del Fuego, Chubut and Santa Cruz, Mendoza and San Juan will also be “Eligible Zones”. The first efforts will be made in the Tierra del Fuego province: there a fixed broadband client consumes between 2 and 2.5 times more traffic than one in Capital Federal, due to the climate and living conditions, according to estimates by Sion. In addition, there is a real need for technological updating: 80% of the clients in Río Grande currently access plans of 1 to 6 Mbps: with the migration -without price changes, according to the explicit will of Telefónica-, they would multiply these speeds by 20. Sion's aspiration is to have 50, 100 and 300 Mbps plans available, although initially, in the network conversion to pre-GPON, 25, 50 and 100 Mbps may be offered.
Under this general framework for the province, there are differentiations by locality. A FTTH pilot is currently underway at Tolhiun; In Ushuaia, there is already a fiber network -with 35,000 accesses from Ushuaia Vision and Tv Fuego-, for which some 20,000 Telefónica ADSL clients will be migrated immediately; in Rio Grande the pilot test for the project was carried out, with 250 clients from the Austral neighborhood, south of the city.
In Santa Cruz, Sion has among its associates Cable 10 de Río Gallegos. The fiber made by Sion for this cable company is being extended in the Chacras and San Benito neighborhoods. In turn, the company is currently negotiating in several towns to migrate Wireless clients, for example in Puerto San Julián.
Comodoro Rivadavia deserves a separate paragraph in the plan designed for Chubut. There a direct investment will be made for a new fiber line. The first deployment is planned for the end of 2021, with a pilot in Barrio Pueyrredón: other towns of the Gran Comodoro will be covered, such as Próspero Palazzo and Barrio Don Bosco, and the expectation is to complete the task in 2022, at the rate of 700 homes passed by month. Sion expects to reach a total of 30,000 clients in the area, within three years.
ON Pyme. A third disruptive point is the constitution of the first social bond of the Stock Market for telecommunications. Sion presented Series VII of SME Negotiable Obligations, for a nominal value of US$ 1.9 million, which will be used to lay fiber (48% to the network and 52% to equipment).
The negotiable obligations were rated by the UNTREF (National University of Tres de Febrero) with "A + (on)" Stable Outlook and "BS2" as Social Bonus, for their positive social impact aligned with the Principles of Social Bonds of ICMA, CNV and BYMA. The “SVS” bonds, meaning, “Social, Green and Sustainable,” are defined as “any type of bond whose funds are used exclusively to finance or refinance either part or all of social, green or a combination of projects from both."
Among the principles for social bonds are the process for the evaluation and selection of projects; fund management and semi-annual reporting. The latter will show the evolution of different parameters in each of the Eligible Zones, to evaluate the fulfillment of objectives.
The ONs will be listed in the Argentine Stock Exchanges and Markets (BYMA, in Spanish), under the SME regime, in accordance with the regulations of the CNV. The external review of the execution of the bond contemplates an alignment with four components, according to Julieta Artal, head of Corporate Governance and Sustainability at BYMA, at the launch of the ON Pyme. First, access to essential services (Internet access); then, construction and / or adaptation of Internet access networks to reach approximately a total of 50,000 households that mostly live without a stable fixed connection; third, conservation of funds in a bank or current account for the purpose of having said amounts identified until their total allocation to the project; and lastly, reports on the application of the funds from the placement and their destination towards eligible investments.
The case of Sion and Movistar Argentina will be presented next Thursday, November 25, at the Big Players Map Day 2021 event. To know about the agenda and register, enter here.