Fecotel and Fecosur, federations gathering over 300 phone cooperatives, filed in July a project to create a mobile GSM firm to offer services, to start with, in only five regions split in three areas, namely, Buenos Aires and the provinces of Cordoba and Santa Fe. Each area will be served by multiple operators at community scales, linked among them through a transmission network.

Based on this bunch of ideas, and once region division has been negotiated, there have been moves to near prospect vendors. The term Telefonica Moviles (Unifon) has to return the resources and the profile of the prospect private interested parties is yet to be defined with the Communications Secretariat (Secom).

Hutchison¿s shadow, one of the strongest global cellcos, haunts the new Argentine cellco. Though emerging as mobile, some basic guidelines within  the cooperative project remind those of Porthable, fixed-mobile firm serving 40,000 lines in the west of Great Buenos Aires, the ownership of which is split between the Chinese Hutchison (90%) and the Argentine businessman Carlos Joost Newbery (10%). The link between both ventures could be explained as follows:

Given resource scarcity –either spectrum or money-, cooperatives find it more reasonable to take a liking to Porthable than to companies operating at national levels, such as CTI (America Movil), Personal (Telecom Italia) or Unifon-Movicom.

Porthable rejected competing for volume and has worked, instead, with a marked client segmentation, so as to maximize revenues per line. Thus, they have posted better ARPU than cellcos. Geographic expansion comes in hand with “completion”: only after cell capacity is not full, they move on with deploying the following.

This scheme, with strong accent in local exploitation and commercial intelligence, is well adapted to the one devised by cooperatives. On the one hand, it focuses on the greatest strength of independent operators: their direct relationship with the community. On the other, it settles a key political problem for federations: it protects the independence of each cooperative and, it also allows differences among them in stating, “only those investing will be involved”.

However, Hutchison has been more than a mere inspiring model. Engineers work quite closely to those in Telpin, the cooperative of Pinamar (a coastal location, some 380 Km. south of Capital Federal) to which Fecotel has ordered technical planning. Telpin is the most important phone cooperative in the country per number of lines, and it’s characterized for innovating and implementing tough expansion. Telpin and Hutchison have jointly attended meetings with prospect vendors.

Though this relationship is not a secret, it has not been mentioned in the presentation of the mobile project to the cooperative movement. Juan Carlos Fissore, President of Fecotel, tapped the event to explicitly dismiss corporate involvement in any international operator.

Fecosur has played defensive. A top executive told the specialized publication Convergencia Telemática “we are watching them move, but we don’t quite get that relationship, bear in mind Joost Newbery is an expert in building up firms to sell them later”. “Charlie” Newbery was the creator of the original consortium that made up Movicom, then he designed that of Bell Atlantic, he obtained and left later upon the privatization of Entel, and he also generated the group that got the license of CTI. “Therefore –Fecosur executive went on-, before investing, we are going to assess the setting in depth so as to make sure such an effort is not only a maneuver to bail out a bankrupt firm, or swipe spectrum”.

Darío Oliver, General Manager of Telpin, told Convergencia, “with Hutchison, we¿ve had enriching exchanges, though it is too soon to advance which role they may play in the future”. Instead, one of the main technicians in Fecosur asserted, “some hold Hutchison¿s involvement is key, as the model strength lies in its commercial intelligence. That is exactly why we think we can do without it: nobody knows members better that the cooperative itself. This is a feasible project –he continued- and we can realize it alone”.

Fecotel has been considering copying Hutchison¿s model as from 2003. It has even surveyed the possibility of exchanging Chinese gear for Argentine products. In turn, the General Manager of Hutchison Argentina, Marcelo Estrada, told the paper El Cronista, in February, they were planning to expand geographically with mobiles to reach Córdoba and Santa Fe, other two regions under the cooperative project, and to Mendoza as from 2005.

It can be inferred then that when a spectrum mobile band “emerged”, the Secom may have hinted a possibility for contact. This was confirmed by sources close to cooperatives: “it was not definite, but the Secretariat suggested that we met other interested parties”. Tying up loose ends, Secretary Guillermo Moreno¿s phrase gains sense: “in the future we¿ll no longer speak about Spanish or Mexican; the Chinese are to flood the country with their antennas”.

Beyond assumptions, definition is still pending on which percentage of the new cellco will go to private investors¿ hands, though versions speak of a 10%. Fissore, from  Fecotel, explained they will deal with firms with “national interest”.

The helm of the Fecotel and Fecosur pointed Argentine State had rejected the possibility to keep a “golden share”; though sources from the Planning Ministry –controlling the Secom- hold a different stance.

However, there is no doubt the rest of the cell operators in the market are to challenge any scheme where Hutchison, or any other international firm, join in as partners without paying for spectrum. Should this happen, Government will have to decide.

Fecotel and Fecosur decided to create a team of 18 technicians to prepare the bill on the new cellco to be filed before the Communications Secretariat (Secom). That group has decided to create a regional GSM operator with an own transmission network to link certain cities within the same area, and interconnect them locally. Operations in the rest of the country will come in hand with roaming agreements.

Deployment is to come in stages. The first, between 2006 and 2008, is to cover “medium” sized cities in five regions. License and spectrum will be held by a parent firm, with cooperative and private capitals, and investments in local infrastructure will be assumed by the cooperative operating in each township. They will request the Secom that Unifon takes no longer than two years to clear spectrum.

The plan includes launching services in locations with the presence of phone and power cooperatives. Thus, in two years, they want to add some 200,000 lines. This “critical mass” would be the base to move on to reach small locations and big cities. Estimates are in line with forecasts stating they would get some 35% of the users in locations where they plan to offer the services.

The first phase is to include deployment of around 150 and 180 radio bases at an estimated cost of US$ 15 million and US$ 20 million. The value of the local operation, with one sole base, may be US$ 100,000, but the figure has to include network transmission expenses, too. Local interconnection aims at eliminating long distance charges effective for mobile calls in the country. The concept “calling-party-pays” will also be eliminated.

However, the main concern has to do with spectrum availability. Fecotel and Fecosur want the Secom to guarantee bands will be free in some two years, rather than in four, as hinted by Unifon. Technicians in cooperatives pointed that, in requesting positions in peripheral locations rather than in urban centers, the petition is quite reasonable. They indicate they would ask for 10 MHz of 40 MHz Unifon has to return, though they gave no details on whether it was about the 850 MHz band, originally awarded to Movicom at no charge, or the 1900 MHz band, auctioned at a millionaire figure.