Argentina Telecommunications Report Q3 2007

Argentina has finally got its first 3G service, launched by Telecom Personal (TP) in late May/early June in the capital Buenos Aires. TP, which expects to have extended coverage to the cities of Crdoba and Rosario by YE07 and to all provincial capitals by 2009, is hoping to sign up 1mn 3G customers over the next two years. To this end it has contracted Sweden's Ericsson to build an HSPA-enabled 3G network, as well as to expand and upgrade its existing network with its Mobile Softswitch solution. Movistar, which has only recently launched a mobile banking service (TP first launched last September), is also expected to launch 3G services in 2007. The company has a more modest target of 1mn 3G handsets in operation by 2010, out of a total customer base of 15mn.

The mobile market could soon be seeing more competition, as regulator CNC has decided to allow Fecotel and Fecosur, Argentina's two co-operative associations, to bid for the 45.2MHz spectrum that is being returned by Movistar. The associations cater for lower-income families in rural areas, parts not currently served by the existing operators, and believe their joint customer base of 700,000 households means a potential mobile subscriber base of around 2mn. But both CTI Mvil and TP are also vying for the bandwidth, which they could use to support 3G services, and it remains to be seen whether the cooperative will have the financial resources to fend off the competition.

Argentina's mobile market continues to post growth rates that are quite remarkable given its already high penetration and the far slower rates seen in countries elsewhere in the region, such as Chile and Brazil. Yoy growth rates slowed during 2006, but the market rebounded in Q107 with some 2.4mn net additions, growth of 42.2% y-o-y. However, this is in line with our expectation that growth rates will generally slow, punctuated by occasional quarters of stronger growth driven by prepaid services, and we are maintaining forecasts for the time being. Forecasts may be revised upwards later this year if it turns out the stronger than expected Q1 growth was not just an isolated incident but the start of another growth spurt. We currently anticipate penetration will near 93% by YE07 and reach around 115% in 2011. There is healthy competition among Argentina's three main mobile operators, which between them account for nearly 98% of the market. Meanwhile, Nextel Argentina provides a good alternative for business customers in larger cities, and is planning investment of US$68mn this year to upgrade its existing network and expand its reach. However, it is not just in the mobile sector that there are signs of increased investment. Mexico's Telmex plans to invest around US$400mn annually in its Argentine mobile operator CTI Mvil and broadband internet projects, for an unspecified number of years. Further, VoIP provider CrossFone is planning to invest US$1.2mn in partnership with Redcotel for the production of alternative handsets for CDMA450 networks, ADSL 2+ modems and VoIP gateways, in addition to plans to launch triple play services in the capital Buenos Aires in Q407. Meanwhile, US-based Global Crossing has completed the acquisition of Impsat Fiber Networks for a total of US$347mn.