Colombia Telecommunications Report Q3 2008

Colombia's internet market has seen a year of particularly strong growth in terms of both internet users and broadband subscribers. The number of internet users reached 12.1mn in 2007 showing an 81% yearon- year (y-o-y) increase in users and an 11 percentage point increase over the year. Even more impressive is the 92% increase in broadband subscriptions in the country to 1.2mn. While broadband penetration remains one of the lowest in the region, the strong growth is a sign of continued investment by Colombian and international operators. Telmex re-launched its five acquired cable operators under its own brand in February 2008, launching triple-play services. The operator has reported strong revenue increases on the back of its run of acquisitions and looks set to be a strong competitor in the market. The strongest growth was in WiMAX and wireless internet although these technologies only make up 4.4% of the market. An increasing focus from fixed-line operators on the broadband market has seen a sharp increase in the number of DSL subscriptions, although cable modem connections remain popular.

Operators are seeing a greater proportion of their revenues from broadband services and, with the decline that the fixed line is likely to see, new revenue streams are being sought.

Colombia's mobile market saw even slower growth in 2007 which has led BMI to revise forecasts downwards last quarter with regulator data showing our expectations to have been close. We have left forecasts unchanged for 2008 and beyond expecting the market to expand by 11% in 2008 with 37.5mn subscribers at the end of the year. The high proportion of prepaid customers in the market continues, but operators are stabilising their subscriber mixes and beginning to concentrate on their postpaid subscribers.

Market leader Comcel launched its 3G services at the end of January 2008, keeping its reputation as the market leader for the latest technology. Tigo has said it intends to offer its own 3G services in the second half of 2008 but has given no indication of a date for launch. A US$40mn investment is expected from the operator although it continues to wait for the regulator's response regarding an additional 10MHz requested for the launch of its 3G services.

Although Colombia's place in our regional Business Environment Rankings was unchanged, its overall score fell as the telecoms market result fell and Colombia's country risk score fell slightly, principally from its recent political conflicts with Ecuador and Venezuela. However, the country maintains a strong country structure core with a relatively young and urbanised population. Slower forecast growth for the mobile market in particular has kept Colombia's score low as its penetration rate is already high and the high incidence of prepaid subscribers in its market has meant that ARPUs are among the lowest, an issue operators will need to address.