Argentina pushes ahead with state telco plan

Argentinian president Cristina Kirchner is pursuing a controversial approach to boosting wireless broadband in the Latin American country, seeking to bring control back to the state by boosting government controlled operator Arsat at the expense of the commercial giants Telefonica and America Movil.

This policy led to the cancellation of a 3G spectrum auction (in the 850MHz and 1.9GHz bands) in September, in which five other operators had been bidding, and the government then handed the spectrum to Arsat, despite complaints that the company has been badly managed and uncompetitive, and has no wireless base on which to build.

Despite all that, Kirchner has now approved the construction of a state-controlled mobile network, saying this will create viable new competition. Claro (America Movil) was the only operator deemed to have met the conditions of the September spectrum sale, but the government argued that giving all the frequencies to that player would give it an unfair virtual monopoly. The same argument does not apply to Arsat as it is virtually a new entrant in mobility, but the policy reflects a broader move in parts of Latin America, also including Venezuela and Ecuador, to increase nationalization and the power of the state.

In a decree published this week in the government's Official Bulletin, Kirchner ordered Arsat to take necessary steps to build a "federal wireless network" to complement a nationwide fiber optic network, also state-run and already under construction.

Arsat, whose main focus until recently has been extending digital television service to remote areas, now has 20% of Argentina's available 3G spectrum. The company has been seeking partners to help it build and operate its own wireless network and compete effectively with Telecom Argentina, America Movil, Telefonica and NII Holdings - the quartet deprived of new 3G spectrum in the fall. They claim the badly need new frequencies as they are running out of capacity in urban areas, in a country with high mobile penetration and data growth.

Arsat's initial business model will be to provide wholesale wireless services to small and medium-sized companies and local telcos, according to the Ministry of federal planning, public investments and services, under the brand Libre.com. It is also likely to have targets to bring 3G, and in future 4G, connections to support rural broadband in underserved areas. These activities will be tied into its rural TV efforts and its participation in the government's 'Argentina Conectada' fibre optic project.

Despite the September auction setback, Telefonica's Argentinian subsidiary plans to invest 10bn pesos ($2bn) over the next two years in expanding its wireless and broadband network. Next year, it plans to build a further 1,000 fiber optic nodes in order to support a 40Mbps residential internet service and direct fiber services for businesses. Meanwhile, the mobile Movistar unit will increase its base station numbers by 80% to 7,500. Telefonica plans to double the capacity of its mobile network to cover demand.

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