Back in 2000, Frank Sader published a book for the IFC and the World Bank titled "Attracting Foreign Direct Investment into Infrastructure - Why is it so difficult?" At one point, the author references experiences of raising foreign investments in Argentina and Peru in the TMT sector, and stresses the importance of a strong regulator to succeed. The Argentinian example seems anachronistic especially in light of the many social and financial events that hit the country over the past fifteen years. However, I have decided to start this editorial which the paragraph on Peru, which seemed relevant today despite being written 15 years ago.
“In Peru […] the government created formally by law an independent regulatory entity - Osiptel - which participated in the privatization decision and negotiations for the sale of the state-owned telephony monopoly Entel. Through two separate sales in 1994 and 1996, the government received US$3.2 billion in a highly competitive bidding process, which made Entel relative to its size the most successful telecom privatization of the region. The relationship between Osiptel and all operators is judged as highly professional and amicable, without any major friction emerging. After negotiations with the new private operator of the previous Entel, the five-year exclusivity period originally agreed upon was officially terminated in August 1998, allowing for the entry of private competitors one year earlier then expected.”
Although referring to the very early stages of the Peruvian telecom industry, these words clearly outline a few important characteristics of the national regulatory system which still seem quite valid nowadays: progressive, open and enthusiastic to promote competition.
Rewriting regulations to speed up growth
Back in June 2014, Peruvian Congress approved a law which is expected to become official over the next few months which creates a single administrative process for the deployment of telecom infrastructure, including aerials, poles and telecom cables. Thanks to the new law, towercos and MNOs will encounter fewer obstacles when seeking permits to develop greenfield projects.
So far, the country’s attempts to modernise its TMT sector have succeeded in attracting several key towercos such as American Tower, Torres Andinas, Innovattel, Torres Unidas and NMS. Additionally, there are rumours suggesting that SBA Communications might be seeking to enter in the country. On the MNO side, the landscape is still very dynamic since the entrance of Entel Chile, which acquired Nextel, and Viettel (Bitel).
A variety of competing MNO and towerco players can only be a positive factor in Peru since the need for infrastructure is still quite urgent. In fact, in a recent statement, the Ministry of Transport and Communications (MTC) said that Peru needs as many as 22,000 new sites over the next few years to meet demand and coverage needs… Quite an increase compared to the nearly 9,000 sites currently existing in the country, but the outlook for the TMT sector is positive and TowerXchange aren’t the only ones thinking so.
Taking leaps forward in IT
Every year, the World Economic Forum publishes an annual ranking on Information Technology and in 2014, Peru moved from 103 to 90 out of 144 countries analysed. According to experts, this progress is mainly due to a few steps forward in infrastructure development and broadband access but, quoting law firm Montezuma & Porto and their recent analysis on this topic, “the country has an obvious lag in the following fields: educational sector (134/144), ICT infrastructure (95/144), digital innovation (93/144) and political and regulatory environment (119/144) among others. The latter highlights the importance of having a national governing body promoting consistent ICT policies.”
Over the past couple of years, Osiptel has been heavily involved in the promotion of modern regulatory frameworks and 2015 is expected to be an important year also thanks to the planned construction of an optic fibre backbone network.
For this purpose, Fitel, the national telecom investment fund, has recently awarded a US$285mn contract to Gilat Satellite Networks to bring connectivity to rural villages via the Peruvian National Fibre Backbone project. As per the contract, Gilat has acquired the rights to build the fibre network and will operate it for one year to then transfer it to the government. Additionally, the company could generate revenue by allowing MNOs to gain much needed extra network capacity.
Fitel was created with the goal to grant universal access throughout the Peruvian territory and operates within the Ministry of Transport and Communications.
Creating a business friendly, low risk environment
Peru still has a long way to go to achieve its full potential and reach the rural coverage goals it has set for itself. However, the country has so far shown a positive attitude towards the promotion of infrastructure deployment and has succeeded in attracting foreign investment.
In a region where international companies are playing a fundamental role in the development of the TMT sector, it can only be a plus to streamline the regulatory framework while easing bureaucracy and reducing perceived country risk. Peru is right on track to succeed, and thus Peru may host the next competitive land grab among CALA’s towercos.
