Peru Says 17 Companies Seek Entry to Fixed-Line Phone Market
Bloomberg News
January 20, 1999, 1:39 p.m. ET
Peru Says 17 Companies Seek Entry to Fixed-Line Phone Market
Lima, Jan. 20 (Bloomberg) -- Peru said 17 companies,
including BellSouth Corp. and OneWorld Systems Inc., have applied
to compete with Telefonica del Peru SA in the country's newly
opened fixed-line and long-distance telephone markets.
Twelve applicants are seeking concessions to operate
domestic and international long-distance services, while the rest
want to provide local service, an official said. The opening of
Peru's telephone market to competition promises to draw $200
million in fresh investment to Peru over five years, he said.
''This is one of the fruits of the opening of the market in
August,'' Jorge Kunigami, head of Peru's telecommunications
watchdog agency Osiptel, told local radio.
Applicants include Tele 2000-BellSouth and OneWorld Systems,
though he didn't provide the names of other companies. Last week,
U.S.-based FirstCom Corp. announced it planned to compete with
Telefonica in fixed-line services.
Peru began opening its telecommunications industry to
private investors in 1994, when it sold control of two state
phone companies to Spain's Telefonica SA for $2 billion. The
Spanish company merged the two operators into Telefonica del
Peru, which held a five-year monopoly on fixed-line local and
long-distance services.
Telefonica's main competitor in cellular, cable television
and other services is Tele 2000 SA, which is majority-owned by
Atlanta-based BellSouth. Telefonica agreed Aug. 1 to relinquish
10 months ahead of schedule its fixed-line monopoly, permitting
competition in those services and fully opening Peru's telecom
market.
High Growth Possibility
Prospects for the onset of fixed-line competition has
weighed on Telefonica's share.
''Our 3-Neutral rating on shares of TDP remains unchanged
due to increasing competitive risk and unexciting upside at these
present levels,'' Lehman Brothers said in a report a week ago.
Kunigami told Radioprogramas del Peru the high number of
applicants highlights the transparency of the government's
oversight of the industry's restructuring, as well as its
promise.
With just 7.5 lines per 100 inhabitants, Peru's phone line
penetration is low compared with others in the region, like
Argentina, Chile and Mexico with 12 to 14 lines per 100 people,
he said.
''There is a potential demand and one of the goals is that,
by 2003, we have 20 lines per 100 people,'' he said. ''This is to
say, we project an aggressive expansion, a doubling of lines.''
Market Dynamism
He said companies which are applying for concessions ''see
that in the country there is a potential demand despite the
difficult time we had in 1998 and which should be improved by mid-
1999.''
Peru's economy was hammered in 1998 by El Nino, weak metals
prices and a credit squeeze, which squashed economic activity and
consumer demand. The deteriorating domestic economy led to a
surge in phone bill defaults, decline in usage and slower network
expansion at Telefonica del Peru in spite of a rate reduction
linked to the end of its monopoly.
The full opening of the industry by granting fixed-line and
long-distance licenses promises to boost telecommunications
investment in Peru by an initial $50 million and a further $150
million over five years, Kunigami said.
''This will inject much more dynamism in the
telecommunications sector,'' he said.
The investment would complement $1.95 billion already
announced by Telefonica and BellSouth and planned spending by
mobile phone company Nextel International Inc. and satellite
phone company Globalstar Telecommunication Ltd., both U.S.-based
newcomers to Peru, he added.
--James Craig in Lima (511) 222-6262, through the New York
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