<Additionally, Medina said he believes CTI's Code Division Multiple
Access technology "will be the best platform". Both CTI and Movicom use
CDMA, while incumbent cellular providers - Personal of Telecom and
Unifon of Telefonica - use the TDMA platform.>
INTERVIEW: Argentina's CTI Movil
Fixated On Wireless Ops
By CAMILLA GALLAGHER
BUENOS AIRES -- Argentine telecom player CTI Movil intends to play
the wireless card all the way, having little interest in venturing into
businesses that don't add value to its wireless agenda.
"We are a wireless company. Anything else we do always has to
complement that strategy," CTI Movil Chief Executive Officer Tim Medina
said in a recent interview.
However, the seven-year-old company welcomed new telecom rules that
promise to build the necessary framework to open the market to true
competition. CTI, owned by GTE Corp. of the U.S. and Argentine media
group Grupo Clarin, now plans to venture into the so far unexploited
long-distance market.
"This changes everything, it changes our perspective," said Medina. "We
can be a lot more aggressive. We'll probably launch a long-distance
campaign before November."
The government last weekend said it will more than halve the
interconnection rate - the fee newcomers must pay incumbents for use of
their networks - to 1.10 cents per minute as of November from 2.35 cents
presently. It also plans to establish a single telecommunications license
giving companies the right to provide all types of services.
After winning a license to offer long-distance when Argentina opened the
sector to limited competition in November 1999, CTI made no real
attempt to lure wireline customers away from incumbents Telefonica de
Argentina SA (TAR) and Telecom Argentina Stet-France Telecom SA
(TEO). Rather, CTI focused on its wireless clients and offered free
long-distance services in its "Plan Nacional" package deal.
CTI's Plan Nacional features national, single-rate pricing for airtime with no
extra charges for domestic long distance or roaming, as well as no
distinction between peak and off-peak calling rates or the days of the
week.
"Now others are following our lead," said Medina. "We're market leaders
from a strategic point of view."
In terms of market share, CTI has plans to gain more ground. Based on
revenues, it has a 17% share of the wireless market nationwide and a 37%
share in the interior, where it's been operating since 1994.
"We obtained 7000 PCS clients in Buenos Aires in three weeks, since our
launch... We believe we can surpass a 25% share in Buenos Aires," said
Medina. CTI launched its Personal Communications Services in Buenos
Aires in May.
Got To See It To Believe It
In general, the long-distance market barely changed after the government
opened it to initial competition - new players didn't launch big campaigns,
while incumbents made no effort to gain terrain; Telefonica serves
Argentina's southern half while Telecom serves the northern half.
All that may be about to change. Drops in the price of Telefonica and
Telecom shares following news of the new rules reflect some of the
challenges that the incumbents are likely to face. Telefonica and Telecom
had lobbied in favor of smaller interconnection rate cuts in an effort to
shield themselves from new and potentially fierce competitors.
But when President Fernando de la Rua issued the broad terms of the new
rules Saturday - just before flying to the U.S., partly to seduce investors -
he ordered his ministers to determine the details of the rules in the next 30
days.
Though the rules were applauded by new telecom players, the 30-day
delay led many to adopt a wait-and-see stance.
"We have to wait for the fine print," said Medina.
However, if the new rules pan out, newcomers will for the first time have
an economic incentive to explore the long-distance field. CTI and others
like Movicom SA would pay 1.10 cents per minute to use Telefonica and
Telecom networks, surprisingly close to the 1.00 cent rate newcomers had
defined as viable to do business.
"It would make the long-distance business for a CTI or a Movicom
profitable instead of profitless," said Medina.
Wireless Internet Coming In 2000
Medina said CTI will no doubt offer full wireless Internet services. Like
other providers, CTI now offers short-messaging services, which enable
clients to receive e-mails and news, but not send. "Today if anybody here
tells you they have wireless Internet, they don't. It's not more than a
short-messaging service," said Medina.
He said that bi-directional Wireless Application Protocol is coming soon -
"by the end of the year".
According to Medina, wireless Internet wouldn't require a big investment,
barely 1% of the $1.5 billion CTI has invested so far. CTI will have
invested a total of $2 billion before the end of 2001, he said.
"It's simply an incremental investment over our digital network investment,"
he said.
Additionally, Medina said he believes CTI's Code Division Multiple
Access technology "will be the best platform". Both CTI and Movicom use
CDMA, while incumbent cellular providers - Personal of Telecom and
Unifon of Telefonica - use the TDMA platform.
Medina didn't provide specific figures for CTI's growth prospects, but said
the telecom sector's potential hinges on the nation's economic recovery.
"But we are a growing sector," he stressed.
CTI's total subscriber base grew by 23% in the first quarter to 879,667
from the year-earlier quarter. Service revenues, however, fell 9% due to
the economic recession's impact on average customer usage.
Plans To Launch IPO
CTI Holdings has agreed to acquire GTE PCS Holdings from GTE Mobile
in exchange for newly-issued shares of CTI Holdings. The deal is subject
to regulatory approval.
"We would like to list CTI Holdings shares in New York and in Buenos
Aires in about 18 to 24 months," said Medina.
CTI Holdings includes CTI services operating under the CTI Movil brand
name, in both Argentina's north and south. Before June, CTI Holdings will
also include CTI's PCS operations in Buenos Aires and in the next few
months CTI Integrales, which holds the license to offer long distance.
After the closing of the GTE PCS Holdings acquisition, GTE Mobile will
sell shares of CTI Holdings to Telfone and Morgan Grenfell & Co. Ltd, an
affiliate of CAI, a current CTI Holdings shareholder. Furthermore, GTE
Mobile, TCW and TAICO will sell shares of CTI Holdings to three
investment funds managed by the Blackstone Group.
As a result of these transactions, the new holdings in CTI Holdings would
be as follows: GTE Mobile 58%; Telfone 24.5%; Blackstone funds
12.5%; and Morgan Grenfell/CAI 5%. It's also expected that CTI
Holdings will liquidate GTE PCS Holdings, leaving it as the direct owner of
GTE PCS.
-By Camilla Gallagher, Dow Jones Newswires; (5411)4313-1918;
camilla.gallagher@dowjones.com |
