ChinaTel expects to launch beta market in July

Monday, April 18, 2011

ChinaTel - a Chinese-US joint venture focusing on WiMax investments in Latin America and Asia - expects to set up a beta market in Peru opening in July to get a better feel for the local segment before its commercial launch in August, ChinaTel VP of strategic planning Ryan Alvarez told BNamericas.

Still on track to launch high-speed wireless broadband during August in all seven Peruvian cities where it holds concessions, ChinaTel will be up and running a month ahead of schedule in Trujillo, Ica and Chiclayo.

The cities were selected for their diverse sizes, as Trujillo is the largest ChinaTel will enter, with Ica landing in the middle and Chiclayo being one of the smallest.

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The operator will use the beta markets to gauge how many prepaid dongles people are buying and what they will be buying the most. Alvarez said this will give the company a better insight into the market, as at the moment all expectations are projection based.

"Our main focus is what happens if we don't have enough units to sell; that's one of the worst things we could do," Alvarez said. "But then I also don't want too many units and have to discount things."

Targeting the low-income population between the ages of 12 and 25, Alvarez said ChinaTel not only plans to have lower rates than competitors Claro and Movistar, but also to beat the average rates at local internet cafes.

According to Alvarez, local internet cafes in Peru charge an average of 1 sol (US$0.35) per hour, which he said ChinaTel will offer its home service at the same price or cheaper. However, he noted that the company is still finalizing pricing to ensure profitability.

Alvarez said ChinaTel's entrance strategy will focus on the underserved low-income market, with people who use the internet daily but cannot afford available services. He said the other operators have targeted the middle and upper-middle classes, where people have credit for costly packages, while ChinaTel will market lower-cost, prepaid services.

"Our target is the people who don't have internet. So in other words, we're not trying to steal customers; we're trying to make the pipe bigger," he noted. "We're trying to get the internet penetration rates up and to create a new customer, not steal market share."

During its first fiscal year, from August 1, 2011 to July 31, 2012, ChinaTel expects to obtain at least 16,000 subscribers. It will aim to reach a little over 1mn subscribers in its first seven years in Peru. The company also expects to hire about 70 employees on the sales and marketing side of the venture.

After launching in all seven cities - which in addition to Trujillo, Ica and Chiclayo, include Piura, Cajamarca, Tumbes and Chimbote and a total market population of more than 3.5mn people - the operator will then look to expand into capital Lima. While it will have to prove itself in the initial markets and win additional concessions, Alvarez said entering Lima cannot wait.

"In getting Lima we're looking to apply for nationwide licenses," said Alvarez. "Lima is something that we can't wait for, and bureaucracy time is a lot slower than business time."

In the next seven years, ChinaTel projects total operational investment of US$49mn in Peru.

In March 2009, ChinaTel announced it had acquired Peruvian telecoms operator Perusat, which holds a license to build high-speed wireless broadband systems. ChinaTel provides fixed, long distance telephony and wireless broadband in China and operates as a holding company with investments in four carrier units: Sino Crossings, Golden Bridge Network Communications, Perusat and Chinacomm.