Possible new conditions for Movistar concession renewal seen affecting market

- Wednesday, November 30, 2011

Possible new conditions for Movistar concession renewal seen affecting market

If Peru's government imposes new conditions for the renewal of Movistar's concession contract, it could affect future investments in the telecoms market, local consultancy firm Alterna Perú's president, Liliana Ruíz, told BNamericas.

Under President Ollanta Humala's administration, authorities put on hold a preliminary agreement reached with the previous administration and are now looking to charge for the concession.

Movistar and the government have been in negotiations to renew the concession contract - originally signed in 1991 and now expired on May 26 - to operate in capital Lima and neighboring Callao. But the concession is still valid until the country's transport and communications ministry (MTC) decides on its future, Ruíz said.

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Movistar is asking the government to renew the concession for another 20 years. Under the preliminary agreement reached with the administration of then-president Alan García, Movistar committed to investing US$500mn over the next five years. "Now, Humala's administration wants to obtain money for the concession and not only an investment commitment," the analyst said.

"I hope the government can finally resolve this issue and renew Movistar's concession. If this issue takes a long time, then it could negatively impact in the telecoms sector," she added.

"Another dangerous thing is that certain members of congress are talking about future international tenders for the concession in case Movistar's concession is not renewed. This is not healthy for the sector because it creates uncertainties. We are talking about very significant investments made by Movistar and also about 20mn lines in the country," Ruíz noted.

Changes in the rules could also affect future investments in the country. "If this continues to happen, the government will have a difficult task in attracting serious investors," she said.

Movistar Perú is fully controlled by Spanish telecoms giant Telefónica (NYSE: TEF).