Colombia
Feature

How and where Colombian telcos are investing

Bnamericas Published: Wednesday, December 28, 2022
How and where Colombian telcos are investing

While investment strategies and priorities vary among telcos in Colombia, combined they invested 6.8tn pesos (US$1.43bn) last year, up 18.3% on 2020. 

The figures were published in the just released 2021 investment report by regulator CRC.

Claro accounted for nearly half of all telecom investments last year, followed by Tigo (17.8%), Telefónica (11.1%) and WOM (10.4%), with the latter doubling its proportion of total investments compared to 2020.

Spending is expected to expand again by two-digits this year and in 2023.

CLARO

Colombia’s leading telecom operator, América Móvil’s Claro announced in June investments of US$200mn focused on digital solutions for the B2B segment, the connection of 20 localities with fiber optics and a datacenter/cloud partnership with Oracle.

Of the total, US$150mn were earmarked for the digital solutions portfolio and US$25mn for the fiber optics expansion. US$25mn were planned to revamp the infrastructure of the Triara datacenter, which will host Oracle cloud services. The agreement also includes the migration of more than 100 local servers for critical processes like billing from Claro’s to Oracle's cloud infrastructure.

Claro Colombia announced earlier this month the extension of its fiber-to-the-home (FTTH) network to the localities of Pitalito, Aguachica and Gachancipa in the Huila, Cesar and Cundinamarca departments. The rollout covers some 24,000 homes and businesses in Pitalito, 11,000 in Aguachica and 4,300 in Gachancipa. 

Colombia is the third largest operation for América Móvil after Brazil and Mexico, with 36.8mn mobile subscribers at the end of September, up 7.2% year-over-year, and 9.18mn fixed-line ones, up 4.5%.

The Colombian operation posted in Q3 the best mobile service revenue growth in five quarters, up by 3%, according to América Móvil. 

It also added 29,000 pay-TV subscriptions, 60,000 landlines and 20,000 broadband connections.

TELEFÓNICA

Telefónica is emphasizing fiber broadband deployment, primarily via its investment partner, US fund KKR, with whom it operates the neutral fiber network On Net.

Through KKR, Telefónica's local subsidiary Coltel is deploying fiber at a rate of around 130,000 homes passed per month, José Juan Haro, director of public affairs and wholesale business at Telefónica Hispam, told BNamericas this month.

According to Haro, given the size of the country, the plan “is somewhat more ambitious” than in Chile, where the telco and KKR equally operate a separate On Net fiber JV.

On Net Fibra Colombia started operations in January with 1.2mn homes passed with fiber, inherited by Telefónica. 

The initial goal was to grow at a rate of around 1.1mn homes passed per year, reaching 2.3mn homes in 2022, and 4.3mn by 2024 – and covering 90 localities, as CEO Ximena Mora Méndez told BNamericas in April.

Mora Méndez said On Net expects to invest in Colombia 850bn pesos in infrastructure deployment.

Fitch Ratings estimates Telefónica Colombia to migrate its current customer base to fiber from copper within three or four years. The agency also expects a capex to revenue ratio of 10%-13%, which includes spectrum payment renewals during the period.

“Coltel has shown a relatively stable operating performance in the last three years. Revenues and subscribers grew consistently in the fixed and mobile segment, helping to offset weakening profitability resulting from a continued decline in mobile average revenue per user (ARPU) and direct costs and expenses higher trades,” said Fitch Ratings in a report last week.

The agency projects that Coltel's net debt will be 3.3tn pesos at the end of 2022, approximately in line with the debt the company had at the end of 2019.

In mobile, the market is expected to continue to be under significant price pressure as WOM seeks to become a big player and the incumbent operators increase or maintain promotions or, in some cases, cut prices while a portion of customers migrate to lower-priced plans.

Coltel is the second mobile operator in Colombia, behind Claro Colombia, and is third in broadband internet.

Fitch projects total revenues to grow to 7.2tn pesos in 2024, from 5.8tn pesos in 2021.

TIGO

Luxembourg-based telecoms group Millicom, which operates under the Tigo brand in Latin America, is investing, among others, in a terrestrial fiber network between Colombia and Brazil, passing through Chile, Argentina, Bolivia and Paraguay.

“We will complete [this year] our fiber connectivity project from Bolivia to Paraguay. As a result, ours will be the only fiber connection between the two oceans through existing terrestrial routes,” Millicom CEO Mauricio Ramos told investors in the Q3 call.

Tigo is the second largest provider of broadband internet, pay TV and fixed telephony in Colombia, and the third largest provider of mobile services in terms of subscribers.

Tigo Colombia announced in July it was entering Bogotá’s fixed broadband market using fiber optics deployed by Ufinet and by ETB. 

The agreement for Bogotá is key since it represents an increase of more than 20% in coverage in terms of residential services, in addition to giving it a greater footprint in the country’s biggest city.

Ufinet's Bogotá network is expected to reach 320,000 homes this year. Meanwhile, ETB has about 1.5mn homes passed with fiber optics, which will be added to Tigo's offer.

Fitch projects 100,000-160,000 incremental homes passed for Tigo each year through 2024.

In mobile, Tigo Colombia recently completed the shutdown of its 2G network, which made the carrier the first in South America to do so, with the refarming (migration) of the spectrum for 4G networks.

"The priority of Tigo, working together with the government, is to close digital poverty. What we will do with the new government is to focus on 4G," Tigo Colombia president, Marcelo Cataldo, said in November at an event in Bogotá.

At the occasion, he complained about what he considered high spectrum costs.

Tigo has invested US$7bn in the last seven years in 4G and will invest another US$3bn agreed in the last spectrum auction, which was in 2019.

Colombia is due to hold a 5G auction next year, hence the pricing issue is crucial for telcos. Besides, in 2023 local telcos are expected to renew their existing spectrum licenses. 

The company is projected to invest 1.1tn pesos per year, at roughly 21% of revenues, with 2023 expected to be relatively higher due to spectrum renewals.

In Q3, the group’s consolidated capex was US$298mn, up from US$253mn in 3Q21. Year-to-September capex amounted to US$868mn, up from US$548mn in the year-ago period.

WOM

The newest of the telcos in the country, launching in April 2021, WOM's goal was to reach a 25% share of the market in five years. 

As of September, the company had around 3.4% (or 2.67mn accesses) of the market, tied with MVNO Virgin Mobile, according to latest data by regulator CRC.

WOM had committed to investing US$1bn over four years, but since the launch of its operations, it has already spent over US$800mn. 

Last August, the company obtained full approval for the merger by absorption of Avantel from antitrust regulator Superintendencia de Sociedades. As a result, Avantel officially ceased to exist.

One focus of the company is to consolidate both businesses into a single grid, plus the antennas park, back-office and network management operation, as well as spectrum bands.

WOM is also interested in the 5G auction, although executives claimed important 4G spectrum bands are also still available for auction.

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