Peru expects bidders 'to be encouraged' about new-look 4G auction

Peru’s investment promotion agency ProInversión is confident about the new design of the 4G spectrum tender, which had to be suspended last year due to the concerns of companies regarding investment commitments and rural coverage.

"What was done is to substantially simplify the conditions of these technical specifications. In my opinion, this time the bidders are going to be encouraged, they are going to look favorably on this structure," Aldo Laderas, project director at ProInversión, told BNamericas.

After several meetings between ProInversión and the transport and communications ministry (MTC) to review the suggestions made by interested parties, Peru decided to resume the bidding with changes in the process and the technical specifications of the investment commitments.

The prequalified operators – Movistar, Entel and Claro – will stay in the race. Laderas considers that, although ProInversión will promote the contest internationally, "our expectation [of adding a competitor] is not very high." 

Unlike the previous tender, this time the AWS-3 band is divided into two 30MHz blocks, so there may be two bidders interested in the band. However, the same bidder could make an offer for the two blocks and acquire all 60MHz.

In the 2.3GHz band, a single 30MHz block will still be offered.

"Unlike what happened in previous tenders, the entire spectrum will be awarded in exchange for investment commitments," Laderas said. The process maintains the format and objective of the first auction, when it was estimated that the tender could bring connectivity to about 1,500 localities.

Although in the new auction there is no minimum number of areas to be served by the winners, it is known that the new coverage will benefit localities of between 250 and 1,000 residents.

ProInversión eliminated the minimum number of localities to be covered and other investment commitments and, instead, will leave the decision on localities to bidders, but from a list provided by the entity. Each locality has a score according to its population, location and difficulty to be reached with mobile connectivity, among other factors. The list includes locations without coverage as well as those that already have 2G and 3G services.

The scores of each locality vary between 7 to 45 points. For the two portions in the AWS band, bidders are required to reach a minimum of 8,833 points, that is, if they choose all the areas with low scores, some 1,200 localities should be covered.

For the 2.3GHz band, the minimum score set by ProInversión is 5,257.

The operators will have four years to meet their coverage commitments.

"The expected score for a town that is going to be covered in year one is higher than that of a town that is going to be covered in year four, so it is rewarded if they do it earlier," Laderas said.

The auction also considers that operators that already have other spectrum bands available can meet the coverage commitments in those bands. In addition, they can cover more than one location with the same radio base.

Another novelty has to do with the minimum required speed, which was set at 4Mbps. As a result, the service can be below the broadband definition threshold, which MTC set at 5Mbps for mobile services. That is important, since the minimum guaranteed speed law, which was mentioned as one of the main barriers to investor appetite in Peru, only applies to broadband connections, that is, those greater than 5Mbps.

"My expectation is that this time the bidders will have better conditions [to deploy the services], without neglecting the quality that we’re seeking. 4Mbps is an appreciable speed, and it’s more or less the average for Peru," added Laderas.

Future technological update commitments are included in the process.

The deadline for prequalification of bidders is April 5 and queries regarding the terms and suggestions for the contracts must be submitted by February 28.