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Telecom Argentina has announced an ambitious investment plan of 40 billion pesos for the period from 2016 to 2018 to improve its 4G network. Here its headquarters in Buenos Aires.(Photo: Elsapucai)
Monday, November 21, 2016
Perspectives

Argentina Telecoms: Reform Boost?


Will President Macri’s reforms boost Argentina’s telecom sector?

BY LATIN AMERICA ADVISOR
Inter-American Dialogue

Argentina’s telecommunications minister, Oscar Aguad … said recently that Argentina’s telecom reforms could attract $20 billion in investment over four years. After taking office late last year, President Mauricio Macri signed a decree allowing phone companies to enter the cable television market. His government also plans to sponsor a new law to encourage competition and technological development. What are the most important parts of the reforms, and what effects will they have on telecom providers and consumers? What are the advantages and drawbacks of the reforms for investors? Will the reforms attract as much investment as the government is anticipating?

Andrea Giuricin, professor at the University of Milano-Bicocca: Presidential decree 267/2015 passed by Macri’s administration posed serious barriers to effective competition by postponing to 2018 the entrance of telephone companies to the cable pay TV market and restricting pay TV satellite providers from offering telecommunication services. As a result, the main beneficiaries were only local media conglomerates and cable TV providers that were shielded from competition. Restrictions for telecommunications providers to provide broadcasting services and vice-versa should be removed immediately as a pre-condition for a successful and impactful legal framework reform. Only when these protectionist barriers to competition are removed will the proposed reform have the opportunity to focus on the core of modern telecommunication legal frameworks, create incentives and an overall attractive environment for investment, and purge the system of outdated rules that impede convergence. For investment to be directed to Argentina, a long-needed modern, convergent regulatory framework plays a key role. Argentina’s telecommunications reform needs to put an end to the outdated practice of regulating telecommunications and broadcasting markets as if they were independent silos. The concept of convergence as the modern synergy, connectivity and interaction of ICT has definitely erased all lines of separation between market segments, as this is the primary requirement for innovation to prosper and benefit both users and the market. Insisting on maintaining outdated rules that regulate telecommunications and broadcasting services differently—only to the benefit of national interests—will most likely bring failure to the Argentine legal reform effort and discourage potential investments in the country.

Wally Swain, senior vice president for emerging markets at 451 Research in Bogotá: In order to attract more investors, Argentina needs to demonstrate legal stability and more technocratic management of all sectors than what was exercised during the Kirchner/Fernández years. In ICT, this was most apparent in a strict separation of television and telecom. All Latin American countries have seen a boom of triple- and quad-play offers as telecom operators expanded into pay TV. But not in Argentina, where the issue was politics (and not in Mexico where the stated reason is fear of domination by Carlos Slim). However, this is Argentina, and implementation of that decree to allow phone companies into video has already been delayed once, and it could be delayed again. Politicians fear media companies because they have such influence on public opinion. Telecom companies lack such leverage on governments. An unrelated but still relevant question is ‘Who would come?’ Even with an improved regulatory environment, between Clarín wanting to play and many telecom services reaching saturation, there is little room for additional players. The most obvious candidate is AT&T, already present through DirecTV, but even if attracted to the opportunity, we expect the company will be looking to buy something with a network (Telecom Argentina?) rather than greenfield a fourth or perhaps fifth operator.

Diego Martínez Burzaco, Buenos Aires-based economist and independent financial advisor: This year could be a turning point for telecommunications companies in Argentina as the economy should start recovering and discretionary consumption should start picking up. One company, Telecom Argentina, announced an ambitious investment plan of 40 billion pesos for the period from 2016 to 2018 to improve its 4G network. The company wants to be prepared for the sector’s next expected boom in demand. A couple of weeks ago, the company received a $400 million loan from the International Financial Corporation to accelerate its investment program. Despite the economic recession, Telecom Argentina could hedge its revenues during the first half of the year. Its nominal annual growth stood at 37.4 percent, in line with inflation. The government’s proposed reform will result in more competition in the sector, leading companies to improve the quality of their service.

 

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor

 

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