Auction Licenses for Personal Communication Services in Colombia

By Esteban Russell and Facundo Fernández Begni

From: Latin American Law and Business Report

Introduction

The Ministry of Communications of Colombia, by means of Resolution 857/2002, has established procedures for auctions of licenses for providers of Personal Communication Services (PCS) in Colombia. PCS includes both mobile and fixed-line telecommunication services.

The process was established in accordance with Act 555/2000, which outlined the general guidelines and rules for providing PCS. The analysis was made by an expert group, which was part of the United Nations Development Program (UNDP), with resources from the World Bank through a loan granted to the Colombian government.

According to recent studies, the cellular mobile service market in Colombia will grow to $1.8 billion by 2006, from $780 million in 2002. While revenues from voice services per capita will fall, the market for data and value added services will, according to forecasts, account for 31 percent of total revenues of the sector in five years.

Background

The Colombia telecommunications sector has seen many changes since reforms were first introduced beginning in 1990. The new regulatory framework structure—established through Act 72/89, Decree 1900/90 and Act 142/94—spelled out the roles of both public and private companies in the sector.

Prior to Resolution 857, the market comprised the following:
• national and international telephone services: the state operating company TELECOM—under monopoly regime;
• local telephone services: 30 state operating companies with municipal or departmental geographical jurisdiction.

Today, local basic telephone services as well as long distance services are provided under a competitive framework. More than 100 licenses to providers of value added services have been granted since 1996.

The liberalization process was supplemented by the Commitment list submitted to the World Trade Organization (WTO) within the framework of the negotiations conducted in relation to the General Agreement on Trade in Services (GATS).

Cellular Mobile Telephone Service

Licenses for cellular mobile telephone service, the predecessor of PCS, were issued in 1993. In order to allocate licenses, the country was divided into three regions, East, West, and Atlantic Coast. One
private company and one public or public-private partnership company were licensed in each region.
Companies that initially were licensed included AT&T, Bell Canada, Telefonica de Espana, Telefonos de Chile.

Presently the following companies are operating in the cellular sector:
• East Region: BellSouth Oriental—formerly CELUMOVIL (BellSouth), and COMCEL (Bell Canada, America Móvil S.A. de C.V. de Mexico, and SouthWestern Bell).
• West Region: BellSouth Occidental—formerly COCELCO—(BellSouth and Grupo Empresarial Valores Bavaria S.A.), and OCCEL (Comcel, Ancel, among other).
• Atlantic Coast Region: BellSouth Costa (formerly CELUMOVIL (BellSouth)), and CELCARIBE (Millicom Telecartagena).

Auction Conditions

Three licensing contracts will be auctioned, one license per region, and the same bidder may propose offers for other regions. The term of the license is ten years, which may be extended up to 10 more years.

The following may participate in the auction: legal public entities; limited companies organized in Colombia; foreign companies; and consortiums or joint ventures made up of the these entities. A winning consortium or joint venture must organize a limited company in Colombia, which will actually provide PCS. In addition, current trunking or cellular mobile service company licensees (including their subsidiaries or stockholders holding more than 30 percent of the shares) cannot participate in the auctions.

Profile—Telecom Services in Colombia
Population: 43,070,704
Inflation: 7.6 percent
GDP growth: 1.6 percent
Fixed lines in operation: 7,226,922
Fixed line density: 16.7 percent
Public telephones: 99,000
Mobile telephone users: 3.2 million
Mobile line density: 7.6 percent
Source: CRT

Mobile Sector
BellSouth Oriental 635,843 users
COMCEL 1,167,290 users
BellSouth Occidental 357,593 users
OCCEL 717,263 users
BellSouth Costa 194,009 users
CELCARIBE 193,263 users
Total 3,265,261 users
Source: Ministry of Communications

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