Bell subsidiary looks south as Argentina increases competition

Bell Canada International (BCI) is preparing to use a partnership with Mexican telco Telmex as its conduit into the soon-to-be opened Argentine market and other parts of Latin America. The offer is still undergoing due diligence, but BCI VP Peter Burn told Network Letter all the pieces will be in place by Labour Day. Earlier this summer the Canadian and Mexican companies announced plans to create a joint venture that will invest in the South American market. American telecom giant SBC, which holds a 20 per cent stake in Bell Canada through its Ameritech subsidiary, has since signed on to the deal. Even as the new agreement is pending, Telmex has purchased a 60 per cent share of a broadband company in Argentina called Techtel. Burn expects the Argentine company will be offered to the new entity as an entry vehicle for Argentina and other markets. In 1990, the country privatized its state-owned telco Telefonica de Argentina and gave two European firms access to the nation. The Spanish company Telefonica and Telecom, a joint venture between France Telecom and Stet of Italy have divided Argentina, with one serving northern regions while the other services the south. The $400-million investment in Argentina would greatly boost BCI’s presence in South America. It currently owns portions of telecom companies in Brazil, Colombia, Mexico and Venezuela. It also holds equity in some Asian telcos, although it has just sold its stake in Hansol M.com in Korea. It expects to play a more important role in China now that that country has loosened its trade restrictions (NL, Nov. 22/99). The announcement of the liberalization of the Argentine rules opened the floodgates for competitive service. More than a dozen international telcos, including AT&T, Bell South and Comsat, are preparing to enter the market when competition starts on November 8. AT&T has indicated it will invest US$500 million for Internet services and e-commerce. Burn says BCI had to budget a similar amount. "I don’t think it makes much sense to invest one dollar if you’re not going to be competitive," he states. "It’s not a question of going in and then undercapitalizing and under investing because that’s just a waste of money." The BCI VP suggests Techtel is just the start of the Canadian company’s migration into South America. He expects BCI’s current holdings will fall under the umbrella of the new BCI-Telmex-SBC company and the firm will continue to grow. "It could be an excellent expansion vehicle into the southern cone, Uruguay, Argentina Chile, starting obviously with Argentina." The opening up of the Argentine market should lead to a spirited fight. Telefonica and Telecom have been deploying lobbyists in Buenos Aires to try to convince the government of president Fernando De la Rua to keep the rules as they are. The new conditions are weighted in favour of the new entrants, the Europeans argue. One of the president’s first actions since taking office last December was to slash the interconnection rates — the Argentine version of contribution — by more than half. The old level of 2.35 cents (US) has been reduced to 1.1 cents. In addition, companies will be given a single telecom licence, allowing them to offer all types of service. With the changes in November, every telco will be permitted to sell fixed or mobile, wireline or wireless, and national or international service, regardless if they have infrastructure or not. The government is hoping the liberalization will lead to price decreases for telecom service and will speed the development of the Internet. Argentina is the third-largest Internet market in Latin America, behind Brazil and Mexico. More than half of the new Internet projects in the area are spawned in the nation, research from Microsoft Corp claims.

Bell subsidiary looks south as Argentina increases competition

News | 07/31/2000 4:00 am EDT

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