The telecommunications industry in Colombia is a very dynamic sector, whose annual growth rate is usually well above the GDP growth rate. During 2006-2008 the sector grew on average by 15 percent per year. Even in 2009, while the economy stagnated, the telecommunications sector grew three percent. However, imports of telecommunications equipment decreased in 2009. The most affected were the cell phones and accessories segments. Preliminary data indicates a 5-6 percent increase in the total market size for 2011 and a similar forecast for 2012. Two market segments in particular: broadband and mobile telephony, make it an attractive market for U.S. product and service providers.
Currently, Colombia has over seven million fixed lines in service, with little increase over the 2005 figure. The fixed line teledensity rate is around 17 percent. There are currently over 30 million mobile service subscribers, for a mobile penetration rate of 64 percent. The operators are: Comcel-Comunicación Celular S.A/America Movil (Mexico), Movistar-Telefonica Moviles Colombia S.A (Spain), and TIGO-Colombia Movil S.A E.S.P/Millicom (Sweden). According to the Ministry of Communications, up to September 2011 Comcel has the highest market share, 65.34%, followed by Movistar, 22.41%, and Tigo with a market share of 11.82%. Avantel, the only company with U.S. capital, possesses a very small proportion of the mobile market, providing a trunking service. The Colombian government granted Avantel interconnection with the cell phone operators in 2008 after an eight year lobbying effort.
Several years ago, mobile telephony services overtook fixed line services, in revenue terms. Mobile services providers (Comcel, Movistar and Tigo) currently have 40 percent of the total revenue, while fixed line operators ETB (Colombia), Telmex (Mexico) and Spain’s Telefonica account for 28 percent of total revenue. Long distance services operators: Colombia Telecomunicaciones (Telefonica/Spain), ETB, and UNE (Colombia) account for only seven percent of total revenue. ETB launched a search for a strategic partner in 2010-2011 but has yet to conclude any deal. ETB and UNE are state-owned companies.
Colombia is served by the following submarine cables: ARCOS-1, Maya-1, CFX-1, PANAM and SAm-1 submarine cables land which land in Tolu, Cartagena or Barranquilla. In 2009, the Colombian Telecommunications Regulator (CRT, for its initials in Spanish) declared cable landing stations as “essential services” enabling the CRT to regulate prices and dissuade monopoly practices.
There is minimal local production in this industry, mostly consisting of cabinets, panels, and electronic components, but these are usually products with low value added. For the most part, consumer goods and industry equipment are supplied through imports (mostly from China, Mexico, U.S., Germany, Brazil, and India). Services too, (especially cell phone services) are provided by multinationals (Colombian capital forms a minority shareholding within the operators Comcel, Movistar, and TIGO).
The approval of the Trade Promotion agreement between the U.S. and Colombia, once implemented, would have a significant impact on this sector. Virtually, all telecommunication products will become duty free upon entry into force of the Agreement, thus stimulating U.S. exports to Colombia. Currently tariffs vary between five to fifteen percent. Products within this sector account for over 15 percent of total U.S. industrial exports to Colombia.
The U.S.-Colombia FTA would also favor US products over Chinese exports to Colombia, as import duties for Chinese products would remain the same, while those for US products would be eliminated. Chinese companies’ main competitive advantage is lower cost compared to similar equipment from established vendors. However, the lower quality and reliability of Chinese equipment are considerable disadvantages. U.S. equipment suppliers benefit from long-standing compliance with industry standards, reliability, lower shipment costs, innovation, and a favorable exchange rate. In 2009, Colombia officially adopted UL standards.
Under the FTA Colombia is also committed to join the multilateral Information Technology Agreement. U.S. exporters of telecommunication products all benefit from the provisions of this treaty.
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