The telecommunications industry in Colombia is a very dynamic sector, with an annual growth rate 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. Most affected were the cell phones and accessories segments. The forecast for 2010 is a 4.9 percent increase in the total market size. Two market segments: 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/America Movil (Mexico), Movistar (Spain), and TIGO/Millicom (Swedish). 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 (Spain/Telefonica), ETB, and UNE (Colombia) account for only seven percent of total revenue. ETB launched a search for a strategic investor in 2009. 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 which land in Tolu, Cartagena or Barranquilla. In 2009, the Colombian Telecomunications Regulator (CRT) 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 low value added products. For the most part, consumer goods and industry equipment are supplied through imports (mostly from China 33.6 percent, Brazil 14.2 percent, Mexico 12.2 percent, and the U.S. 11.2 percent). Services too, (especially cell phone services) are provided by multinationals (Colombian capital forms a minority shareholding of the mobile operators Comcel, Movistar, TIGO and Avantel).
The eventual approval of the CTPA between the U.S. and Colombia 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 CTPA would also favor U.S. 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.
Colombia also recently joined the multilateral Information Technology Agreement (ITA) (December 31, 2007). U.S. exporters of telecommunication products all benefit from the provisions of this treaty.
For 2010, the expansion of broadband access and of mobile telephony services in Colombia will continue to provide diverse business opportunities for U.S. companies. The most promising areas for business development exist in the areas of:
• Cable TV equipment and services (especially advertising)
• TV equipment manufacturers and broadcasters
• Satellite manufacturers and operators
• Software and platform developers
• Internet service providers
• VoIP services providers
• Routers and switches
Increasing Internet usage has positioned Colombia among the top ten growth markets in 2007-2008. The Internet user density rate has been steadily growing (currently around 8.2 percent), and positions Colombia in fourth place within South America. The diversity in broadband products and services availability is attracting greater numbers of U.S. content provider companies to the Colombian market. Telecom operators began to offer triple play packages late in 2007.
Traditionally the U.S. has been one of the main suppliers of telecommunications equipment, especially for radio and TV transmission. In recent years strong competition has come from China, although the U.S. still holds the lead in state of the art technology products. China currently holds 33.6 percent of market share while the U.S. market share has fallen to 11.2 percent. However many U.S. product brands are also imported to Colombia through third countries (which do assembly), especially from Mexico and Brazil.
Broadband deployment is a priority for the Colombian Government, which has implemented programs for increased access, such as the “Agenda de Conectividad” and the Last Mile Initiative with support from USAID. U.S. companies should consider participating in government procurement programs. These programs are announced on the Communications Ministry website and on the government procurement website. Major projects currently put out for bid include a telecommunications satellite, to provide rural broadband access. The Colombian government has budgeted between USD 250-265 million for this project, collected via the Universal Service Fee charged to all telephone companies.
The recent opening of the WIMAX spectrum and the anticipated procurement of a rural telecommunications satellite and third TV broadcast channel will be key drivers of growth in 2010 and beyond. In addition, on December 7, 2009, the Alcatel-Lucent consortium announce it had won a contract to lay an 815 km submarine cable to bring Tolu in the Colombian mainland closer to the San Andres Island with advanced broadband connectivity in 2010. The network will support IP-based services and applications, such as on-line tourism services, e-education and e-government solutions.
In the television industry, in 2008, the Colombian National TV agency (CNTV) selected the European Digital TV standard (DVB) for the country, and broadcasters are in the process of converting to digital transmission services. CNTV is also currently in the process of awarding a license to a third private operator for national TV broadcasting. These developments could provide export opportunities for U.S. businesses. There would be demand for products especially in the areas of: broadcast transmission equipment; components for digital television consumer products, mobile telephone handsets, and there would also be increased opportunities for programmers.
Colombian companies routinely attend the USDOC-organized trips to National Association of Broadcasters (NAB) and Infocomm/NXT shows held in the U.S., to seek new product or service ideas and equipment. CS Bogota has certified the ANDINALINK and ANDICOM shows organized by CINTEL for several years.
Finally, the Colombian Government has identified call centers and contact centers as one of eight best prospect growth industries or “clusters”. Private businesses have been continually deciding to outsource their call center operations, rather than to keep this activity in-house, in order to boost efficiency and increase their competitiveness. Many businesses of this type have been set up in recent years, and also a business association has been created to further the development of the business in Colombia. The government will continue to focus efforts to attract foreign investment in this sector.