Colombia’s telecommunications sector can offer substantial returns for investors willing to take on emerging market risks. The Colombian telecom market has been experiencing intensified competition, increasing convergence, and the emergence of a rapidly growing broadband sector. During 2011 and 2012, radical transformations are expected both in terms of market consolidation and in the provision of new services, with landline main operators seeking strategic partners and/or investors.
The outlook is promising for the country’s economy, which is forecast to grow by an average of 4.5% annually during the 2010-2020 decade. In 2010 the GDP grew 4.2% yearon- year, spurred by sustained internal demand recovery, as a result of increased confidence, an expansive monetary policy, and improved balance of trade. The sectors that spurred this growth were mining, with an increase of 12.7% (this sector accounted for 6.9% of GDP), followed by the industrial sector with a 5.4% growth (12.5% of GDP), retail trade, restaurants and hotels 5.3% (11.9% of GDP), transport and telecommunications with a growth of 4.7% (7.5% of GDP). During the first quarter of 2011 the telecommunications and postal services already reached 3% of the GDP.
This report makes special reference to certain high growth areas such as mobile telephony services, Internet subscription services, and the television industry. These sectors have seen particularly high growth in recent years, with companies continually investing in new technologies and offering new services to clients. This report will also provide an overview of the regulatory environment, accompanied by statistical data, analyses, and outlook.
The Colombian telecom market has been experiencing intensified competition, increasing convergence, and the emergence of a rapidly growing broadband sector. A single Convergence License allows companies to offer fixed-line telephony, Internet access, broadband, and other value-added services. In order to maintain business in a highly competitive market, operators have added new services, expanded coverage, improved efficiency, and lowered costs. Operators have been increasingly offering bundled services with attractive rates for consumers, in which Internet access and other value added services are included. As per the Center of Research for Telecommunications (CETEL), in the past 10 years, the gross domestic product derived, from this economic activity increased 120%, with average growth per year higher than the GDP for the entire economy.
The country’s tele-density (the density of telephone lines in a community) is relatively high for Latin America (17-18 percent in 2010). However, there is a steep imbalance between rural and urban areas, with some regions below 10 percent and the big cities exceeding 30 percent. Bogotá, Medellín, and Cali account for about 50 percent of telephone lines in use. As of March 2011, the number of telephone main lines in use was close to 6.9 million. The landline market has been in decline and it is currently served by ETB with 27 percent of the market share, and UNE, Telefonica, Telmex, EMCALI, Telebucaramanga and other service providers with 25%, 22%, 8%, 7%, 3% and 8% respectively of market share.
Mobile Telephony Services
Colombia’s mobile market is one of the fastest-growing industries in the country. In mid- 2004 mobile telephones overtook fixed lines in service for the first time. By 2005 Colombia had the highest mobile phone density (90 percent) in Latin America, as compared with the region’s average density of 70 percent. The number of mobile telephone subscribers totaled an estimated 46.3 million during the first semester of 2011, as compared to 21.8 million in 2005 and 6.8 million in 2001. Behind the growth have been new entrants to the market, such as Spain's Telefonica and the Mexican group Telmex, which owns Colombia's leading mobile phone operator, Comunicaciones Celulares (Comcel).
Telefonica is the number-two player in the mobile phones market, which in 2004 took a controlling stake in Colombia Telecom, the country's leading landline provider. Colombia’s mobile market provides the best opportunities for growth in the telecom industry. Comcel (a subsidiary of America Movil) dominates with about 66% of the market, followed by Movistar with 22%, and Tigo (owned by Millicom International Cellular) with 11%. All three operators have been offering 3G services since 2008. Mobile Virtual Network Operators (MNVOs) have also been present in the market since 2010. Municipal telecoms operator Une-EPM currently owns a 25% stake in Tigo, but after its recent acquisition of 50MHz of spectrum in the 2.5GHz band, it is predicted that the company will become an independent operator, which will launch LTE technology.
Internet Subscription Services
In the second quarter of 2011, the ICT Ministry recorded a total of 5.52 million Internet access connections in Colombia, of which 69% were fixed and 31% mobile. Although as many as 70 percent of Colombians accessed the Internet over their ordinary telephone lines, dial-up access is losing ground to broadband. Activity in the broadband market is concentrated in major cities, such as Bogotá and Medellin, and an increasing interest in mobile broadband options is driving this market. In January of 2011, the government announced that it would raise the maximum spectrum per operator in the 1900MHz bandwidth from 55 to 60MHz, to encourage the expansion of Internet access. The four major players are Une-EPM, Telmex Hogar, Telefónica Telecom and ETB, which account for more than 80% of the market.
During 2011 computer sales have been increasing due to the revaluation of the peso and the exemption of duties and sales taxes on computers that do not exceed USD$ 900.00 (Law 1111 of 2006). Statistics from International Data Corporation (IDC) revealed that Colombia had one of the most dynamic growths in the region in this segment. As per major manufacturers with presence in Colombia, computer sales have been growing at a rate of 30% a year. In three years, from 2010 to 2012, Colombia will have sold more computers than it had sold in 30 years since the invention of the personal computer.
Radio and television
In late 2004, Radio Television Nacional de Colombia (RTVC) replaced the liquidated Instituto Nacional de Radio y Televisión (Inravisión) as the government-run radio and television broadcasting service, which oversees three national television stations and five radio companies (which operate about a dozen principal networks). Colombia has about 60 television stations, including seven low-power stations. There are approximately 515 radio stations, of which 454 are AM; 34 FM; and 27 are shortwave.
As per data reported by service providers, in 2010 the sector's revenue reached US$ 8,893 million. Mobile telephony continued to be the highest income generator within the telecommunications industry with 55 percent of total revenue (US$ 4,880 million), representing 15% growth compared to 2009. Comcel, the market leader represents US$ 3,308 million in sales, while Movistar and Tigo Colombia Movil reached approximately US$ 1,035 million and US$ 538 million respectively.
Fixed Telephony and Trunking services which accounts for 24% of the total revenue, reached approximately US$ 2,151 million. In landline and related services, the group leader was EPM Telecommunications UNE-EPM with sales of approximately US$ 846 million. Orbitel, Edatel, EPM Bogota and TelePereira reported revenues of approximately US$ 335 million. Colombia Telecomunicaciones and ETB reported revenue of US$ 1,017 and US$ 773 million respectively. On the other hand, trunking and other related services reached approximately US$ 187 million.