Mobile in Uruguay: Competition Fuels A Surge in Cellular Subscribers
By Larry Luxner
Along the seaside boulevard fronting Montevideo's container shipping terminal, Uruguayan phone monopoly Antel has just laid the cornerstone for its 34-story "Torre de las Comunicaciones." Upon its completion in 2000, the silver-blue, needle-shaped structure will be the tallest building in Uruguay -- and a testament to the country's success in bringing advanced telephony to average citizens.
Uruguay's 3.2 million people already enjoy South America's highest teledensity (30 per 100 inhabitants), and it's the first Latin nation to achieve 100% digitalization of its phone lines.
One indication of the growth in telecom is that last October, telephone numbers for Montevideo and surrounding suburbs were lengthened from six digits to seven. And nearly everyone, it seems -- from gaucho cowboys to college students -- has access to e-mail.
When it comes to basic telephony, there's no competition. That's because fearful Uruguayan voters -- in a December 1992 referendum -- overwhelmingly rejected selling off the state-owned monopoly, going against the overall trend toward privatization.
But in value-added services, particularly cellular, competition is fierce. Sweden's Ericsson, Canada's Northern Telecom and Japan's NEC all have contracts to supply cellular infrastructure to Antel.
In October 1997, Ericsson won a $29 million lease and revenue-sharing contract to expand Antel's cellular network -- bringing the company's cumulative sales in Uruguay to $75 million. Under the plan, Ericsson not only supplies the RBS-884 and RBS-882 radio base stations and other equipment, but also a whole service package including a financing mechanism whereby Antel pays a sum based on the monthly invoicing per subscriber. Ericsson's goal is to have 80% of this package implemented by the end of August 1998.
"As far as I know, this is the only place in Latin America where Ericsson operates the network on a build-operate-transfer basis," says Anna Schmidt, product manager at Ericsson Uruguay, which supplies the heavily populated southern and eastern regions. "Normally, the operators themselves handle that."
In September, Antel awarded Nortel a $15.5 million contract to expand Uruguay's digital wireless network. The deal will add capacity for 30,000 new subscribers to the project Nortel initiated in 1996 for Antel, and will double the number of subscribers using TDMA cellular technology in Uruguay.
Nortel says the network -- whichi covers central and northern Uruguay -- is the first in Latin America to combine fixed wireless-access technology with mobile IS-136 TDMA digital technology. The network -- providing a cheaper alternative to copper-based networks -- consists of Nortel's 800 MHz TDMA infrastructure equipment, including DualMode base station radio equipment, Proximity T base stations and terminals, DMS-MTX digital switching, and fixed and mobility services.
The total cellular market now stands at 120,000, of which Antel enjoys a roughly 65% market share. Movicom (a joint venture of Motorola, Movicom Argentina and some local investors) has the remaining 40%. Broken out by company, Ericsson's cellular market share within Antel stands at 49.24%, while its fixed cellular market share is 9.65%. Rivals Nortel and NEC have the remaining cellular lines.
"At the beginning of 1994, there were only 3,000 or 4,000 subscribers in the whole country. All were Movicom customers," said Ericsson Uruguay's general manager, Peter Axell. "When Antel launched on April 1, 1994, they planned to reach 2,000 to 3,000 within two years. But by the end of 1994, they already had 2,000. Growth was much faster than anyone expected. Prices started falling immediately."
At present, the cost of service is 3 pesos (29¢) a minute, plus a monthly fee of 400 pesos ($39). Given Uruguay's prosperity, says Axell, there's plenty of room for growth. Ironically, the biggest obstacle to further cellular expansion is Uruguay's sophisticated phone system -- unlike other Latin countries where people resort to cellular phones because conventional telephony is so inadequate.
"The fact that they opened up the cellular sector to competition has proven the benefits of competition from the point of view of service and the consumer," complains David Michaels, president of the Uruguayan American Chamber of Commerce in New York. "Why doesn't Antel do the same with its regular telephone service?"
The reason may be that Uruguay's fixed network is on par with that of neighboring Argentina, and much better than that of its other neighbor, Brazil. "It's a very good network, among the best in the world," says Ericsson's Axell. "Even Scandinavia doesn't have 100% digitalization."
Uruguay also has one of Latin America's highest Internet penetration rates -- and literacy rates. Earlier this year, the Uruguayan government chose Novell Inc. to network 700,000 students at 450 high schools via the Internet. Novell says Uruguay is buying licenses for 5,000 workstations using its network services, as well as centralized network management software. Also part of the deal: 100 licenses for Novell Directory Services.
"Novell is the only network server system that includes a directory service allowing a school to manage e-mail, Internet access and administrative applications from one location and on log-in" says Novell's Jonathan Cohen, adding that rival solutions require too much staff and are too costly to manage, "especially in situations where Internet access needs to be tightly supervised."
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