20 Years of Ecuadorian Mobile Networks

On May 11, 1994, the mobile telephony service in the country was inaugurated. At that time, two private companies, Conecel, under the Porta brand, and Otecel, with Cellular Power, began the competition to win customers in Ecuador.

20 years later, the mobile phone market exceeded the expectations of all its players. With a penetration of 108%, it became one of the sectors with the highest profits in the country.

In fact, last year, the company in Ecuador that registered the highest profits was Conecel, with USD 341 million; while its main competitor, Otecel, was placed in seventh place with 113 million, according to the Superintendence of Companies.

However, in the mid-1990s the projections for the growth of this industry were not so high. Hugo Carrión was part of the consultant team that developed studies for the implementation of cellular telephony in the country.

At that time, says Carrión, it was expected that in 15 years the number of users would reach just 180,000. But the reality was different. For 2009 the number of subscribers reached 13.3 million.

But what were the factors for the mobile boom? For Juan Carlos Solines, former president of Conatel, the main factor was the low penetration of telecommunications services. "The penetration of fixed telephony did not reach 3%, getting a telephone line was something great," he says.

In the country, Solines explains, "the exponential technological jump" occurred. That is, faced with the scarce adoption of a technology, such as fixed telephony, the user adopted the following: mobile telephony.

With all that scenario, two companies took the opportunity to expand in the country. The Mexican América Móvil, since 2000, and the Spanish Telefónica, since 2005, compete to add users.

For example, Conecel, owned by the Mexican América Móvil that initially operated under the Porta brand and now with Claro, has invested more than USD 4.6 billion in 14 years, including concession rights, use of spectrum, direct taxes, indirect taxes. , among other investments. This was reported by the company through an email.

Likewise, Otecel, owned by Telefónica that is in the market with the Movistar brand, has invested USD 1 708 million in its almost 10 years of stay in Ecuador. This amount includes the initial payment made by Telefónica's shareholders to acquire the operations in Ecuador to BellSouth, in 2004. The company, through an email, indicated that this amount also includes investment in networks and systems.

A third actor, but with less prominence in the market, is the Public Company National Telecommunications Corporation (CNT EP). The state company took the place of Alegro PCS, which entered the market in 2003. CNT currently has 3.4% of the Ecuadorian market.

In 2014, this industry faces new challenges. The private telephone companies seek to reach an agreement with the Government for the concession of the spectrum of the 4G network. Also, it is intended to promote greater competitiveness through the entry of new telephone companies into the national market.

A market led by 2 protagonists

The national market has two main players: Claro and Movistar. Despite the efforts, the third actor, the National Telecommunications Corporation (CNT), has not been able to consolidate among the preferences of the consumers of the service.

The history of mobile telephony dates back to 1992. That year, the Ecuadorian Institute of Telecommunications (Ietel), which at that time was in charge of controlling telephony in the country, approved the regulations for the concession of cellular telephone service.

The rules of the game allowed only two companies to compete in the national market, says Hugo Carrión, who was part of the consultant team that conducted the study to implement mobile telephony in the country.

Six companies entered to compete to offer the service: Movitel SA; Opetel SA; Ecuador Cellular One SA; Optel SA; Conecel SA; and Otecel SA; the last two obtained the concession before the authorities.

The service costs were high. However, Conecel (Porta that later became Claro), began to emerge in the market. For Carrión, the reasons for this have happened is that Conecel "did things right".

"He started offering the text message service and investing in coverage throughout the country, that helped him stand out", concludes this analyst. 1997 was the year in which Conecel marked distance in the competition. According to a publication of September 11, 1997 of Diario Hoy, Porta reached 75,000 users, while Cellular Power (which is now Movistar) had 43,000. The reasons for distancing between companies are three: the reduced costs of telephones, to make tariff plans more accessible; an investment of USD 70 million to expand coverage; and the intentions to venture into digital technology.

For José Otero, consultant of Signals Consulting, Conecel grew when Otecel passed into the hands of the Spanish Telefónica, in 2005. In that year, the company sought to change technology, from CDMA to GSM, that is to say, it started using chip phones. For the consultant the use of a new technology brought uncertainty in the users, who preferred to stay in Porta or change to it, which already had GSM.

While the state operator Alegro, which entered the market in 2003, failed to consolidate. In this case, Otero points out that Alegro took a "wrong technological decision: he did not offer good coverage from the beginning and entered the market with CDMA technology, which was beginning to be discontinued in the market.

For 2008, Alegro went to the National Telecommunications Corporation (CNT), but the results are still discrete. Over the past six years, CNT has invested more than USD 1.4 million in state-of-the-art technology and infrastructure, the entity said in an e-mail.

Despite the fact that the CNT is the only one that offers 4G service, the Internet with the highest speed available in the market has not managed to attract new users either. Only to deploy this technology the public company has invested USD 36 million since 2012.

For Soraya Sinche, professor of the National Polytechnic School, when the operators began their operation in the country they were welcomed in different geographical sectors. Conecel was more popular on the Coast, while Otecel in the Sierra. This would mark a trend because the greater demographic concentration of the Litoral would give Conecel advantage.

Also, Sinche attributes that another cause for the breakout was the rapid adoption of GSM technology by Conecel. This attracted more subscribers to that operator.

On July 30, 2010, the National Telecommunications Council (Conatel) decided to declare Conecel as the dominant operator. The agency said that the operator is in advantage over its competitors.

Important dates

1994 Start the race. The operation of the companies begins. Two telephone companies inaugurate the national market: Conecel with the brand Porta and Otecel under Cellular Power. In 1996 Cellular Power changed to BellSouth.

1997 Conecel gains ground. Porta won more customers for the first time in the national market. In that year Porta reached 75,000 users, while BellSouth had 43,000. The increased coverage and adoption of new technology gave it more customers.

2000 Conecel sold. In that year, Conecel became a subsidiary of the Mexican América Móvil. Three years later, state operator Alegro enters the Ecuadorian market, but is not successful due to its low coverage and the use of CDMA technology.

2005 Telefónica in Ecuador. The Spanish firm Telefónica Movistar buys Otecel and it stops operating with the BellSouth brand. In 2008, the contracts with Otecel and Conecel were renegotiated. In 2011 Porta changes brand to operate as Claro.

2014 4G Negotiation The State calls for more spectrum tender to deploy 4G Network with private telephone companies. A regulation is also created for the entry of new companies under the modality Mobile Virtual Operator.

Spectrum

In the country. Ecuador is one of the countries with the smallest spectrum in the region, only 180 Mhz, distributed among the three operators, while countries such as Colombia and Chile have more than 400 Mhz allocated. It is expected to increase with new tender.

4g technology promises more speeds and user services

The implementation of the 4G network in mobile telephony - scheduled to be operational next year - will provide faster access to the Internet and expand services for users. The dean of the Faculty of Telecommunications of the University of the Armed Forces-Espe, Paúl Bernal, points out that 4G technology competes with the fixed network in terms of the speed of Internet access. This will give impetus to mobile devices that connect to this network. "The technology is quite good in terms of the new market niche that will attack mainly executives and who always want to be connected to your office."

The telephone operator Claro indicates that the allocation of more spectrum of 4G LTE (long-term evolution, for its acronym in English), is essential to expand the capacity of network data transmission and thus offer more advanced services and greater innovations technology to users.

For this reason, the operator hopes that the Government will make it possible to allocate the spectrum in the short term and establish conditions that support the investment.

The process of negotiating the new spectrum has already started and the Regime aims to sign the new contracts at the end of the year with Claro and Movistar. This last operator argues that it is not usual for a new technology like this to be developed steadily in nine years and that concessions of between 15 and 20 years are granted internationally.

The operator stressed that the massification of 4G or mobile broadband not only goes through the offer of telephone companies, but to encourage demand through public policies that promote the use of education services, health, health, procedures, etc. "That is, it is a shared obligation between the public and the private."

In addition to the implementation of a new spectrum, new virtual operators are expected in the future. These are other brands that use under lease the network of existing operators.

Bernal argues that this implies a change at the level of commercial strategies, since the new operators will not be able to make technical variations. That is, they will try to capture users with promotions, discounts and new applications and software. In Claro they are open to competition and that if the arrival of the new virtual operators is materialized, the firm aspires that they enter to compete in an environment of respect for the Law.