Spotlight: How and where Chilean carriers are investing

The main Chilean operators are ready to make large investments to bolster their spectrum positions in next week's second auction of 3.5GHz frequencies for 5G. 

This extra spend will occur at a time when companies continue to make coverage investments as part of their commitments related to the first 5G auction, held in February 2021, and 4G capacity expansions.

5G players Entel, Movistar and WOM are all in their second and third phases of installing 5G-related infrastructure as part of their investment obligations.

And on the fixed broadband side, the carriers continue to invest to migrate networks from legacy and outdated technologies, such as copper, to fiber amid a fiercely competitive scenario.

To alleviate some of the strong capex pressures, some operators have bet on partnerships, as in the case of ClaroVTR, and/or using neutral, wholesale networks.

BNamericas provides an update of each company’s investment strategy.

ENTEL

The market leader in the mobile segment, but with a relatively low penetration in fiber broadband, Chilean firm Entel should see some spending relief in terms of expanding the fiber infrastructure.

This is because it obtained clearance for its agreement with neutral network OnNet Fibra Chile, the joint venture between Telefónica and KKR.

OnNet acquired Entel's fiber network for US$432mn, which included a deal for the use of the network by Entel after the sale.

By relying on OnNet for the infra rollout, Entel expects to more than triple the number of homes passed by the end of 2024. The company also estimates capex savings of US$400mn annually from the agreement.

According to its latest results report, Entel ended last year with 243,000 fiber clients. Fiber sales represented 74% of the Entel Hogar unit's total revenue, while connection penetration as a proportion of homes passed was 19.6%.

In 2023, the company invested 476bn pesos (US$522mn), down 7.6% due to lower investments in fixed services. Funds were allocated mainly to the 5G rollout and 4G access in the mobile segment.

The company projects high sales, general and administrative expenses in the coming years as strong network rollout, leasing costs and capex are set to continue to impact profitability and cash flow.

TELEFÓNICA

In addition to 5G, Telefónica's Movistar unit is investing in migrating all of its fixed broadband subscribers to fiber from copper by year-end. 

More than 1.3mn homes with Movistar fixed broadband contracts are on track for the upgrade, the head of public affairs, Fernando Saiz, said last month at the MWC event in Barcelona.

Movistar Chile also announced plans to phase out all its public payphones in the coming years.

As for its OnNet Fibra JV, Telefónica will advance with footprint expansion after reaching over 4.4mn homes last year, following 200,000 additions in 2023.

OnNet plans to spend US$120mn in the next three years to consolidate its growth, according to local newspaper El Mercurio, aiming to reach 5mn homes passed.

Movistar Chile’s expenses grew 10.8% last year, which it attributed to an increase in inventories and commissions, as well as expenses related to the JV with KKR.

Despite the increase, the company sees good capex prospects for the business following the OnNet-Entel deal.

“The difficult competitive environment and the use of OnNet's fiber network had a negative impact on opex (but positive for capex). However, following the recent agreement between OnNet and Entel, the unit cost of network usage will be reduced by 22% from January 2024,” the Telefónica group said in its latest financial report.

Overall last year, Telefónica invested 938mn euros (US$1.02bn) in its HispAm arm, which includes Chile.

CLAROVTR

ClaroVTR, the company resulting from the merger of Claro Chile and the local operations of Liberty Latin America's VTR, had pledged US$400mn in investments to upgrade and expand fixed and mobile networks. 

The company recently saw a boost to its fiber plan by signing a 15-year agreement with OnNet Fibra to rely on the wholesale network for FTTH expansion.

Under the deal, 115,049 homes connected to VTR fiber and 20,960 to Claro fiber will be incorporated into OnNet’s footprint.

Meanwhile, there have been recent reports about problems between the partners that put the project into doubt.

Claro’s parent, América Móvil, has said it remains committed to the Chilean operations.

Replying to an investor question at the group’s latest earnings call, América Móvil CEO Daniel Aboumrad said the Chilean business was “improving” and that local managers were reducing costs and putting together a "much better network."

According to Aboumrad, the local company is worth over US$1bn and is big enough to be a competitive player in Chile, where the parent has a long-term focus.

“It’s a difficult operating environment and there’s plenty to do over the next two to three years. But as Daniel says, what we’re focused on is the long term and we expect that long-term this will be a good investment,” CFO Carlos Garcia Moreno said in the call.

MUNDO

DigitalBridge’s fixed provider Mundo is targeting another 1mn homes to connect with fiber in Chilean city centers, a large part of which it expects to undertake in 2024, CEO Enrique Coulembier told BNamericas in a December interview.

The company plans to invest around US$100mn this year in the network and clients.

The telco is expanding at a rate of 12,000 net clients per month, with close to 30,000 monthly installations. Mundo was projected to have ended 2023 with 4mn homes passed and 890,000 clients, according to Coulembier.

The third largest fixed broadband provider claims to have become the first local telco to complete the migration from copper to fiber optics in May last year, spurred by heavy investments to become 100% fiber-based.

“We're accused of having made the market very competitive in terms of rates, but we made it very competitive with connectivity, reaching where others did not reach, and in terms of customer service,” Coulembier said in the interview.

DigitalBridge had committed around US$1bn to expand its Latin American businesses in 2023, which include datacenters, fiber optics, and telecom towers.

The operator is the second largest provider of FTTH behind Movistar and is working on a wholesale format to open its infrastructure to third parties.

Mundo has invested in an MVNO operation over Movistar’s network with enabler Suma Móvil, having been the first client of the MVNO enabler group.

Last November, Mundo and Silica Networks Chile were both awarded a 5.74bn-peso contract to deploy a last-mile fiber backbone network in Los Lagos region.

WOM

After making a big splash in the local market when entering in 2015, WOM has reached a market share of over 25% market share and is the second local mobile player. It remains committed to becoming number one despite recent arm wrestling with authorities over 5G deployments, licensing and operational fees.

WOM reported 6.1% year-on-year growth in Q3 revenues to 173bn pesos. The company did not disclose capex figures.

In the third quarter, Chile registered 18.4mn 4G lines, down 6.5% year-on-year, and 3.1mn 5G lines, up 98%. With 33.9% of the mobile internet market, Entel held the top spot, followed by WOM with 25.8%. Movistar commanded 20.7% while Claro’s share was 17.4%. 

According to regulator Subtel, WOM was the operator whose market share grew the most in the quarter, at 3.7%.

In two recent rounds of layoffs, which were part of a business revamp that began in November with the return of CEO Chris Bannister, WOM cut over 300 employees. Bannister told local press the latest round was the final phase of the process.

The company is owned by UK-based fund Novator, launched in 2015 following the acquisition of Nextel Chile.