Entel entering new business phase in Chile after reaching 'comfortable' position

Chilean telco Entel is entering a new phase of business after almost four years of focusing on regaining market share. 

The company has reached a position that it considers comfortable for now and is committed to continuing to deploy 5G and growing in the home segment above all else.

Entel plans capex of close to 20% of its revenues during 2023, Entel CFO Sebastián Domínguez confirmed to BNamericas during the presentation of its 2022 results.

“We’re constantly revisiting our investment forecasts. If we see room to reduce them, we will do so and if we believe that the evolution of rates and the growth in the home [business] allows it, we’ll make investment efforts. We’re facing a cycle of technological replacement and there’s room for opportunity with fiber to the home,” said Domínguez.

In 2022, the firm’s capex reached 515bn pesos (US$641mn), of which 393bn pesos was attributed to the Chilean operation.

The main investment focus for the company will be the second stage of deployment of the 5G network in Chile. Entel already has close to 1,200 active sites and 1mn 5G customers. It had a total mobile customer base of 20.5mn as of December 31.

The company has already progressed with the second stage of the rollout of 5G with the activation of the first 51 sites.

Entel also expects to make investments in fiber optics and home terminals with the aim of continuing to add broadband clients. The company has made the home segment its main pillar of growth after deciding to sell its fiber optic network to On*Net Chile, in a deal that includes an agreement for the use of the wholesale network.

The transaction has not yet been completed and is being assessed by Chile’s national economic prosecutor (FNE).

Entel had 1.2mn homes passed with fiber optics as of the end of the year – this is the network that it agreed to sell to On*Net – and the proportion of connections to homes passed was 18%.

Jose Luis Poch, vice president of Entel's consumer division, said that if the agreement with On*Net is approved, it would be able to quickly increase its fiber optic coverage, incorporating almost 3mn homes passed.

The company therefore plans to increase its commercial investments in order to attract new customers in this segment.

The move will not be easy, since Chile has an average of 3.5 service providers per home passed and Entel believes that figure could rise to 4.0 or even 4.5 in the future.

In any case, the results of its strategy to grow in the home segment will not be immediate. Entel expects to have effective access to the On*Net network in the fourth quarter of 2023, so the first commercial results would be seen in 2024-25.

COMPETITION

After several years of aggressive competition in the mobile segment due to the arrival of a fourth operator, WOM, Entel expects that the changes in the market will begin to slow.

"Once Entel stops taking market share and instead seeks to stabilize its position, it’s reasonable to consider that the market will be a little less aggressive," said Poch.

The company already feels it has a comfortable market position. Entel was the leader in 5G technology with nearly 738,000 lines and 45.6% of the market as of the end of September, according to the latest data from regulator Subtel.

If all technologies are taken into account (2G, 3G, 4G and 5G), Entel is also the leader with 34.6% of total mobile lines in Chile, followed by WOM (23.8%), Movistar (21.3%), Claro (18.4%) and VTR Móvil (1.1%).

Entel made a rate adjustment in September for its new plans and on January 1 it increased prices for its entire customer base. “I think it is a practice that the industry is going to do and which in the last 15 years has been unthinkable. The competition has followed us," he said.

Asked by BNamericas about the impact of the merger between VTR and Claro, Poch said that the company sees an opportunity in the short term, but uncertainty in the long term.

“They’re going to enter a complex period of consolidation. They have two different DNAs, brands that have different positions, and that will surely mean a short-term opportunity [for Entel],” he said.

In the long term, however, everything will depend on the decisions that the new merged operator is going to take. “It will depend on what their strategy is, whether they’re going to form their 5G network or are going to make a complete transformation to fiber technology,” he added.

RESULTS

Entel's consolidated revenues amounted to 3.14tn pesos in 2022, which was an increase of 28% compared with 2021. This was driven by positive results in the mobile services segment in Peru, added to solid growth in digital services and internet in Chile and Peru, as well as the effect of extraordinary income associated with the sale of its datacenters in both markets, the company said in a statement.

Consolidated Ebitda amounted to 1.28tn pesos (+66%) and annual profit surged from 75.0bn pesos in 2021 to 457bn pesos in 2022.

In Chile, Entel grew its customer base by 2.5% to 10.4mn, with a 6.2% increase in postpaid clients.

In home services, there was a 39% increase in fiber optic services to over 324,000 revenue-generating units.

Total revenues in Chile were 2.15tn pesos, some 29.2% more than in 2021.

Pictured: Entel headquarters in Santiago, Chile.