Telefónica concerned about concession uncertainties in Ecuador, Argentina

Telefónica is concerned about concession renewal processes in Ecuador and spectrum tender talks in Argentina, and about how both would play out in terms of costs for its operations for the remainder of the year.

“I'm not sure that will happen in 2023,” Laura Abasolo, head of HispAm operations, said in an earnings call on Thursday about writing down such extra costs in the current calendar year.

“In HispAm, we are being very pragmatic and financially driven regarding spectrum,” she said, but “we have uncertainty about the Ecuador concession renewal as it may be delayed because of the political changes.”

In May, regulator Arcotel decided to call off for 120 days the negotiations for spectrum renewals with Telefónica, whose license would expire in November, as well as América Móvil, whose license runs out next month. 

GSMA, which represents both of the two carriers affected – Movistar and Claro – was highly critical of the decision, calling it "one of the most significant events in the national telecoms portfolio in recent years," according to a statement.

As for Argentina, "there's 3.5GHz, but we are not sure if it will be [by] the end of this year or maybe a year from now," said Abasolo.

The country is planning a 5G tender amid economic crisis and tensions with operators regarding price controls imposed during the pandemic.

Although the approval of the tender specifications was expected for the first half, a lack of agreement is causing delays and the auction might slip into 2024.

COLOMBIA AND URUGUAY

Colombia is another, albeit minor, potential source of concern. Telefónica is requesting its AWS spectrum be renewed only for a short period due to “the agreement we are going to sign with Millicom because we need less spectrum in that scenario,” said Abasolo.

Movistar and Tigo, the Colombian subsidiaries of Telefónica and Millicom, announced an agreement in June regarding the development of a shared mobile access network.

BNamericas reported in February that Movistar was eyeing a sharing deal in Colombia.

Meanwhile in Uruguay, where the local Movistar unit secured blocks in the 3.5GHz band in a 5G tender in May, Telefónica already paid 25% of the licensing fee, according to Abasolo. 

HispAm results were solid and stable despite the tough competitive environment, she said. Tailwinds included more favorable FX and declining interest rates, including in Brazil.

MONETIZING FIBER GRID, AI

Telefónica HispAm announced two important deals in recent weeks.

In addition to the sharing MOU with Tigo Colombia, the company teamed up again with US fund KKR, in addition to Entel Chile, to create the On Net neutral wholesale fiber company in Peru. The unit aims to pass 5.2mn premises with fiber at the end of 2026, doubling the current footprint.

“We continue with the execution of our strategy to reduce the exposure to the region and make the business more profitable,” Abasolo said.

Both deals add up to Telefónica’s long-standing cost-cutting and asset disposition project.

"Group-wise, Telefónica Tech continues to outgrow its market with solid revenue growth and continues to be a source of value while Telefónica Infra further develops our fiber vehicles and looks for consolidation opportunities," said CEO José-María Álvarez-Pallete.

Worldwide, Telefónica claims to have passed 90mn premises in underserved and/or low-density areas with fiber.

On a global basis, Álvarez-Pallete also said that 32 telcos have already joined the Open Gateway Initiative, and that the group is “fostering the development of artificial intelligence-based use cases.”