MercoPress. South Atlantic News Agency

Argentina cancels bid and opens 20% of 3G spectrum for government company

Minister De Vido, only one bidder met all conditions; government through with monopolies

Argentina announced the government has rejected the proposals made by bidders seeking to gain a public contract to manage up to 25% of the 3G telecommunications frequency nationwide. Instead the federal government satellite and communications company Arsat will get 20% of the available 3G spectrum.

Federal Planning minister Julio De Vido said that Arsat will seek joint venture partners to develop its own wireless network to bring more competition and lower rates to the mobile phone industry.

“We're going to define how we'll move forward with the use of these frequencies and their profitability will be given to all Argentines through Arsat,” De Vido said.

De Vido referred to Claro communications company as “the only bidder that met all capital conditions”, but also explained that the national government “is through with monopolies, so we decided not to give the contract to one company only, thus, we have decided to call off the bidding since the government considered that bidders did not meet the minimum requirements.”

Argentine President Cristina Fernandez has greatly expanded the state's role in the economy since she took office in 2007. She shocked investors earlier this year when she seized a controlling stake in Argentina's biggest oil company, YPF from Spain's Repsol.

Now telecommunications appears to be the next sector that will see an increased government presence. Argentina boasts one of the highest rates of mobile-phone ownership in the world, with about 55 million wireless subscribers in a country of almost 41 million people.

The cancelled spectrum auction is a blow to Argentina's four incumbent wireless carriers--Telecom Argentina and subsidiaries of Mexico's America Movil (Claro), Spain's Telefonica and US-based NII Holdings, that submitted bids.

Carriers have called on the Argentine government to free up more spectrum so they can meet the growing demand for bandwidth- intensive data services.

De Vido also indicated the government would take another look at the complex shareholder structure that links Telefonica to Telecom Argentina. Telefonica holds an indirect stake in Telecom Argentina as a result of a convoluted transaction that saw the Spanish firm obtain an interest in Telecom Italia SpA in 2007.

The Argentine government at one time opposed that transaction on the grounds that the Telefonica and Telecom Argentina tie-up had created a virtual monopoly. Argentina's anti-trust agency approved the arrangement in 2010 when Telefonica agreed to give Argentine minority investors sweeping powers in Telecom Argentina.

“In the case of Telecom and Telefonica we are going to continue working to resolve the issue of an installed monopoly [situation]. We are going to be prudent, but very firm in making decisions and setting a time frame to resolve these issues,” Minister De Vido said.

The Cristina Fernandez administration appears to have big plans for Arsat, a company whose budgeted revenue this year totals just 430 million Argentine Pesos, some 92 million dollars.

The company is already committed to a number of ambitious and very expensive projects, including the launch of a satellite next year and the deployment of a 58,000 kilometre nationwide fibre-optic network.

De Vido demanded that wireless carriers invest more to improve service quality because consumers often complain about poor service and a total lack of coverage in many areas. Earlier this year, the government fined Telefonica's local subsidiary about 185 million Argentine pesos for a massive service outage in April.

Minister De Vido said Arsat will work with cooperatives and smaller companies in the capital of Buenos Aires and the provinces, “with profits benefiting all Argentines”.