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More value for Peru: Value-added services take off
Global Telephony / May 1998

By Larry Luxner

Known for spectacular Inca ruins and murderous terrorist attacks, Peru is starting to quiet down as its vibrant economy recovers from the trauma of the 1980s. That's attracted a host of foreign telecom investors eager to cash in on value-added services before Telefonica del Peru's monopoly on basic phone service comes to an end in June 1999.

"I think it's an important market," says Francisco Navarro, Global One's Bogota-based director for the Andean region. "Peru is a country of 24 million people with a stable economy growing by an average 8-9% a year over the last five years, and with a very good attitude towards foreign investors."

In March, Global One launched operations in the Lima-Callao metropolitan area, providing X.25 switching, frame relay, data transmission and Internet access to five top corporations.

Likewise, after two years of negotiations, Comsat International has won a license to build a digital telecom network in the Lima-Callao metropolitan area, using fiberoptic and microwave technologies. The company, which wouldn't say how much it's investing, will offer business clients circuits for voice, data and multimedia applications such as computer networking, videoconferencing and Internet access.

"We worked through the whole deregulation process to make sure the PTT carved out a small piece of the telecom sector for competitive applications," said Luis Valencia, Comsat's vice-president for Latin America. "That was pretty much all we could do in terms of high-bandwidth corporate services."

He added that Comsat's investment "will be driven by our success in the market. It's not like we'll build a significant infrastructure and then wait for customers to come."

With its new license, Comsat -- which also operates digital networks in Argentina, Bolivia, Brazil, Colombia, Mexico and Venezuela -- intends to start serving Lima businesses this year. As soon as Peru's telecom market is fully deregulated in mid-1999, Comsat hopes to expand its network to other Peruvian cities including Trujillo and Arequipa.

"Our target market is really corporations that require interconnection of their PBXs so they save some money," Valencia told Global Telephony. "Companies such as banks and retailers may want to connect central locations to multiple offices spread all over town. We may tie some main offices to manufacturing plants as well."

Comsat's technology is primarily microwave; the company has applied for frequencies in the 18-gigahertz range and even higher, "because the lower frequencies are fairly congested," and 18 GHz is fairly good for point-to-point applications.

He adds: "Instead of putting towers and switches all over the city, we intend to put up some basic small infrastructure to allow us to serve a number of customers. We're just getting started, since the license is such a brand new thing, but suffice to say we will first approach other customers in the region."

Meanwhile, Nextel International Inc. has bought a 70% stake in Peru's Valorcom S.A., which delivers analog SMR services in metro Lima and holds licenses covering 138 channels. Following the $27.9 million purchase, Nextel will upgrade the system to digital next year. The company, which suffered a $1.64 billion loss in 1997, recently acquired all the equity in SMR operators Mobilcom and Nextel Argentina for $178.2 million.

Finally, Intelsat recently began telephony trials with Telefonica del Peru using wireless local loop/VSAT technologies in rural areas. According to company officials, the three-month experiment will "demonstrate the technical feasibility of providing satellite interconnection for WLL installations, via Intelsat satellites, including backhauling basic telephony services into the public switched network."

The trials -- which are designed to support both local and long-distance services -- will utilize an Intelsat 2.4 meter VSAT terminal and an AMPS-based WLL system manufactured by Celcore Inc. The network will initially serve 18,000 people.

Investment is also booming in basic and cellular telephony. Since its privatization, Telefónica del Perú has invested $2 billion to develop its infrastructure. At the end of 1997, the company had 1.6 million lines in service, including 38,200 pay phones.

Meanwhile, the Peruvian privatization commission, Promcepri, has postponed to May 7 the tender for a license to operate B-band cellular phone services outside the Lima-Callao metro area. Qualified bidders are GTE and BellSouth Cordillera, and the base price for the B-band concession is $35 million. Tele 2000, a BellSouth subsidiary, already provides B-band services in the Lima area, while Telefonica del Peru operates A-band services throughout the nation.

BellSouth recently announced it would invest $100 million to expand cellular services in Peru during 1998; this announcement, made by Peruvian President Alberto Fujimori and the president of BellSouth International, Charles Miller, follows a $200 million investment in 1997.

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