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Arcotel foolishly halts negotiations with Claro and Movistar due to its own data provision failure

Published on July 03, 2023

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The renegotiation of contracts between Claro and Movistar, two major mobile telephony operators in Ecuador, is currently at a standstill as their 15-year concessions are about to expire.

The Telecommunications Regulation and Control Agency (Arcotel) suspended the renegotiation process with Claro and Movistar on May 24, 2023, for a duration of 120 days. The reason for the suspension is the incomplete assessment of the radioelectric spectrum, which needs to be conducted by Arcotel and the International Telecommunications Union.

To unblock the renegotiation process with Conecel (Claro) and Otecel (Movistar and Tuenti), several pending procedures with State entities need to be addressed. However, by the time the 120-day suspension ends, Conecel’s concession for the provision of Advanced Mobile Service (SMA) will have already expired. Conecel is a subsidiary of the Mexican group América Móvil, and its contract was signed on August 27, 2008. Similarly, Otecel, a subsidiary of the Spanish Telefónica, will see its concession term end on November 30, 15 years after the contract was signed.

15-year contracts to expire soon

Claro currently holds a 52% market share with 9.2 million active lines, while Movistar has a 30.5% share with 5.4 million lines. Patricia Falconi, the director of the Association of Telecommunications Companies of Ecuador (Asetel), emphasizes the need for the State to ensure the provision of services and recommends extending the operators’ contracts during the negotiation process.

Both Claro and Movistar are among the top 10 companies with the highest sales in Ecuador. In 2022, Conecel recorded revenues of $1,041 million, ranking eighth among the country’s largest companies, while Otecel ranked tenth with revenues of $915 million, according to the Superintendency of Companies.

In its 2022 financial statements, Conecel expressed its expectation to reach an agreement with the Government for the contract renewal during the third quarter of 2023. Falconi highlights the importance of providing legal certainty to companies and warns that the suspension of the negotiation process sends a negative signal to foreign investors.

Negotiations halted because Arcotel hasn’t completed assessment

The main reason behind the renegotiation suspension is the incomplete assessment of the radio spectrum, which is a natural resource owned by the State. The spectrum allows for the transmission of electromagnetic waves and the provision of telecommunications services. While the rates for the spectrum’s use and exploitation are set by Arcotel, the process must adhere to the criteria of the International Telecommunication Union (ITU), as stated in the Telecommunications Law.

Although the ITU had conducted a technical assessment of the 2.5 GHz and 700 MHz bands in January 2021, additional assessments, including the 3.5 GHz band crucial for 5G technology development, were still pending. The negotiation process is also challenged by the issue of determining the price that the operators will pay for the use of the spectrum.

In 2008, Conecel renewed its licenses by paying $480 million, while Otecel paid $220 million for the concession. In 2015, there was a further renegotiation to expand the spectrum’s use for the development of the 4G network, for which the operators paid an additional $330 million to the State.

Negotiations started 2 years ago

The delay in renewing the contracts is causing setbacks in the government’s plan to provide 4G coverage to 80% of the Ecuadorian population by 2020. Arcotel announced the start of negotiations with Otecel and Conecel on August 25, 2021, after receiving the ITU study. The negotiation process was expected to last two years and included various phases, such as meetings with the operators, the State, and independent observers, which should have lasted 120 days.

Certal, the Center for Studies for the Development of Telecommunications and Access to the Information Society of Latin America, is one of the independent observers involved but has also been notified of the suspension of dialogues.


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