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Wireless Mission to the Andean Region

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					                 Wireless Mission to the Andean Region
                    Market Opportunity Overview


                                               Peru
Market Overview
In the 10 years since this sector was privatized and the 6 years since the market was opened up
for competition, the progress of telecommunications in Peru has been remarkable. Mobile
phones, long distance and corporate communications have been the most dynamic sectors, with
future trends aimed at convergence among the different IP technologies. Wireless is making
inroads into other telecommunications domains, and according to the Peruvian government, it is
an essential tool to bridge the digital divide. Wi-Fi free bands (2.4, 5.7 Ghz) are available, with a
number of pilot projects in rural areas being implemented. Wireless hot spots based on the IEEE
802.11 standard are becoming even more prevalent in Lima and WiMax wireless technology
might reach its peak in 2005. Internet growth has been considerable with users going from
60,000 in 1996 to more than 3 million in 2003. Growth in data transmission has also been
significant as gradually more enterprises invest in these systems to improve their internal
communications and productivity. Broadband growth has become the new telecom wave in
Peru, with 80% of internet users using broadband and nearly all public internet kiosks changing
to ADSL.

The mobile market has expanded rapidly, owing in part to strong competition. In 2003, mobile
revenues in Peru totalled some $ 630 million. According to the World market Research Centre
(WMRC), 2.3 million mobile subscribers in 2002 represented a penetration level of 8.6%.
Mobile phones overtook fixed-line phones in 2001, and by September 2003 the number of
mobile subscribers was 49% higher than the number of fixed-lines in service. According to
Osiptel’s (the Peruvian telecom regulator) industry estimates, Peru had 2.9 million mobile lines
by year-end 2003, representing a 10.6% penetration rate. Osiptel further forecasts the number of
mobile users to reach 5 million by 2005. On a related note, the Peruvian operator of the
Telefónica Móviles Group has begun offering a comprehensive line-up of 3G mobile services
nationwide using an advanced wireless data network solution from Nortel Networks. This new
network (based on CDMA 2000 IX technology) virtually puts Telefónica as the leading operator
in Peru in offering advanced mobile data services like high-speed web browsing, video
downloads, single and multi-user games, chat, ring tones, location-based services, amongst
others.

Opportunities
  e s telecommunications market is expanding at a rate of some 8% annually – almost double
overall GDP growth. Income generated is expected to top $ 2 billion this year and reach $ 2.16
billion by 2006. Accumulated investment by numerous telcos exceeds $5 billion. Steady
expansion in demand for telecoms is largely the result of previously low levels of coverage and
the healthy and recovering Peruvian economy. There is a strong demand and interest in VoIP and
wireless technologies, the latter driven by rural telecommunications projects calling for Wi-fi,
VSAT and Wimax technology, both with applications in both public and private sectors. In
addition, the presence of mining and oil and gas companies (including a large number of
Canadian mining companies) with connectivity requirements offers significant opportunities for
partnership and business. There is also a growing demand for innovative and integrated
solutions in specific niche sub-sectors such as e-Learning, Security ICT products, Geomatics and
optical technology. Opportunities exist now, with aggressive competition from American and
European suppliers.

A number of ICT government-sponsored projects are being promoted locally and internationally,
in line with the count s objectives to promote the use of ICT (particularly wireless) and bring
access to the most isolated areas of Peru. To name a few:

•      Fourth mobile band license (PCS) recently awarded to Sercotel, a unit of the Latin
       American telecoms group América Móvil (owned by Carlos Slim, founder of Telmex).
       By entering the Peruvian mobile market, América Móvil will be competing for a share in
       Peru and in the region as a whole against Telefónica Móviles. TIM (Telecom Italia) and
       Nextel are also active to a lesser extent. Telmex´s acquisition of the new mobile band
       positions it as an important player in Peru. Already in late 2003, Telmex had bought the
       Latin American operations of US-based AT&T. Although its main interest was the huge
       markets of Brazil and Argentina - and to a lesser extent Colombia – Telmex also acquired
       AT&T’s small e uvian ope ation, which had established a foothold in the ma ket fo
       corporate traffic and an optic fibre network in the capital.

•      New technologies such as Wi-Max will begin to have an impact on the market in 2006.
       Intel has been promoting the technology in Peru with presentations at Peruvian
       government events. In its first phase, Wi-max will be used for backhaul services and
       evolve to encompass rural Internet projects. The Ministry of Transportation and
       Communications (MTC) has issued new regulations designed to attract foreign and local
       investment, and these regulations cover Interoperability, Infrastructure Network Sharing,
       Number Portability, National Band Allocation Program, Rural Communications
       Investment Program and Fixed Telephony in the 450 MHZ band using CDMA
       technology. These new policies will further develop e-commerce in Peru by providing
       ideal conditions for broader mass access to communications services. The MTC also
       provided new regulations for the concession of the recently-auctioned PCS band and the
       fusion of Bellsouth into Telefonica del Peru (October 2004).

•      Growth is likely to be strong in broadband and Internet-related services as well: Some
       230,000 of a total of 2.1 million fixed line subscribers currently pay for broadband
       packages. This is the highest proportion in Latin America, explained by the fact that
       public Internet booths were established early in Peru by the pioneering Red Científica
       Peruana. There are now some 20,000 public Internet access points across the country, and
       many users were quick to sign up for the private broadband option.

•      B oadband should soon be available in the inte io of the count y, th ough a ― u al
       b oadband‖ p oject being p omoted by Osiptel. It will be funded through FITEL, a fund
       to develop rural telecommunications projects and created through a 1% levy on amounts
       billed by all telephone operators. It is planned to spend $19 million in the first stage.
       Project just received approval from the ministry.

•      Osiptel has also approved plans for four rural telephony projects requiring a total
       investment of US$ 20 million. Under the first project, Osiptel plans to install public
       telephony booths in 1,134 isolated locations. A second project aims at providing
       broadband connectivity to 3,000 rural locations. The third project involves the provision
       of mobile telephony in four areas defined as economic corridors. The last project will
       seek to bring Internet connectivity to all district capitals, with a trial project in 68 cities.

•      Future trends reflect network convergence based on the IMS (IP Multimedia Subsystem)
       standard, with a development of wide bandwidth access platforms that allow for voice
       integration, data and multimedia services in order to offer the same applications
       regardless of the type of access. Orientation towards third generation networks will allow
       convergence of services accessed through mobile networks based on CDMA IX/EV-DO
       or UMTS and the ones of fixed access based on IP/MPLS. Solutions aim at a network
       integration through new technologies such as IP, which will reduce link costs which are
       excessively high in Peru.

For further information, please contact: Katia Rivadeneyra, Trade Commissioner,
kata.rivadeneyra@international.gc.ca

Prepared by the Trade Section
Canadian Embassy in Peru
                                           Ecuador
Market Overview
In Janua y 2002, Ecuado ’s ma ket fo telecommunications (telecoms) se vices was opened to
free competition. At that time it was valued at some $2.8 billion.

Acco ding to Ecuado ’s telecoms egulato , Supe intendencia de Telecomuncaciones
(Supe intendency of Telecommunications), the count y’s fixed-line market accounted for 1.65
million subscribers and a penetration rate of 13.1%, as of March 2005. This represented an 11%
increase from 1.54 million registered customers at the end of 2003. Despite the increase, this
penetration rate represents one of the lowest tele-density rates in Latin America.

Given the expensive cost of new fixed-telephone lines and shortfalls in the quality of telecoms
services, wireless telephony is the preferred option by Ecuadorean consumers. Indeed, the
number of cell phone users has increased exponentially over the last five years. As of March
2005, Ecuador had a total of 3.95 million mobile phone clients, representing a 65% increase from
the end of 2003, and a 179% increase from the end of 2002.

Ecuado ’s wi eless telephony ma ket is dominated by two majo playe s, o ta (with
approximately 60% market share) and Telefonica Moviles (35% share). A third carrier, Telecsa,
has a minimal market share. Both Porta and Telefonica Moviles are aggressively expanding their
networks and services.

•      Last year Porta invested US$77 million in the modernization of its Global System for
       Mobile Communications (GSM) / Enhanced Data Rates for Global Evolution (EDGE)
       network. The upgrade gave Porta one of the most advanced networks in Latin America,
       increased its capacity to be able to handle 1 million new customers, and is allowing it to
       move increasingly away from pre-paid to subscription services.

•      Telefonica Moviles which only entered the Ecuadorean market in 2003 through its
       acquisition of Octecel from BellSouth, has invested substantially in the last year in re-
       branding itself as Telefonica Movistar. Prior to selling Octecel, BellSouth invested$23.8
       million in an upgrade of its network, moving towards a 3G infrastructure that was
       provided by Nortel Networks and uses CDMA2000 1X technology.

•      Telecsa is Ecuado ’s thi d, smallest and newest wi eless ca ie having only launched its
       se vices at the beginning of 2004. It is cont olled jointly by Ecuado ’s two state-owned
       fixed-lined telcos, Andinatel and Pacifictel but is managed and operated by SwedTel.
       Although the carrier is fighting for market position against two large multinationals, it
       has been able to make some impressive gains in the market, obtaining 64,000 users in its
       fi st 10 months of ope ation. Cu ently the company’s se vices a e only available in the
       cities of Quito and Guayaquil; however, it plans to roll nationally this year.

Since 2003, Ecuado ’s inte net client ates have inc eased substantially, f om 107,350 use s at
the end of 2003 to 210,812 users as of March 2005. By far the majority of these users are
individual, rather than corporate, users. Broadband internet technologies (ADSL, cable, etc.) are
a fairly recent addition to service provider offerings and remain uncompetitive to all but
corporate users, as a result of their high cost.

Opportunities
Steady expansion in demand for telecom services is driving huge market growth and will
continue to do so in the near and medium-term. Growth is expected to slow in the long-term as
the wireless market, particularly the cellular market, becomes saturated. There is a strong
demand and inte est in VoI (amongst Ecuado ’s leading telcos) and wi eless technologies, the
latter driven by rural telecommunications projects calling for WIFI, VSAT and WIMAX
technology, both with applications in both public and private sectors. There is also a growing
demand for innovative and integrated solutions in specific niche sub-sectors such as e-Learning,
Security ICT products, and Geomatics. Opportunities exist now, however, there is aggressive
competition from American and European suppliers.

What follows is a selection of specific opportunities both within the public and public telecom
sectors:

•      Although slow to act, Ecuado ’s public secto offe s Canadian telecom companies a
       number of opportunities. Fo example, unde the Wo ld Bank’s owe and
       Communications Sectors Modernization and Rural Services (PROMEC) Project, the
       Ecuado ian gove nment has developed a US$4 million u al ―telecent e‖ p oject which
       aims to eventually connect some 5,000 rural communities using a combination of VSAT
       and WIFI technologies. The previous administration was about to release an RFP for this
       p oject in Ap il 2005 when the gove nment was changed by Ecuado ’s Cong ess.
       Although, the project is expected to continue (the World Bank has already disbursed the
       funds for the project), it remains to be seen whether or not the RFP will be revised — it is
       very likely that it will.

•      As pa t of the Ecuado ean gove nment’s plan to inc ease telephony penet ation amongst
       its population, the count y’s two la gest (public secto -owned) telcos, Andinatel and
       Pacifictel, each must also develop a number of telecentre projects. Andinatel who is best
       placed to manage such an initiative, having had three successive years of profitability
       (US$82.9 million in 2003 and US$71.6 million in 2004), is required to develop 72
       connectivity (telephony and internet access) projects across northern Ecuador. These
       projects will focus on rural and remote communities that will be best served using
       combinations of fixed and wireless solutions, including VSAT, WIFI, and potentially
       WIMAX as well as microwave and radio technologies.

•      Recently, Ecuado ’s thi d la gest fixed-line telephony service provider, Etapa Telecom,
       was given approval to expand its infrastructure and services nation-wide. Previously the
       company had only operated in the province of Azuay. It is currently looking for partners
       to jointly develop this expansion and plans to use a mixture of fixed line telephony and
       wireless equipment.

•      As a result of an increase in the number of credit lines and payment facilities available to
       the public, many medium- and large-sized ecuadorean companies (banks in particular)
       are bringing their technological systems (including telecommunication systems) up to
       date. In addition, the multitude of multinational oil and gas exploration and service
       companies with operations in Ecuador offer vast opportunities for Canadian wireless
       technologies providers. These multinational oil and gas firms have substantial
       investments in remote areas and so have very particular telecommunications needs.

•      Ecuado ’s inte net se vice p ovide s a e slowly but su ely int oducing new b oadband
       and Internet- elated se vices. This ma ket segment is ve y much eme ging with Ecuado ’s
       larger internet providers planning major infrastructure investments in order to expand
       their networks and improve their service offerings (both quality and range of service).

Fo mo e info mation on Ecuado ’s telecom ma ket visit: http://www.infoexport.gc.ca/ie-
en/DisplayDocument.jsp?did=44351

or contact Mark Richardson, Trade Commissioner, mark.richardson@international.gc.ca

Prepared by the Trade Section
Canadian Embassy in Ecuador
                                                Venezuela
Market Overview

Venezuela’s telecommunications (telecom) ma ket, se ving a population of nea ly 26 million
people, is among the most advanced in Latin America. In 2003, total telecommunications
services revenues accounted for over $4.2 billion2, while the gross domestic product (GDP) was
roughly $120 billion and GDP real growth rate was -9.2%. Total telecom investments reached
$332 million in 2003.

Although the oil indust y has become the count y’s most impo tant indust y, Venezuela's
information and communications technologies (ICT) market, particularly in the area of
telecommunications (telecom), and has developed a highly skilled workforce. The telecom
industry is forecast to emerge as a priority area for the country's economic growth. Since 1991,
the Venezuelan regulatory telecom body – Comision Nacional de Telecomunicaciones
(Conatel), was established for issuing new mobile concessions, setting equipment standards and
monitoring quality of service.

Venezuela's fixed-line telephony penetration rate (11.5%) is among the lowest in South America.
Howeve , the count y posted a ma ket g owth ate of 1.9% in 2003. In addition, Venezuela’s
fixed-line network is currently losing market share to the mobile market.

ICT growth has been stimulated by increased demand (from both individuals and businesses) for
advanced telephony and broadband Internet services. Government support for advanced
technologies and networks as well as increased liberalization of the sector also spurred on
growth.

Opportunities

The high regard in Venezuela for Canadian technological expertise creates excellent
opportunities for Canadian companies that offer innovative and sophisticated products and
services at a low cost.

Both state and regional levels of government have shown strong support for the use of the
Internet to provide a wide range of electronic services, including e-commerce transactions, e-
government, e-learning and e-health. Considerable opportunities exist for suppliers of network
equipment, e-services and in all areas of these sectors. Opportunities also exist in information
technology (IT) support and maintenance, Internet development, systems design and integration,
and network outsourcing.

Canadian companies will find opportunities to provide e-learning content, services and
technology, which are viewed as cost- and time-efficient alternatives to traditional learning and
training systems. As the demand for e-learning accelerates, opportunities will increase for on-line
        2
          All monetary amounts are expressed in Canadian dollars, unless otherwise indicated. The conversion rate
to Canadian dollars is based on IDD Information Services, Tradeline, May 2004.
courses, on-line course catalogues, local area network systems, Web-based learning management
systems, and on-line support. Other emerging opportunities with considerable potential include
the provision of the content, services and technology required to support wireless e-learning, e-
learners with special physical and learning needs, and various education centres throughout
Venezuela. Suppliers from the United States dominate the e-learning market, particularly with
respect to technology and generic content. However, shifting alliances and increasing
partnerships have led to increased industry consolidation.

Venezuela’s location, stable economy, well-developed infrastructure and long-standing political
relationship with Canada offer Canadian companies comparatively straightforward access to one
of the world's richest developed nations.

It is important for Canadian companies to develop a strong relationship with, and provide good
support (including training) to, potential and current Venezuelan partners. Speaking Spanish
gives a definite advantage, as does offer solutions that are multi-sectoral. Single Canadian firms
and organizations or networks of firms will be in an excellent position if they are able to
organize a suitable array of hardware and technical capability to meet the varied needs of
Venezuela’s ICT indust y. It is also impo tant to conside p oviding joint demonst ations and
pilot plants.

Since late January, 2003 the Venezuelan government has implemented foreign currency
exchange controls. These new measures severely restrict the free access to foreign currency.
Some locals companies are circumventing the exchange control by utilizing offshore funds.
Therefore before doing business in Venezuela, Canadian companies are advised to ask buyers
about their availability of funds for payment.

The Venezuelan government and businesses are eager to receive foreign partners that offer new
technologies and local participation in production. The transfer of technology and know-how
between the Venezuelan government and Canadian companies would contribute to continued
success fo Canadians in Venezuela’s ICT indust y.

Specific information about the security market in Venezuela: To counter increasing crime
rates in this country of 25 million people, companies and individuals are adopting more
sophisticated technology systems in areas such as access control, automotive protection devices
(alarms, GPS tracking, etc.), biometrics, closed circuit TV systems, and perimeter protection
systems. The Venezuelan security market is highly competitive and the most important
manufacturers have a presence either directly or through a distributor. New entrants must be
price competitive and willing to make a commitment of time and resources.

For more information, please contact Victor Stott, Trade Commissioner,
victor.stott@international.gc.ca
                                           Colombia
Market Overview
In 2004 the telecommunications sector grew at an annual rate of 4,9%, outpacing the growth of
the overall economy. 2004 marked the 10th anniversary of cellular mobile telephony license
granting in Colombia. Ten years after this process, the number of subscribers for cellular mobile
telephony overtook the fixed telephony services and became the prime telecommunications tool
in the country.

Colombia’s mobile phone penet ation g ew exponentially du ing the yea eaching a 21% level
and is projected to increase at a much faster pace (40% for year 2006) when 20 million people
(approx.) will have a cellular phone, up from 14 million subscribers in April 2005.

By the end of the first half of 2004, there has been an estimated total of 3.5 million internet users
in the country, reaching a 7.91% penetration rate. From June 2003 to June 2004, there was an
estimated inc ement of 29,8% in total inte net use s. Acco ding to the use ’s base dist ibution,
dial-up continues to be the technology most widely used in the nation.

Although dedicated users using cable, copper or radio technologies increased 59.6% with respect
to the preceding period, at 1.2% annual growth pace, the Country shows a penetration level
below similar developing countries. Broadband access has become one of the most important
issues in order to find alternatives to improve the telecom sector.

Opportunities
The mobile cellular telephone industry in Colombia is one of the most dynamic sectors of the
economy. Cellular carriers, pcs and trunking operators are aware of the need to improve their
infrastructure in order to meet the ever changing needs of the market and to keep up to date with
the latest technology in overseas markets.

According to statistics provided by Telecoms & Media Firm, Colombia, with 11,4 million
subscribers (1st quarter 2005) has the fourth largest mobile cellular telephone market in Latin
America, preceded by Argentina with 14,9 million, Mexico with 40 million and Brazil with 72,5
million.

Comcel (www.comcel.com.co) owned by America Movil from Mexico, and Telefonica
(www.telefonica.com.co) owned by the Spanish Telefonica group, which recently acquired
Bellsouth’s assets in the egion, a e Colombia’s la gest cellular phone carriers and both enjoy
solid financial health. Ola, the pcs operator of the country has faced a series of problems while
establishing itself as a major player in the mobile communications arena, but it is owned and
backed by two of the la gest telecommunications companies of the count y, ETB (Bogotá’s
telephone company – www.etb.com.co) and by E M (Medellin’s public utilities company –
www.epm.com.co) .

Avantel (www.avantel.com.co) is the nation’s t unking ope ato . It is backed by a la ge indust ial
g oup (El Tiempo G oup) and ope ates ove Moto ola’s technology. Avantel is in talks with the
Ministry of Telecommunications to get permission to gain direct access to the cellular network
dialing nomenclature. Telecom (www.telecom.com.co), a state owned local and long distance
carrier is also in the quest to get a license to launch a fourth mobile telephony carrier. A final
decision over this matter will be made during 2005.

These large companies should represent a premium business opportunity for Canadian exporters
involved in the mobile telecommunications field, such as: Equipment suppliers, software
vendors, technology consultants, etc.

As of June of 2004, the total amount of subscribers to internet using different technologies
totaled 818.853. This gradual increase confirms a tendency of growth over previous years and
the Government has acknowledged, that only when Colombian users have enough tools allowing
efficient access to the content and applications, will it be possible to implement practical
solutions in topics such as education, e-commerce and e-government among others.

Through the Ministry of Telecommunications and initiatives by Compartel
(www.compartel.gov.co) which will bring connectivity to rural areas among others, the
Government is backing a national strategy to develop an internet backbone for the country.

The private sector is also investing heavily in infrastructure deployment to attract both corporate
and home customers to the internet. The internet is a clear opportunity for Canadian companies
interested in the areas of infrastructure, content, software, e-government, e-security, e-health, etc.

Andicom:
Andicom (www.cintel.org.co) is the Andean region's largest annual and most respected ICT
trade show. Andicom is sponsored by the Ministry of Telecommunications of Colombia
www.mincomunicaciones.gov.co, the International Telecommunications Union (ITU)
www.itu.int and the Institute of Electrical and Electronics Engineers (IEEE) www.ieee.org.

Andicom 2005 will be hosted in Cartagena - Colombia on October 26-28 in Cartagena's
International Conference Centre. This event presents a golden opportunity for Canadian
companies willing to make a major impact on the market.

For more information, please contact Fernando Vargas, Trade Commissioner,
fernando.vargas@international.gc.ca

Prepared by the Trade Section
Canadian Embassy, Colombia

				
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