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The age of alliances: a new path for Latin America

 

As we explain in our “Digital Deal”, now is the time to lay the foundations for more digital and sustainable societies and economies. A spirit of cooperation needs to be fostered to face the challenges of closing the digital divide and the deployment of new networks.

The telecommunications sector needs a new momentum to ensure new flows of capital are again allocated to infrastructure deployments: the last decade has witnessed a sharp decay in the sector’s return on capital, due to fall in revenues and a continuous effort in expanding connectivity to meet traffic growth. Similarly, new flows of ideas, technical solutions and innovative business models are required to cope with the challenges we face ahead. Amazing things are possible when we cooperate and work together towards a common goal.

Peru connected

Telefonica is developing a new strategy to ensure the sustainability of its investments, signing alliances and agreements to extend and deploy its networks in Latin America. Through the exploration of new business models, Telefonica is a digital ally that expands connectivity reaching out to areas where it was not economically feasible until now. Internet para Todos (IPT) and PangeaCo, both models put in place in Peru, and our new operational model in Mexico are examples of these new efforts. To ensure that these new approaches to infrastructure investments are successful, the right policies and regulations should be put in place, so the digital divide is closed by connecting everyone, in an effort to reduce social inequalities.

In May 2019, Internet para Todos (IPT) was launched as a collaborative initiative between Telefónica and Facebook. Its objective is to bridge the digital divide in rural areas under a sustainable and innovative model that overcomes the obstacles posed by carrying connectivity to areas with high geographical complexity. This initiative was joined by IDB Invest and CAF, guided by the same goal of connecting the unconnected. All the members of the IPT partnership are convinced that connectivity is an important lever for the development and transformation of people's lives. IPT allows all Peruvian mobile operators, under a wholesale business model, to extend their mobile services to rural areas, providing 4G mobile broadband services through more than 3100 base stations. IPT’s open and innovative technological model, incorporates the use of shared access infrastructure (RAN Sharing), network virtualization and automation of operational processes for cost reduction.

 

 

In November 2019, Telefónica México and AT&T announced the signature of a wireless last mile access agreement. This deal contributes to the sustainability of the telecommunications sector in Mexico. Telefonica has increased its efficiency, focusing on its digital transformation and delivering the best customer experience.

In March 2020, Telefónica del Perú announced the creation of PangeaCo, a subsidiary that will expand its optical fibre network throughout the country with the aim of closing the digital divide. Through PangeaCo, with the collaboration of other partners, Telefónica will contribute to improve key sectors like remote education and remote health and will have a positive impact in productivity. The new investments will deploy new infrastructure, massifying fixed high-speed networks, meeting the demands driven by the new normal and connecting the unconnected. In the words of Pedro Cortez Rojas, Executive President of Telefónica del Peru:

 

“It is important to massify high-speed networks for all Peruvians, especially during this pandemic context in which connectivity has become essential. And we are aware that we will not be able to do it alone. We need alliances and partners to tackle this great challenge. The winners will be our clients and the country's digitization process”

 

It is important to review all levers that are making the business case for rural network deployment unfeasible. New regulatory approaches should eliminate all hurdles that prevent for more efficient investments in remote and rural areas, while Public Policies should support making private investments viable: sharing goals of social inclusion and progress with governments generates fluid relationships and facilitates the alignment of public policies for the same objectives.

On the regulatory agenda, several decisions that foster an agenda to provide connectivity to everyone: eliminating barriers to infrastructure sharing and project co-financing, opening the commercialization of backbone and transport networks to third parties, reviewing the spectrum policies to ensure that available resources are employed on infrastructure deployment rather than on effort-consuming auctions, simplifying administrative procedures and authorisations, and eliminating the specific taxes that apply to the telecommunications sector and customs duties for equipment. If access to the internet is important for individuals, society and enterprises large and small, then these telecom services cannot be treated as luxury items.

Allowing for new agreements between private partners, makes us further advance in the industry cooperatively and more efficiently, thus in a sustainable way. The alliances described in this article are good examples of alternative models that are transforming Telefonica’s operations in Latin America, ensuring their sustainability and cost-efficiency.

 

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