TOP INTERVIEWS Interview with Dr. Henoch D. Aguiar Secretary of Communications of the Republic of Argentina January 30, 2001 When looking at the history of telecommunications in Argentina, I found four very interesting dates: 1881, 1946, 1991 and the year 2000. Would you explain to our readers why these dates might be considered crucial in the development of telecommunications in Argentina? I think the first two years are very important but that's more for a Master's degree in history (First telephone line in Buenos Aires; nationalization of Telecommunication sector under Peron). The 90's were more important because that's the moment when only a few countries had open markets, including Chile, England, the United States, Australia and New Zealand. To open our market to privatization in the 90's was a very important step. In my opinion, this period was perhaps too extended. The opening of all telecommunications services without restrictions and distinctions occurred November 9th, 2000. It was an important moment. After the sale of Entel to Telefonica (of Spain) and the signing of a joint venture between France Telecom and Telecom Italia in 1991, the telecommunication sector in Argentina was practically divided into two companies, with restricted competition frame… In that ten-year period there was a monopoly for the public services, but competition in the mobile and data services sector. Moreover, there was also a monopoly in the international services market. Only a little piece of the cake was open to competition. It was important to have an initial period of competition in order to analyze the rules of competition. That's perhaps why it was possible for us to write the rules of competition and open up the market as we did. When do you expect the sector to be fully liberalized? Last year we had 2% of Internet users, 21% of fixed line users and around 8% of mobile users. Our target for the next three years is to see around 25% of Internet users, 30% of fixed phone lines and 30% of cell phones. It is true that there will be more cell phone users than fixed lines in a year, a year and a half, but these are only numbers. The most important issues for the client are quality and price. Our prices, for example, for a call from Argentina to the U.S., at the beginning of last year, were at 80 cents to a dollar before taxes - and taxes are quite high here! Inter-city calls from one point to another in Argentina were costing around 45 to 60 cents a minute. At the same time, a call from the U.S. to Argentina cost 15 cents or maybe 17. The cost of communications in Argentina is based on communication costs in neighboring countries where prices are three to four times higher than our local prices. Since 1991, some 20 billion USD have been invested in the telecom sector. Do you foresee a significant increase of that figure in the near future? In the year 2000 we obtained approximately 4.2 billion USD - that's more than twice the normal investment in Argentina. Our outlook is similar in the future. That's very impressive when you analyze these figures in per capita terms, which is twice the amount of investments obtained by Brazil in the last year. The telecommunication infrastructure is growing, and will reduce the lack of competition as the number of new players is increasing steadily. The deregulation of the market will surely influence the price structure. Will the public notice this advantage soon, or will it be mainly an advantage for corporate clients? When you open up any market, big corporations needs are met in large cities where you can reach around 90% of the population. That's what we are experimenting right now. For corporations, at the moment we can get rates of about 12 cents for internal communications. Normal prices were four times higher. But for long distance and international calls I think we will reach a reduction of 50% as companies are now installing their services in main cities and will launch advertising campaigns to compete for national clients. Telephone companies have now one year to create a second network out of the original zone and to cover the undeveloped zones. GTE and Bell South are covering the entire country with their own network to provide mobile phone services. That's more or less 40% of the total amount of phone calls in Argentina. Several "new" entrants are already battling in Argentina for market shares on the telecommunications sector, as for instance AT&T, Bell South, GTE or Telmex. Do you foresee any problems such as the ones encountered by Telmex in Mexico, where the institution was accused of monopolistic activities by its competitors? Not Really. It's important to underline the fact that the authorities must oblige companies to provide interconnections. If there is a dispute over interconnections, a company has ten days to express its opinion. Within another ten days we will reach a preliminary resolution and we will oblige connections. We will then take a few months to analyze the numbers. If one company benefits from an interconnection, she will be obliged to pay for it. Interconnections are not the right of companies, they are the right of the users. The user's rights are protected from the beginning and we will intervene immediately if they are not respected. We might have some perhaps in the future, but companies cannot use interconnection disputes as a mean to work around competition. You have recently set up a government administered fund - referred to as "universal service" - to provide basic phone services to marginal areas, could you elaborate on this issue? After a decade of privatization in Argentina, there are still too many communities of one hundred to three hundred inhabitants who do not have access to telephone services. We are compelling companies to use 1% of their income to provide service to those areas. Around 80 to 90 million USD will be allocated to areas with no lines. We currently have three policies. Competition, competition and competition for the normal zones. For the partially developed zones, companies offering services will benefit from tax breaks. Finally, in places where there is no service, 1% of profits will go to providing universal services. Deregulation will surely set the stage for the influx of new technology into Argentina, a market where, for instance, Data-transmission services make up only 6% of the sector's revenues, compared with 20% in the EU or in the US. In your opinion, is the field of network technology going to be the main battleground for competitors? My main concern is to obtain more than two competitors in every region of Argentina. With infrastructure and competition in place it will be possible to provide local services connected to a global network. We have four big tycoons-Multicanal, Cablevision, Supercanal and Telecentro. After that, there are about 450 other companies now licensed and providing Internet services, and they can battle for clients. I hope that in a year time everyone will have the possibility to reach global networks for internal and international communications. We will have plenty of small and medium size companies providing telecom services in Argentina. We hope to attract small companies willing to establish also headquarters in villages to provide phone services and Internet. That's one of our challenges this year. We had 460, 000 Internet accounts around the first of December 1999 and we have now reached 1.2 million at the end of the year 2000. That's a growth rate of over 117 % in one year. Do you expect similar growth rates in the coming years? I think we are going to reach around 120 to 150% growth this year or maybe even more. The critical point was the one million-account mark. No serious company can work without this kind of number without losses. One million will be the starting point for many companies. And we will reach 1.2 million accounts this year, which means 2.6 millions users. In your opinion, will Argentina be able to compare itself to countries such as Ireland, Israel, and India, in the field of IT? I think we have an advantage for that. As a consequence of a bad policy we had only 2% of internet users, however, we created last year over fifty percent of the global Spanish contents on the Web. That's amazing. It's like playing soccer with two players against eleven and winning the game. There is something special happening with the Internet in Argentina and that's why plenty of companies are coming and looking for people to create Web sites. We have a large number of university degree holders in Argentina and a very significant academic tradition. We must underline that our best capital is our people - the knowledge of our people in areas such as physical and medical science. We have always had a leadership role in South America in these areas and we will also be leaders on the Internet. The "new economy" could be one of the best opportunities Argentina has ever had. We want to reach a position par with Ireland and Israel. We want to create conditions to increase opportunities. How do you evaluate the possible impact of an UMTS license auction in the future in Argentina? We do have a "third-generation" license auction in October of this year. We will be defining in the next 3 months the frequency position. I think it is going to be a very competitive field, till now only the big four players in Argentina were interested, but we want competitors from abroad to broaden that group. Our expectation is to obtain around 800 million USD from this auction. We want to be the leaders in the field of 3G in Latin America. Where would you like to take the telecommunication sector five years from now? I only want to reach the last month of this government in December 2003 with a really open market, a communication revolution in Argentina with students having Internet in all the public schools. We have 45,000 public schools and we are very committed to giving them Internet. The idea is to create conditions for young people to make their future here and not to feel that they need to leave Argentina for professional and personal goals. I am a university professor and I feel something in my heart every time I hear someone say "I need to leave". NOTE: WINNE cannot be held responsible for the content of unedited transcriptions.