Telecommunications Equipment and Services
A Top Export Prospect for Colombia

Sources:
* CRT Report (Revenue for provision of services)
* * World Trade Atlas (HS 8517)
***Manufacture of electronic tubes and valves and electronic components, manufacture of transmitters and receivers for TV and radio and devices for telephony and sound reproduction, DANE.
****Current data, August 2011.

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Overview

The telecommunications industry in Colombia is a very dynamic sector, whose annual growth rate is usually well above the GDP growth rate. During 2006-2008 the sector grew on average by 15 percent per year. Even in 2009, while the economy stagnated, the telecommunications sector grew three percent. However, imports of telecommunications equipment decreased in 2009. The most affected were the cell phones and accessories segments. Preliminary data indicates a 5-6 percent increase in the total market size for 2011 and a similar forecast for 2012. Two market segments in particular: broadband and mobile telephony, make it an attractive market for U.S. product and service providers.

Currently, Colombia has over seven million fixed lines in service, with little increase over the 2005 figure. The fixed line teledensity rate is around 17 percent. There are currently over 30 million mobile service subscribers, for a mobile penetration rate of 64 percent. The operators are: Comcel-Comunicación Celular S.A/America Movil (Mexico), Movistar-Telefonica Moviles Colombia S.A (Spain), and TIGO-Colombia Movil S.A E.S.P/Millicom (Sweden). According to the Ministry of Communications, up to September 2011 Comcel has the highest market share, 65.34%, followed by Movistar, 22.41%, and Tigo with a market share of 11.82%. Avantel, the only company with U.S. capital, possesses a very small proportion of the mobile market, providing a trunking service. The Colombian government granted Avantel interconnection with the cell phone operators in 2008 after an eight year lobbying effort.

Several years ago, mobile telephony services overtook fixed line services, in revenue terms. Mobile services providers (Comcel, Movistar and Tigo) currently have 40 percent of the total revenue, while fixed line operators ETB (Colombia), Telmex (Mexico) and Spain’s Telefonica account for 28 percent of total revenue. Long distance services operators: Colombia Telecomunicaciones (Telefonica/Spain), ETB, and UNE (Colombia) account for only seven percent of total revenue. ETB launched a search for a strategic partner in 2010-2011 but has yet to conclude any deal. ETB and UNE are state-owned companies.

Colombia is served by the following submarine cables: ARCOS-1, Maya-1, CFX-1, PANAM and SAm-1 submarine cables land which land in Tolu, Cartagena or Barranquilla. In 2009, the Colombian Telecommunications Regulator (CRT, for its initials in Spanish) declared cable landing stations as “essential services” enabling the CRT to regulate prices and dissuade monopoly practices.

There is minimal local production in this industry, mostly consisting of cabinets, panels, and electronic components, but these are usually products with low value added. For the most part, consumer goods and industry equipment are supplied through imports (mostly from China, Mexico, U.S., Germany, Brazil, and India). Services too, (especially cell phone services) are provided by multinationals (Colombian capital forms a minority shareholding within the operators Comcel, Movistar, and TIGO).

The approval of the Trade Promotion agreement between the U.S. and Colombia, once implemented, would have a significant impact on this sector. Virtually, all telecommunication products will become duty free upon entry into force of the Agreement, thus stimulating U.S. exports to Colombia. Currently tariffs vary between five to fifteen percent. Products within this sector account for over 15 percent of total U.S. industrial exports to Colombia.

The U.S.-Colombia FTA would also favor US products over Chinese exports to Colombia, as import duties for Chinese products would remain the same, while those for US products would be eliminated. Chinese companies’ main competitive advantage is lower cost compared to similar equipment from established vendors. However, the lower quality and reliability of Chinese equipment are considerable disadvantages. U.S. equipment suppliers benefit from long-standing compliance with industry standards, reliability, lower shipment costs, innovation, and a favorable exchange rate. In 2009, Colombia officially adopted UL standards.

Under the FTA Colombia is also committed to join the multilateral Information Technology Agreement. U.S. exporters of telecommunication products all benefit from the provisions of this treaty.

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Best Prospects/Services

For 2012, the expansion of broadband access and of mobile telephony services in Colombia will continue to provide diverse business opportunities for U.S. companies. The most promising areas for business development exist in the areas of:

The increase in Internet uptake has positioned Colombia among the top ten growth markets. According to the Ministry of Communication, the total number of internet subscribers (mobile and fixed) in Colombia increased 46% from September 2010 to September 2011. The Internet user density rate has been steadily growing (currently around 8.2 percent), and position’s Colombia in fourth place within South America. The diversity in broadband products and services uptake is attracting greater numbers of U.S. content provider companies to the Colombian market.

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Opportunities

The U.S has traditionally been one of the main suppliers of telecommunications equipment to Colombia, especially for radio and TV transmission. In recent years strong competition has come from China, although the U.S. still holds the lead in state of the art technology products. China currently holds more than a third of market share while the U.S. market share has fallen to less than 10 percent. However many U.S. product brands are also imported to Colombia through third countries (which do the assembly), especially from Mexico and China.

Broadband deployment is a priority for the Colombian Government, which has implemented programs for increased access, such as the “Plan Vive Digital” and the Last Mile Initiative with support from USAID. U.S. companies should consider participating in government procurement programs. These programs are announced on the Communications Ministry website and on the government procurement website: www.contratos.gov.co/puc/.

The Colombian Government has identified call centers and contact centers as one of eight best prospect growth industries or “clusters”. Private businesses have been continually deciding to outsource their call center operations, rather than to keep this activity in-house, in order to boost efficiency and increase their competitiveness. Many businesses of this type have been set up in recent years, and also a business association has been created to further the development of the business in Colombia. The government will continue to focus efforts to attract foreign investment in this sector.

The recent opening of the WIMAX spectrum should also provide new business opportunities.

In the television industry, in 2008, the Colombian National TV agency (CNTV) selected the European Digital TV standard (DVB) for the country, and broadcasters are in the process of converting to digital transmission services. CNTV is also expected to re-issue its tender for the award of a license to operate a third private national TV channel. These developments could provide export opportunities for U.S. businesses. There would be demand for products especially in the areas of: broadcast transmission equipment; components for digital television consumer products, mobile telephone handsets, and there would also be increased opportunities for programmers. Colombian companies routinely attend the USDOC-organized trips to National Association of Broadcasters (NAB) and Infocomm/NXT shows held in the U.S., to seek new product or service ideas and equipment. CS Bogota has also certified the local shows ANDINALINK and ANDICOM over the last couple of years.

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Resources

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