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18 June 2003
Telecommunication Market Privatized
Privatization of Management
Wireless Local Loop
State Monopoly Strengthened
Competition in Data Transmission
New Competitor for Local Fixed Telephony
International Long-Distance Calls
The Ecuadorian government decided to open up the telecommunications market in order to encourage foreign investment. Thus, in March 2000 all telecommunications services were opened up
to free competition.
Consequently the regulations were modified to require:
The regulator granted concessions and use of frequencies for the operation of telephony and data transmission wireless local loop.
As a result of the increase competition in the telecommunications sector, Pacifictel SA and Andinatel SA needed to be managed more efficiently by an experienced international operator. Thus, an independent commission was set up to privatize the administration of these companies (without effecting a sale).
The process was started with Pacifictel SA, the most important fixed operator in Ecuador. It was carried out by the Special Committee for Selection of the International Operator. Telefonica Internacional SA, Swedtel AB, America Movil, AT&T, BrazilTelecom and Detekon (affiliated with Deutche Telekom) all participated in the tender.
An Ecuadorian company called Telefecom SA brought an action seeking a declaration that the process was unconstitutional because of the alleged exclusion of local investors. The action was found to be inadmissible.
The Ecuadorian government included the delivery of Pacifictel SA and Andinatel SA into the administration of an international operator in a letter of intent to the International Monetary Fund.
In parallel with the administrative process of privatization, the regulator held an auction of the B band and B' (3,425 to 3,550 megahertz (Mhz)) for the service of the wireless local loop service.
The following companies participated in the tender:
The successful bidders were the national companies Ecuador Telecom SA and Partnership TV Cable, which also obtained a wired local concession for fixed telephony.
In March 2002 the regulator (Conatel) held an international public auction for the concession of band C and C' (1,895 to 1,990 Mhz) for a third mobile telephony operator. The auction was designed to further its aim of attracting foreign capital in order to promote free competition in the telecommunications market (for further details please see "New Mobile Telephony Operator in the Market").
Conecel SA and Otecel SA were excluded from participating. The participants were Entel of Chile, Pacifictel, Andinatel and Partnership TV Cable.
As the only offeror, Andinatel SA was awarded the concession. This resulted in controversy as it strengthens the state monopoly, which will affect the economic balance guaranteed to cellular companies by the Ecuadorian state. The Constitutional Court declared that mobile telephony operators had the right to demand equal treatment from the Ecuadorian state against any advantage granted to the new licence.
Andinatel decided to incorporate a company called Telecsa SA to operate
this service. Its exclusive stock
holders are Andinatel, Pacifictel and Etapa (which operates only in the city of Cuenca).
Competition in Data Transmission
The data transmission market has seen the most experimentation with competition.
From March 2000 it has been granted five new concessions, producing a degree of competition which has resulted in reduced prices for access to private network channels and internet use.
Nevertheless, none of the new concessions comes from foreign investment.
Following the opening up of the telecommunications sector in March 2000 the telecommunications regulator issued all the secondary regulation necessary to open up the market. In 2001 it issued regulations on:
Few new regulations were issued in 2002. The most important include the following:
A concession for fixed local telephony for the city of Guayaquil was granted to Linkotel, which will have to compete with the dominant operator, Pacifictel. This concessionaire is also an Ecuadorian company.
While the international long-distance call market has not yet been regulated, fluctuations in the call rates have discouraged traffic and produced a lack of competition between the suppliers. This has affected users, who still pay high tariffs in comparison to other countries in the region.
For further information on this topic please contact Carlos R Chávez at Pareja & Asociados Abogados by telephone (+5934 2 68 7100) or by fax (+5934 2 68 7104) or by email (firstname.lastname@example.org).
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Carlos R Chávez Negrete