Ecuador's struggling CDMA MNO set to be rescued by a strategic partner?

Back in late January, I wrote (on my former blog, since handed over to a former colleague) about how Ecuador's struggling state-owned CDMA mobile operator Alegro PCS was the subject of reported offers for prospective strategic partnerships from Uruguay's Antel, and Venezuela's Movilnet, both of which are also owned by the Governments of their respective countries. I noted then that these offers both came from countries which, like Ecuador, have left-of-centre governments. This prompted me to mull over the subject of the possible telecoms sector links between politically sympathetic Latin American countries which I'd learned something about on my own travels in that part of the world. It's a topic I personally find quite interesting, so I took the opportunity to expand on this theme here in March.

Today, thanks to TeleGeography, I received an update on the news item which set this train of thought in motion - the state of play at the ailing Ecuadorean cellco. In January, I'd reported news that Alegro PCS was said to be 60 to 90 days away from reaching an agreement with a foreign strategic investment partner. This has clearly taken a bit longer than anticipated to play out. Today's news from TeleGeography suggests that the cellco is now still "approximately two months away from reaching an agreement" with a partner. The article does not clarify which company this partner is likely to be, simply repeating the ones mentioned at the start of the year, which included Telekomunikasi Indonesia (Telkom) as well as the Venezuelan and Uruguayan parties. The fact that this back on the news wires, however, might suggest that some progress is being made.

If a deal of this sort is not reached, it looks as though the Ecuadorean Government will force the sale of Alegro PCS, according to the country's President, as quoted in the TeleGeograpy article, which also notes that the CDMA operator has had to delay a plan to roll out GSM infrastructure due to a lack of capital and is instead currently using wholesale GSM capacity from larger rival Movistar Ecuador. This move has yet to make a significant impact on the operator's feeble market share. When I first visited this story in January, Alegro PCS had just 1.31% of the country's mobile subscriptions according to December 2008 figures from WCIS. That figure had improved only very slightly to 1.34% by March this year.

With high reported debts and such a tiny share of the market in a country of just 14 million people, I wonder how attractive Alegro PCS is going to look to any prospective buyer if a sale does become necessary in the view of the Government. The toughness of the competitive environment is compounded by the fact that in addition to Telefónica-backed Movistar, the Ecuadorean market is home to an MNO which is part of the powerful América Móvil group, a venture of Mexican multi-billonaire Carlos Slim Helú. It gets worse. The country's 87.15% mobile penetration rate does not leave boundless room for growth, even for the two powerhouse-backed operators currently splitting the bulk of the market between them.

So it remains to be seen what the future holds for struggling Alegro PCS. I can't decide if rescue from a telco owned by the state agencies of some politically sympathetic government will ensure the long term survival of the MNO or just delay, at some cost to the friendly partner, the eventual demise of a company caught between the vastly superior resources of two powerful competitors. I'll have to have a look some time to see if there's a precedent anywhere else in Latin America for a cello successfully competing with both of the region's two dominant telecoms groups in a relatively small market. It sounds like a tough position to be in.

Ecuador's struggling CDMA MNO set to be rescued by a strategic partner?

Nokia's cheapest emerging markets phone vs. El Vergatario

Emerging markets winner? The Nokia 2720 Fold - picture from Cellular News

Just when I'd finally recovered from the side-splitting hilarity of discussing the (allegedly) saucily-named low-cost cellphone recently launched in Venezuela, along came another emerging markets handsets story to remind me of the fun.

The (nudge, wink) Vergatario will cost the man and woman on the streets of Caracas a mere USD15. It's recently been reported in the press that this represents only 25% of the cost of manufacturing and distributing the device. According to the country's state news agency, there is "a long-term project to export phones from Venezuela to the rest of Latin America". It will be interesting to see whether the Chavez Government would be interested in subsidising cheap phones for the masses beyond the borders of their Bolivarian Republic. Last year, I had the opportunity to visit the HQ of Venezuela's renationalised national incumbent wireline operator, CANTV. I learned a little about the company's (and the Government's) desire to use ICT/telecoms as a driver of Bolivarian socialism - but not enough to speculate with any degree of confidence about whether this could include underwriting the cost of handsets in markets where CANTV's mobile unit, Movilnet, would not have the opportunity to recoup the subsidies during the subscription lifecycle of the customer. I suppose it's theoretically possible that an arrangement could be worked out with friendly operators elsewhere in Latin America, or even elsewhere in the world.

Let's assume for a moment that something of that sort does not turn out to be feasible. With which handsets would a non-subsidised El Vergatario be competing on the global low cost devices market?

One suite of such handsets has been launched recently by Nokia, according to a Cellular News item I received today. The Finnish device maker says the new phones are aimed at emerging markets and come preloaded with a range of Nokia's mobile internet services. The Nokia 2730 classic, Nokia 2720 fold and Nokia 7020 each come Internet-ready, and work with Nokia's range of emerging markets services.

The article quotes Nokia's Alex Lambeek, who says "we've seen mobile technologies catalyze the growth of the informal sector across the world, empowering local entrepreneurs and having an immediate and lasting impact on people's lives. Services like Nokia Life Tools and Ovi Mail, combined with the mobile phones we're launching today, bring powerful solutions that can be the gateway to knowledge, entertainment and people, without the need for a PC."

According to extensive Nokia consumer research, states the article, nearly 50% of consumers in emerging markets would indeed rather connect to the Internet over a mobile phone than a PC.

An interesting component of Nokia's service bundle is Ovi Mail, "which has the potential to be the first digital identity for many people in emerging markets" Unlike most other email services, the Cellular News article reminds us, "an Ovi Mail account can be created and used directly on a Nokia device without ever having to use a PC." The article indicates that since the launch of the beta service in December 2008, around 90% of Ovi Mail accounts have been created on a Nokia phone rather than a PC.

How do these devices stack up price-wise against the Venezuelan phone?

The most affordable of the set of three is the Nokia 2720 Fold, a compact clamshell handset expected to begin shipping in Q3 2009 for an estimated retail price of EUR 55 (USD74) before subsidies and taxes. By my maths, El Vergatario comes in at around USD60 when not subsidised by the Venezuelan state, so it does look competitively priced vs. a comparable device from Nokia. The Venezuelan handset, however, is a CDMA standard device. Presumably a GSM version would need to be on offer if the Chavez Government really does mean to export the phone.

Nokia's cheapest emerging markets phone vs. El Vergatario

Chavez unveils super low-cost mobile phone

In early March, I seemed to amuse a couple of regular visitors to this blog with my jocularly-titled discussion of the telecoms sector of a selection of countries with left-of-centre regimes.

One stop on that tour was Venezuela, whose state-owned cellco Movilnet was set to launch a low-cost mobile phone on the local market.

The launch date for this handset is coming up soon. Very soon. Tomorrow, in fact, according to a recent TelecomPaper article. So you'd better get yourself to Caracas sharpish if you fancy one.

Unveiled (see pic) by Hugo Chavez himself, the new C366 El Vergatario is the first mobile phone to be built on Venezuelan soil. Produced in partnership with ZTE of China, the phone will feature MP3 playback, FM radio, and a camera.

Chavez unveils super low-cost mobile phone