Telefónica, Clarín sharpen knives over telco decree
Spain-based company argues gov’t ‘always favours a single actor’ as media giant says telephone firms ‘accumulated benefits for 25 years’
The Clarín Group and Telefónica are not the only actors whose business model is set to undergo substantial changes in the coming years, according to the new legal framework that the government of Mauricio Macri has laid out with a number of decrees and resolutions — the latest published in the Official Gazette on Monday.
More players appear on the horizon which already have significant presence in Argentina, like América Móvil or Claro (owned by the Mexican magnate Carlos Slim, who is also a The New York Times’ shareholder), Telecom (Mexican David Martinez is its controlling shareholder) and DirecTV (AT&T). In turn, there are recently arrived participants, as Viacom (which bought the open-to-air TV channel Telefe to Telefónica), and some foreign giants overflying the market, like Time Warner and Fox (Murdoch), with interests in soccer broadcasting.
However, Clarín and Telefónica are the ones which more resoundingly reacted to the decree for telecommunications issued this week. And although their rivalry could become sharper in the coming years, their arguments are based on the same logic: both say they are being discriminated against.
For Telefónica, which dominates 45 percent of the landline market, 32 percent of mobile phones and 27 percent of broadband Internet, the government decree “delays the real competition,” a source from the Spanish company told the Herald.
Having had a strategic relationship with all the governments for more than two decades, Telefónica chooses another tone this time, adding that it is considering a complaint before the courts, without further specifications. When a year ago the Mauricio Macri administration set the new regulatory agency for telecommunications ENACOM under Pink House control, it gave at least one of the seven seats of the board to a close ally of Clarín and another to a former executive of Telefe in the days of Telefónica.
However, the Madrid-headed company started complaining 12 months ago, when the Macri government swept aside constraints to the expansion of Clarín. Following that emergency decree, Clarín took a step buying Nextel company, a minor player in the mobile communications market.
With the new decree, Telefónica warns again it will revise the investment plan of 36 billion pesos for the 2016-2019 triennium, 9,5 billion of which were already spent last year. Specifically, the main claims from Telefónica are:
- The decree grants Clarín the possibility to take a portion of the 4G spectrum of mobile telephony for free when it should have been tendered, according to the guidelines of the International Telecommunications Union.
- It postpones definitions for the 4G market, for which the European company invested US$427 million in 2014.
- It freezes the possibility that telephone companies inroad into the pay TV market until 2018, and it will be only in the biggest cities, Buenos Aires, Rosario and Cordoba, providing benefits to “an operator which has 60 percent of the cable market share (Clarín)”.
- It prevents Telefónica from providing satellite TV, for which it is already prepared.
“The convergence preached by the government is increasingly more time-consuming. It is being driven by subjective parameters, always with the sole purpose of favouring a single actor,” the source sumed up.
The Clarín Group was divided into two large units last year, with the same shareholders. In one of them, the company lodged the most profitable and dynamic operations: Fibertel (28 percent Internet market share), Cablevisión (60 percent of the cable market or 39 percent of the pay TV) and Nextel (2 percent of mobile telephony). The second company was made up of the following media units: newspapers Clarín, La Voz del Interior, Olé and Los Andes; Mitre, FM 100 and Mía radio stations; TV channels 13, TN and TyC Sports; DYN news agency, among dozens of media outlet throughout the country.
“The decree benefits the telephone companies while we face giants that amortize costs globally,” a source from Clarín tells the Herald.
The Clarín Group considers that:
- Upgrading Nextel, which currently operates in 2.5G, to 4G requires investments for US$500 million in a first stage, “so it is not true that this is a transfer for free”, and the decree also facilitates the reverse path for Telefónica to access the 2.5G spectrum.
- Both América Móvil and Telefónica’s billing in Latin America multiplied by at least twenty times the sales of Clarín’s pay TV and telecommunications units in Argentina.
- Those giants won a year, because initially the convergence towards pay TV would arrive in 2019, while Clarín is going to take a year and a half for investments and technological adaptations.
- The decree gives telephone companies 15 years of exclusivity of the so-called last mile of their network (home connections), a key aspect that blocks real competition. In countries where rules encourage competitivity, providers are forced to rent their network, which will take place in Argentina as far ahead as in 2032.
For Clarín, the telecommunications companies “have accumulated benefits for more than 25 years”, since Spain’s Telefónica bought half of the state-owned company Entel, and Italy’s Telecom and France Telecom did so with the other half.