Investment closes the technology gap
ECUADOR'S LEADING TELECOMMUNICATIONS COMPANY, ANDINATEL, IS URGING INVESTORS TO SEIZE THE DAY AND TAKE FULL ADVANTAGE OF THE CURRENT POTENTIAL OF THE SECTOR

Andinatel is the largest and most successful telecommunications firm in Ecuador. It pays the most taxes, makes the largest profit in the Fondo de Solidaridad, the public institution that holds a majority share in all state companies, and has an annual growth of 85%. At present, it is looking for an international partner to help it bid for the new wireless license up for auction, which it regards as an essential step for survival.
Like its coastal zone competitor Pacifictel, with which it is anxious to avoid price wars in their respective areas of concession, Andinatel has invested over the past 18 months in network digitalization and optical networks for data transmission.

ANDRES PEREZ ESPINOSA Executive President of Andinatel

“Ecuador suffered tremendously from economic instability,” says Executive President Andrés Perez Espinosa of the recent economic crisis and recovery in his country. “In 1998 we had very little acquisitive power. Then, just when things looked hopeless, the dollarization saved the day. We hoped it would re-establish a rhythm of growth and development and, lo and behold, it did.”
Mr. Perez is strongly in favor of the modernization and privatization steps being taken by Ecuador and sees both as important in helping the country recover. “My origins are in the private sector, and I’ve been President of the Quito Chamber of Commerce on more than one occasion,” he says. “It’s been a long, slow process, which is bad in some ways but good in others, as we’ve taken steps carefully and cautiously.”

One fear has been that in some sectors, for example electricity, privatization will cause a surge in prices. In the telecoms sector the state monopoly has been transformed into two separate companies, Andinatel and Pacifictel, both still under government supervision, yet acting within a private framework.
Mr. Perez feels that Andinatel is well equipped to face the imminent liberalization of the market. “Technology and internal administration have changed a lot. We have better personnel and an improved culture of service to the customer. This new desire to move forward is diametrically opposed to the earlier ‘laisser faire’ attitude. In the old days, a line took six months to repair. Now it is done in 48 hours. All the staff here are aware of these changes. These are what have made us into Ecuador’s top money-making business.”

Andinatel wants to increase its current 650,000 customers to 900,000 and, by April, have at least 900,000 lines. “This, with the help of our new state-of-the-art technology and widened sphere of operations, will bring us more income, more growth, more expansion,” says Mr. Perez. “It also allowed us to increase our tariffs in October without losing clients. Our customers have accepted the new rates because we give them what they ask for: customer care, quick repairs, solid administration and transparency in business transactions.”

In spite of the recent price hike, Ecuador’s telecoms tariffs are still nowhere near as high as those of other Latin American countries, such as Colombia and Peru. “Our rates are too low and unprofitable,” says Mr. Perez. Before raising them again, however, Andinatel has to ensure its services are not just good but will continue to improve. “We have approached the quality level of our neighboring countries, and by the middle of the year hope to be even better. Within our current scale of rates the commercial tariff is higher than the residential tariff which is sub-divided into two other branches, including a ‘popular’ one.”

The company is now looking for a strategic partner that will consolidate the advances made so far and help to provide the latest technology. “Up to now we have progressed in a controlled manner and now we are looking to conclude an alliance with a major international partner. I don’t think we’re equipped to enter a really competitive market on our own. As long as Andinatel and Pacifictel are government property, we are restricted to the domestic market. If we get a key partner to administer both companies, we will be able to expand internationally. We may be big fish here but we’re small fry on an international scale.”
The company is also keen to close the technology gap, especially with regard to fiber optics. “In addition to the Guayaquil-Punta Carnera link by Pacifictel, which was fairly small, larger loops–such as Tulca-Guayaquil–are being put into effect. “All these new extensions are being done with fiber optics,” says Mr. Perez. “This is how we’ll survive in the new telecoms world.”

He feels U.S. investors should be more aware of the great business potential Ecuador offers and put aside possible doubts about the political, legal and commercial transitions still taking place. A closer look at the status of his company should convince them of its viability. “You cannot fail to be impressed by the quality of our staff and development potential,” says Mr. Perez. “Any investor who takes the risk will undoubtedly be rewarded by excellent returns on his investments. We are still a young company with lots to do in many spheres. The moment is ripe.”