Operator looks to broaden horizons
IN AN ATTEMPT TO REACH PROJECTED PENETRATION TARGETS, INCREASE EFFICIENCY, AND UPDATE TECHNOLOGY, ECUADORIAN TELECOMS OPERATOR PACIFICTEL IS HOPING TO SET UP A STRATEGIC ALLIANCE WITH AN OVERSEAS COMPANY

Mainly covering Ecuador’s west coast area, Pacifictel is one of Ecuador’s two national telecommunications companies. In view of the country’s recently improving economic status, and the promise to liberate the country’s telecoms sector, Pacifictel is now looking to find a strategic partner.

ANTONIO SAENZ FERNANDEZ Executive President of Pacifictel

“A few years back, Ecuador touched bottom with frozen deposits and three digit inflation figures, but now the country is rising again,” says Pacifictel’s Executive President Antonio Saenz Fernandez, referring to the economic crisis of the late 1990s. “The banking system has finally been streamlined, giving it a more solid framework than it had before dollarization.”
He regards the telecoms sector as one of Ecuador’s most important developing areas and wants to take advantage of the dynamic technology that has emerged over the past three years and of the more competitive prices available now. “When cellular phones first came out they cost $1,000,” he recalls. Today, telecommunications are competing in an increasingly open market and some companies may have difficulty keeping up due to the wide variation of bands and frequencies that exist.

Ecuador has two leading companies in the fixed line business: Andinatel and Pacifictel. “At Pacifictel we have around 650,000 clients and applaud the government decision to open up the market and not leave us waiting around until 2003, like other less fortunate countries,” says Mr. Saenz. “It would have been cosy but unprogressive to continue in our old protected state, developing slowly and quietly without the hassle of competing with new players. I think we have responded to the new situation in a responsible way. From now on, any company wanting to come and start up a phone company can do so and we feel we’re technologically prepared to cope with this situation.”

Three to four years ago Pacifictel lost out on chances to be privatized. Now its priorities have changed. “It’s time for strategic alliances,” says Mr. Saenz. In accordance with government recommendations, Pacifictel has decided to look for international companies to manage operations.
Pacifictel currently has 680,000 fixed lines and has signed contracts for 220,000 new lines, of which 70,000 will be to cover analog lines changing to digital. Penetration is 10.5% and the short-term target is 12-14%. Guayaquil, where Pacifictel is based, has a continuous and unpredictable population growth and people need more phones and services.

Various national and international projects are now under way. The largest and most ambitious is the link with the 4,536 mile Panamerican underwater cable which uses fiber optic lines and connects with Chile, Colombia, Venezuela and Panama. Among local projects are a Guayaquil fiber optic loop, with the last mile in copper, and an inland loop to Quito, currently handled by Pacifictel at a cost of $23 million and soon to be contracted to the Chinese state company ZTE.

Pacifictel is particularly eager to begin strategic alliances with international operators such as U.S.-based Telecon, Spain’s Telefonica and Mexico’s Telmex, all of whom have already seen the local set up and are interested in
collaborating. Mr. Saenz believes his company’s credentials speak for themselves. “We don’t need a state budget or any loans since we rely on and live off our own cash flow,” he says. “We are independently run, use the latest technology, have top consultants and represent a credible and safe investment. We are also making advances in ADCL technology and have our own internet firm for which we’re looking to arrange a flat rate. Soon we hope to have a PCS band and perhaps GNS technology.” Mr. Saenz sees the battle between fiber optic and copper resurging in telecom technology with copper making a comeback after recent years of devaluation. “There is a good marriage now between these two elements,” he says. He is also proud of his company’s dynamic and independent attitude towards the new economy. “We never let the grass grow under our feet. Instead we went out and found clients on our own.”

In order to reach its new projected penetration target, Pacifictel need to take a good look at tariffs. “We’ve been left behind,” says Mr. Saenz. “Ecuador produces $11 per phone line compared with Colombia’s $22 and Venezuela and Argentina’s $33 which means we only produce half of what Colombia does and a third of what other South American countries produce.” From 1997 to 2000 the rate of the national currency, the sucre, rose from 4,500 to 25,000 sucres to the dollar, which forced the reduction in tariffs. Now the aim is to return to international tariff levels and produce realistic rates compared with those of other countries.
Pacifictel is governed by a general council of shareholders under an administrative directorship headed by the Fondo de Solidaridad. “We report to the directors for control of the company,” explains Mr. Saenz. “There is no political influence.”