Today's comment: Entel has yet to launch LTE, but now has the richest spectrum holdings in Chile to innovate with 4G.
- Entel has won 30 MHz, and Movistar and Claro 20 MHz each of 700-MHz spectrum.
- Entel paid CLP6.68 billion (USD12.3 million), Movistar CLP4.5 billion, and Claro CLP0.4 billion for blocks A, B, and C respectively.
- Under their licences, the operators must provide nationwide LTE coverage within two years, and are obliged to connect 1,281 isolated locations, 503 educational establishments, and 854 km across 13 road routes and with 4G LTE within 18 months.
- The regulator, Subtel, has also used the 700-MHz licensing process to stimulate greater competition in the mobile segment. Under their licences, Claro, Entel, and Movistar must provide MVNO access to their 700-MHz networks, offer national roaming, and propose prices for wholesale data transport for national and international internet traffic at different speeds tiers.
Our take
Entel and Movistar share leadership of the mobile market, with shares of 38.9% and 38.7% of subscriptions at the end of September 2013; Claro is a distant third with 22.4%. The outcome of the 700-MHz auction does not markedly alter these competitive dynamics: Entel has won the largest chunk of 700-MHz spectrum, which will help the winners reach more remote areas and provide better in-building coverage in urban areas than is achievable with their current 2.6-GHz holdings. Claro and Movistar have already launched commercial 4G LTE services. Currently, Claro offers five 4G LTE plans, ranging from CLP29,990 per month for 2 GB of data to USD125.2 per month for 10 GB. Movistar's 4G LTE plans are similarly priced.
Entel is taking its time with LTE. It has richer 4G spectrum holdings than its competitors: 2x15 MHz of 700-MHz spectrum plus 2x30 MHz of 2.6 GHz; Claro and Movistar also own 2x30 MHz of 2.6 GHz, but only 2x10 MHz of 700-MHz spectrum. This advantage will give Entel the ability to differentiate in the LTE space and possibly depart from the current pricing structure of Claro and Movistar. Although neither Nextel nor VTR participated in either the 700-MHz or the 2.6-GHz auctions, the outcome of these will have a significant impact on them. VTR has already abandoned its facilities-based wireless strategy in Chile, despite having won 2x15 MHz of 2.1-GHz spectrum in September 2009. Nextel won 2x30 MHz of 2.1-GHz spectrum in the same tender, but its owner NII Holding's ongoing financial difficulties, and decision to focus on Brazil and Mexico mean that Nextel Chile (and Nextel Argentina) will not be sufficiently funded to challenge effectively in their respective markets. It is more likely that they will be sold to existing operators.