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ARTICLE
By Cintia Garza, Market Analyst
Ertach (previously Millicom Argentina) was founded in 1998 by Millicom International Cellular and the business group Sociedad Comercial del Plata (SCP). In that year, Ertach was awarded licenses of 50 MHz of spectrum in the 3.4-3.7 GHz frequency band for data transmission and value-added services. Today, the company is one of the leading providers of broadband wireless solutions in Argentina and Latin America. But the success they enjoys today was not an easy battle. The company commented to us about the challenges they overcame in order to occupy their present position in the Argentinean market. Their strategy, which was initially focused on the provision of broadband wireless services to residential users using the traditional technology Wireless Local Loop (WLL), was completely reformulated during the severe economic recession of 2002. The company started focusing on providing services to the business market segment: corporate users and SME. In 2003, Ertach launched the “First National Broadband Wireless Network,” an expansion plan that covered 40 new cities in only 12 months. However, Ertach faced what they called the “Bandwidth War” – increasing competition from other operators who provided DSL and cable modem speeds of 1–2 Mbps at very competitive prices. The WLL service lost competitiveness because it could not provide enough bandwidth to users. Mr. Luis Galli, General Manager of Ertach, commented that at that time they needed to implement a technology upgrade that allows them to keep a leadership position in the sector of wireless communications. “We saw in WiMAX a promising opportunity. We adopted the 802.16-2004 standard and the growth possibilities of the company multiplied,” Mr. Galli added. In 2004, Ertach deployed “The First WiMAX Network in Latin America,” providing internet access, data transmission, and Voice over Internet Protocol (VoIP) with the standard 802.16d. “In the short term, WiMAX provided us with many benefits such as the possibility of providing our customers with bandwidth speeds of up to 10 Mbps and QoS that allowed us to strengthen our business and equally compete with the other telcos; in most cases we were able to improve upon their price offerings and quality,” said Mr. Ezequiel López Alcalá, Manager of Products and Marketing. According to a survey by Information Technology Magazine to the most important CIOs, Ertach was nominated as “The Most Innovative Company” among all the telecommunication companies in Argentina in 2004. In that year, 100% of Ertach’s stock was acquired by SCP, changing its name to Ertach, Evolución Inalámbrica (Ertach, Wireless Evolution). In mid-2005, Ertach together with Clarin Group, received approval to create “The Unique Data Network for the Government of Buenos Aires,” the largest WiMAX dedicated network in Argentina. The company installed over 1,500 access points for the project. The network covers 125,600 Km2, this represents 40% of the Province of Buenos Aires, and connects schools, public hospitals, vehicle agencies, State Tax Agencies, etc. Ertach continues adding governmental entities to its network, the most recent being announced for September 2007 in the city of Moreno in Buenos Aires Province. Another important milestone for Ertach was the launch of the first Portable Broadband Network in Latin America with WiMAX Technology in August 2006. The network was launched in the city of Carlos Casares, providing broadband internet access to one of the largest agro-business company in Argentina and to remote communities and enterprises in rural and suburban areas. Mr. Luis Galli added that the company CAGR (Compound Annual Growth Rate) was 75% between 2000 and 2007 with a sustainable and profitable business model. The company has made strong investment in the network, accompanied by considerable improvement in service and customer satisfaction. The company has invested more than US$23 million in the development and continuous expansion of its WiMAX network countrywide.In late 2006, Ertach was acquired by Telmex for a total of US$22.5 million. The transaction was started in August and signed an acquisition agreement in November of that year. The deal has still to be approved by the Argentinean regulator SeCom. It is possible that this will be the new wireless strategy of Telmex to compete against Argentinean fixed incumbents (Telefonica and Telecom Argentina). Telmex, together with Motorola, is conducting trials of WiMAX in the greater Buenos Aires area as well as in the cities of Cordoba and Mendoza. The company expects initially to target the residential and SME segments. In addition, Telmex and Motorola have 30 active trials in other countries across Latin America. Ertach Today Today, the company has over 13,950 links, of which 75% are business, 15% government and 10% residential; 4,500 VPN IP-MPLS points; and more than 100 governmental entities being served by its network. These entities include the Government of the Province of Buenos Aires, San Juan, Salta, Tucumán, Entre Ríos, Tandil, San Miguel del Monte, and more than 30 cities all over the country. Ertach provides services to more than 6,000 companies, both large and small. Ertach’s service portfolio includes variable and dedicated internet services provided over a WiMAX platform to corporate users, VPN IP-MPLS, fontach IP Telephony, VoIP (only available for Ertach’s VPNs), and Wi-Fi. The company provides speeds of up to 4 Mbps in both variable and dedicated connections. WiMAX tariff plans start at ARS 245 (US$77.65) for downstream speeds of 256 kbps. In comparing business packages having similar speeds, we found similar pricing between Ertach’s WiMAX offerings and those provided by another Argentinean operator.
All prices are depicted in US dollars. In Argentina, 512 kbps and 1024 kbps are the preferred speeds for the business market, according to Mr. Ezequiel López Alcalá. Internet, data services, and VPN are the most commercialized services. Ertach does not subsidize the cost of the CPE; the CPEs are lent to the subscriber free of charge for the duration of the contract. Cable and DSL continue to be the most used technologies by Argentina’s mass market, not only because of their lower cost than wireless but also because of their greater availability. “In Argentina, ADSL is more oriented to the residential users. Ertach’s focus is on the SME and corporate users; therefore it is difficult for us to provide a comparison between our WiMAX offerings and the ADSL and cable offerings of other telcos. However, in terms of bandwidth, WiMAX price is a bit higher than ADSL, for the same bandwidth,” commented Mr. Ezequiel López Alcalá. “The customer does not have a preference for ADSL or broadband wireless; what they see is the quality of the service and the customer support. In this respect, the ADSL customer support is very bad here in Argentina. In Ertach, the difference is that we provide to all our customers very personalized attention and service.” According to IDC Consulting, by the end of 2006, there were over 1.5 million broadband connections with ADSL and cable modem in Argentina, of which 91% were home users, 5% were SME, and the remaining were big corporations, government, and educational institutions. This figure is expected to reach 2 million by year end. This provides Ertach a very competitive position by being a WISP focused on the business market segment. Ertach’s nationwide leadership is defined by its presence in more than 160 cities all over the country and a network consisting of 221 base stations, covering 223,725 square kilometers. For the last couple of years, the company has experienced continuous growth and prosperity and is likely to continue to do so. Ertach is now implementing trials and evaluating different equipment vendors for the launch of “True Mobile Broadband” with technology 802.16e. The company expects to bring its customers a true mobile WiMAX experience by 2008. Want to learn more about Latin American operators? For more information you can contact the author: cintia@maravedis-bwa.com
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