CHILE, ARGENTINA LEAD PRIVATIZING MARKETS IN LATIN AMERICAN REGION;THE AMERICAS

Published on .

Most Popular
Chile, ahead of much of the world on the deregulation curve, privatized the Telephone Co. of Chile and long-distance provider Entel in the mid 1980s, and today has eight long-distance carriers.

Analysts say the nation's 13 million people can't support that level of competition and expect three or four to fade away eventually. But in the meantime, the fierce competition has cut prices in half and doubled long-distance traffic.

Bigger changes in 1994 put a multicarrier long-distance system in place, operated by eight services: BellSouth, Southwestern Bell and Bell Atlantic, from the U.S., and Chile's Chilesat, VTR, CNTel, Entel and CTC Mundo, the long-distance subsidiary of the Telephone Co. of Chile, or CTC.

Entel is betting on satellite service with partner MCI and is expanding into local service, competing with VTR and its partner Southwestern Bell. CTC competes with BellSouth in the cellular market, now looking toward PC integration.

Entel spends about half a million dollars on advertising annually via Leo Burnett Co., Santiago.

ARGENTINA

International services appears to be the first area in which Argentina's two giant privatized telecoms could see some competition.

Telecom Argentina in the north and Telefonica de Argentina in the south hold exclusive licenses through 1997 that might be extended until 2000. However, the companies may choose to relinquish their international service stranglehold next year if they themselves are as a result allowed to get into non-voice, or imaging, services.

Foreign telecoms are in Argentina already, in the cellular and cable markets. BellSouth holds 45% of CRM Movicom, whose highly successful service to Buenos Aires since 1989 gives it tremendous brand cachet.

All cellular phones in Argentina are known as "movicoms," even those operating with upstart rival Compania de Telfonos del Interior, outside greater Buenos Aires. CRM boasts 150,000 subscribers to CTI's 105,000.

CTI's print ads by Ogilvy & Mather, Buenos Aires, refer to "GTE and AT&T Technology" and print those companies' logos-relying on the companies' images and reputations-along with its own.

TV spots establish recognition for CTI as a business tool and push the still-novel cell service concept more generally. Its 1995 budget came to $7.5 million.

Telecom spent $11.5 million on advertising in 1994 and this year plans to quadruple its budget, handled by Ayer Vazquez; Pragma/FCB handles Telefonica.

MEXICO

Telefonos de Mexico, technically privatized in 1991, has until 1997 to prepare for long-distance competition.

Telmex is teaming up with Sprint against Grupo Alfa, Monterrey, linked to AT&T; Avantel, joined with MCI and national bank Banacci; and a venture with GTE and national bank Bancomer.

Telmex is handled by Alazraki Associates, Mexico City, and Young & Rubicam handles AT&T.

CANADA

Bell Canada in recent years has spent heavily to protect its long-distance business from the likes of Unitel Communications and Sprint Canada. Bell Canada's strategy has changed from redefining the company and recovering customers to emphasizing future applications like online education, medical service and entertainment. The company's multimillion-dollar advertising is handled by Leo Burnett Co. and BBDO, both Toronto, while Cossette Communication-Marketing, Montreal, handles French-speaking Quebec.

Bell's Toronto-based cellular subsidiary Bell Mobility is also now promoting its service heavily in the consumer market. After 10 years of Canadian cellular service, Mobility and the Cantel network split the market. Cantel, via agencies Gee, Jeffrey, Toronto, and Groupaction, Montreal targets both business and consumer customers.

PERU

Telefonica del Peru has a basic telephony and long-distance monopoly that runs into 1999, and the privatized state telecom intends to make the most of it.

Telefonica markets its value-added and cellular services most heavily, targeting mid-size to large businesses that buy high-end multimedia applications. Telef¢nica's $10 million marketing budget, handled by Publicistas Asociados, Lima, runs the gamut from brand identity TV campaigns to direct marketing, event sponsorship and face-to-face presentations.

BRAZIL

Near the extremes of the Americas' largest and smallest market sizes are Brazil and Costa Rica, which share resistance to privatizing their state-owned telecoms. In December, Brazil announced its first round of draft bills setting privatization regulations for its telecom Embratel.

One draft bill prevents companies with less than 51% Brazilian ownership from competing for satellite or cellular licenses, including wholly owned Brazilian companies with voting stock in foreign hands. Some analysts call the bills unconstitutional, as they restrict participation based on nationality. Congress is expected to vote early this year.

Sergio Motta, Brazil's communications minister, said Embratel's monopoly on satellite service will end in January 1998, and Brazil will require reciprocal investment opportunities for Embratel in its investors' domestic markets. "AT&T trusts in the government's project," said Omar Carneiro da Cunha, president of AT&T Brazil. AT&T will invest $1 billion in cellular service, in association with mammoth broadcaster Organizacoes Globo and bank Bradesco.

COSTA RICA

Further north, the Costa Rican Electricity Institute clings to its monopoly on the market as much as ever, and experiences like that of cellular service provider Millicom frighten potential foreign investors away. The institute gave free airwave access to Millicom, in the country since 1987, which then had to defend itself against corruption allegations in a newspaper campaign. In 1994, after the Supreme Court ordered a constitutional change or Millicom's ejection from the market, the institute tried the former route but ultimately absorbed Millicom's 4,000 customers.

Contributing to this story: Don Angus, Toronto; Jo Bedingfield, Mexico City; Peter Brennan, San Jose, Costa Rica; Michael J. Galetto, Buenos Aires; Lake Sagaris, Santiago; Douglass Stinson, Lima; John Thrall, SÌo Paulo.

In this article: