Analyst: Ola Suitors Face Complex Challenges

Companies interested in becoming a technology, management and financial partner for mobile operator Colombia Móvil (Ola) have challenges that could go far beyond the fact that Ola's total net revenue in the past three years is negative US$386mn.

Ola's troublesome financial situation may turn out to be the least of the winning bidder's worries. Many of the companies evaluating the opportunity will face serious internal or regulatory problems that could prevent them from following through on their commitments to the operator should they find themselves at the helm.

Both Spain's Telefónica Móviles and Mexico's América Móvil would face regulatory problems due to an excessive concentration of spectrum - 70MHz in the case of AMX, which already owns local mobile operator Comcel. In addition, this could push other industry players to sue to block these companies from joining the Ola family, Signals Consulting president José Otero told BNamericas.

In this scenario, AMX and TEM would most likely be required to return part of their spectrum, as well as face additional coverage requirements.

A previous incursion into Colombia by Luxembourg's Millicom International Cellular ended less than successfully, with the sale of its Celcaribe unit to AMX. Furthermore, Millicom itself is up for sale, which could put a brake on its investments, said Otero.

AMX announced this week a decision to buy a 28% stake in Venezuela's Cantv from US behemoth Verizon, and may be tempted to use Cantv as the vehicle for buying Ola. But this could bring about the same regulatory problem - too much bandwidth concentration - that AMX would face if acting directly, Otero pointed out.

For its part, Swedish telecoms services firm Swedtel, which has formed an alliance with Colombian cableco Cablecentro and telecoms company Phone1, is not a mobile operator, but an administrator. Historically, it has invested with the goal of harvesting short-term returns, as shown by its recent moves in Honduras and Nicaragua, where it sold Megatel and Enitel to AMX. If this were to happen in the case of Ola, the spectrum concentration issue would yet again arise, Otero said.

Finally, South Korea's SK Telecom and Brazil's Telemar (Oi) declined to participate in the process, and British telecoms group Cable & Wireless (C&W) said it never had any intention of doing so.

In short, there is no post-auction scenario for Ola's future strategic partner that is exempt from problems, some of them quite complex. Furthermore, in certain cases the winning bidder may find itself blocked from assuming its role as strategic partner by regulators or lawsuits potentially lasting for years.

BNamericas.com"

Posted to the site on 4th April 2006