---------- Forwarded message ----------
Date: Wed, 12 Jun 96 10:34 PDT
To: latco@psg.com
Latin America Plans Massive Telecom Investment
By Paula Green, Journal of Commerce
Knight-Ridder/Tribune Business News
Jun. 10--Latin America is expected to let loose with a $40 billion
technological buying spree through the end of the decade as the region
upgrades a telecommunications system that remains obsolete, dilapidated or
nonexistent from Mexico to the southernmost reaches of South America.
And with their technological edge, U.S. companies are poised to cash in on
the growing market, as Latin governments keep loosening the regulatory reins
they have held over their telecommunications sectors for decades.
"The regulatory changes have presented enormous opportunities," said Eric
Nelson, an executive with the Telecommunications Industry Association in
Arlington, Va. "U.S. companies haven't been that interested until fairly
recently. Now they're aggressively looking at the market."
A weeklong international conference on telecommunications investment in Latin
America kicks off today in Brazil.
Last year, U.S. companies exported nearly $3 billion worth of
telecommunications equipment to the region.
That's up about 7 percent from the $2.76 billion exported in 1994 and 112
percent over the $1.4 billion worth of equipment -- including everything from
radio transmitters to cordless telephones -- shipped in 1990.
But the most lucrative deals -- created as Latin governments slowly push
their state-run monopolies to be more competitive -- lie in the market for
services.
These are the multiyear contracts that a developing country opens for bid to
private companies to run a cellular phone system, for example, or a cable
television network.
"An that's where U.S companies have the edge. They're going to demolish their
competitors," said Erik R. Olbeter, a telecommunications analyst based in
Washington. He added that European and Japanese companies, with their stronger
manufacturing bases in the region, have traditionally held the edge in
equipment sales.
The absence of even rudimentary telephone services in the region -- there are
10 telephone lines on average for every 100 people in South America, compared
with 63 lines per 100 in the United States -- means the Latin market is ripe
even for basic infrastructure investment like the cable laying and telephone
sales. But the region also wants more sophisticated services, such as cellular
phones and fixed wireless, a developing technology in which radio antennae is
used to transmit a telephone call from a regular home telephone, rather than
using traditional lines.
In some cases, a country may find it's more economical and faster to just
leapfrog over the timeworn installation of cables and move directly to one of
the more advanced technologies. "It's an attractive option in rural areas,
where you don't have lines and in urban areas where you won't have to dig up
the streets," said a U.S. analyst.
International investors' growing interest in the region can be seen in the
nearly 50 percent jump in attendance at the regional telecommunications
conference held this year by the International Telecommunication Union, Geneva.
Americas Telecom 96, being held June 10-15 in Rio de Janeiro, is expected to
draw 20,000 people. The last regional Latin American conference sponsored by
the union in 1992 drew 14,000 people.
For U.S. companies, as well as their counterparts in Europe and Japan, Brazil
is the prize everyone is waiting for.
After sealing its market for decades, the Brazilian government has over the
past year taken the first steps toward opening its telecommunications sector.
"With a teledensity of nine lines per 100 people, Brazil has a lot of space to
grow," said a spokesman at AT&T's Miami office, a base for most of its Latin
American operations.
The U.S. Commerce Department ranks Brazil, the world's eighth-largest economy,
as the best telecommunications prospect in the world for U.S. companies.
Brazil's domestic telecommunications market for equipment and services totaled
$8.5 billion in 1995, which includes $1.5 billion in equipment and $7 billion
in services.
U.S. exports of telecommunications equipment to the former Portuguese colony
jumped nearly 30 percent to $618 million in 1995, up from $480 million in
1994. That amount is expected to keep growing as the country embarks on an
ambitious plan to sink $75 billion in the sector over the next eight years.
Earlier this year, Sergio Motta, Brazil's minister of communications, touted
the market potential of his country's telecommunications sectors during an
international tour, which included stops in Japan, the United States and
Brazil.
The country is a sleeping giant. They need everything from switching
equipment to microwave cells to fiber optic cables," said Mr. Olbeter,
director of telecommunications projects at North Atlantic Research Inc. "The
system is in terrible shape." Other hot markets south of the border include
Mexico, whose government put through a new telecommunications law last year
that provides for greater competition, as well as Chile, which has led the way
in telecommunications reform. Argentina, Peru and Colombia are other markets
that U.S. investors are watching. END!A3?JC-LAT-TELECOM
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