Argentina Decides to Create its Own Mobile Company

Argentina's government apparently is canceling an auction for third generation (3G) spectrum that represents about a third of all potential 3G spectrum in Argentina.

Argentine President Cristina Kirchner has greatly expanded the state's role in the economy since she took office in 2007.

Kirchner shocked investors earlier in 2012 when she seized a controlling stake in Argentina's biggest oil company YPF SA  from Spain's Repsol SA.

Now telecommunications appears to be the next sector that will see an increased government presence, some would argue. 

Argentina boasts one of the highest rates of mobile-phone ownership in the world, with about 55 million wireless subscribers in a country of almost 41 million people.

Instead of licensing that spectrum, the Argentine government will go into business as a service provider itself using the state-owned satellite company ARSAT for backhaul and core network.  So far, it is not clear whether that means Argentina will operate the network directly, or have a business partner do so. 

Argentina's $14 billion mobile phone market is now lead by America Movil's Claro, Telecom Italia's Personal Telefonica's Movistar. The canceled spectrum auction is a blow to Argentina's four incumbent wireless carriers--Telecom Argentina SA and subsidiaries of Mexico'sAmerica Movil SAB de CV, Spain'sTelefonica SA  and U.S.-based NII Holdings Inc. that submitted bids.

Claro, owned by Mexican billionaire Carlos Slim, was the only company seen as having the resources to build a network using the new spectrum allocation, and letting Claro win "would have led to more concentration," Argentina says. 

The government also is studying other ways of reducing what it claims is "monopoly control in the telecommunications business," citing the dominant positions of Telefonica and Telecom as an example. 

The government was initially planning to award 30 MHz of spectrum in the 1,900 MHz band for an area covering the provinces of Entre Ríos, Corrientes, Misiones, Córdoba, Santiago del Estero, Chaco, Formosa, Catamarca, La Rioja, Tucumán, Salta, Jujuy and Santa Fe.

For the southern provinces of San Juan, San Luis, Mendoza, La Pampa, Neuquén, Río Negro, Chubut, Santa Cruz, Tierra del Fuego, parts of Santa Fe and certain areas in Buenos Aires, the government planned to award 35 MHz in the 1,900 MHz band.

For the greater Buenos Aires area, the government was looking to award 7.5 MHz of spectrum in the 850 MHz band and 30 MHz in the 1,900 MHz band.

"This is not a state takeover," the Argentine government says.