TBY talks to Juan Carlos Archila, President of Claro, on the advantages of the merger of local players, the innovative Multiplay offer, and the drive to launch 4G.
THE BUSINESS YEAR Claro recently launched operations in Colombia, following the union of Comcel and Telmex. What have been the major advantages of this merger?
JUAN CARLOS ARCHILA We have made a statement to the market that has been clearly recognized by consumers, the industry of telecommunications is evolving into a new era of convergence, which is a worldwide trend. Everybody understands that telecommunications is a critical sector; it extends into many other segments of the economy and supports productivity. In that sense, consumers have started to see that the company is blending fixed networks, such as internet subscriptions and TV services, with mobile services, which shows the strength of our business and the power of telecommunications for the future of our country. The union seems to be working well for us and the change was very fast—the morning after the announcement, consumers saw that over 3,000 points of sale of Comcel and Telmex had changed to Claro. It is easier for the consumer to jump on to what’s next instead of waffling back and forth. The merger introduced an international perspective to Colombia. Today, people recognize that there is a wider telecommunications world beyond the local players. Currently, the company has subscribed close to 37 million clients.
What new products are you planning to launch in the short term, and what are the advantages of Multiplay?
We are making all of the investments required to combine the two networks into a single network. It does take a significant amount of work to make sure the components are compatible to provide convergent services. We have done a soft launch to test quadruple play, which was historically known as triple play, a TV offer subscription with a phone and home internet service packaged together with the mobile internet offer. The program is fairly robust at the moment; we cover 100% of the counties of the country.
What is your pre-paid to post-paid ratio, and how is that changing?
It is changing slowly. Currently, 85% of the market is pre-paid, which is a reflection of the price sensitivity of the consumer. It is important to be price conscience for the Colombian consumer. The other 15% is post-paid, but that ratio is growing slowly. There is a huge amount of consumers that consider switching to post-paid services, and their credit history is adequate. Additionally, the demand for data services is a driver that is further developing our post-paid offer.
What makes the Colombian consumer unique?
Colombian consumers are heavy mobile services users. They use voice services for about twice as long as anyone else in the region. This comes combined with the fact that we offer almost the lowest tariffs per minute worldwide.
What is your average revenue per user (ARPU)?
ARPU is roughly $11, which is one of the lowest in the region. This is because people talk a lot for little. However, this characteristic of the company has attracted 37 million consumers.
What has been the significance of 3G for Colombia?
We have 3G coverage in almost every location nationwide. Claro has decided to extend that coverage to even the smallest towns. Although not a huge percentage of voice traffic has shifted to the 3G network, the demand for data services has evolved away from the 2G network. Considering the case of Bogotá, we are seeing about 50% of traffic going through the 3G network. This is happening as people update their technology and handsets. Therefore, we are doubling the amount of data we carry through the 3G network month after month.
What is your outlook regarding 4G services?
There is a great deal of contention surrounding 4G. There are many proposals from our competitors, and recent reports show huge potential. Everyone is aware that internet and broadband services outside the home are happening through the mobile world. However, we also need to provide fixed internet for people who demand the highest quality. The vast majority of consumers are demanding these services, and there is an incredibly powerful plan from the government to make this happen. Regardless, many different companies need to come to Colombia, invest in the country, and enjoy the legal stability we have enjoyed in the past few years. Our outlook is that the implementation of 4G will be the Ministry’s decision. Our infrastructure is ranked third in the region, behind Brazil and Chile. The telecommunications infrastructure is one of the few aspects of the country that is not falling behind that of other countries in region. I am positive about the next five years—4G needs to happen, but sometimes decisions take a long time to make. The authorities discuss the issue and forget that 47 million users are waiting for a resolution. In the end, the service will be for the people and the users, not the government, so we are pushing for the process to move more quickly.
What financial performance are you expecting for 2012 compared to last year?
In 2011, our service revenue grew by around 10%-11%. This is significantly higher than the growth of the country’s economy. There is huge demand for the services we provide. We are seeing that consumers demand more communications technology, which we struggle to provide because we lack different spectrums. 4G needs to be applied as soon as possible, so that we can provide higher-quality services at a faster pace. The demand for data is growing, and has reached about 17%-18% of our daily revenue.
What is your vision for the ICT sector and Claro in the medium term?
We definitely believe that the industry can become a locomotive for the economy. The telecommunications sector has the opportunity to become much more robust and a driver of development for the country. What we have been creating is a think tank for the telecommunications industry. The size of the market is an invitation for competition. If the conditions in the country are maintained and we don’t change the rules of the game, people will continue to invest. I believe that we will start to see a more competitive environment. The country welcomes investment and seeks to ensure that there is always competition to drive the quality of services up. Claro will continue to push and compete, just as we have done over the past 18 years. We will do everything possible to maintain the leadership position that we have today.
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© The Business Year - October 2012