SECTOR WITH BYTE

Colombia 2014 | TELECOMS & IT | REVIEW: TELECOMS & IT

The government is harnessing the private and public sectors to technology in anticipation of major growth in software and BPO services, while mobile and internet offerings are meeting healthy demand.

There is a clear awareness across frontier markets and EMs alike that systematic ICT investment is crucial to national development. And, for the long term, factoring technology into education generates a skilled workforce better prepared to compete locally and further afield, enhancing the value of, and diversifying, the industrial matrix. It is telling that Colombia was acknowledged as a “leading country in defining ICT policies" at the 2012 Barcelona Mobility Fair.

(OUT)SOURCE OF WEALTH

The route to maximizing the ICT proposition seems to lie in innovative public-private partnerships (PPPs). The Colombian government has ranked ICT among the priority sectors of the economy, and the nation already boasts the lowest piracy rate in Latin America of 55%, according to the Business Software Alliance (BSA). And as ministries, the civil service, and businesses increasingly concentrate on their core competencies, farming out essential activities, the business process outsourcing (BPO) sector is where innovative thinking is being channelled into local solutions.

In conversation with TBY, César A. Echeverri, Executive Director of ADA, “a shared service center," stated that, “From our early stages of developing the company, we started providing software solutions and packages to government authorities and institutions. Since then, we have understood the possibilities of that market niche, considering that most of the players have traditionally focused on the private sector."

A major vehicle of the Ministry of Trade, Industry and Tourism in promoting public-private cooperation in key economic sectors—including ICT—is the Productive Transformation Program (PTP). The services segment accounts for 55% of Colombian GDP, and while this lags behind Panama, Costa Rica, Brazil and Uruguay, a 2014 report co-penned by the PTP reveals tremendous growth potential. The report indicated a high concentration of BPO companies in contact center services, collections, logistics, and human resources management. Low bilingualism in Colombia has curbed the share of bilingual contact center business to just 6% of total BPO operations. Meanwhile, a growth area identified by the report is human resources outsourcing—globally the primary outsourcing revenue generator, at 43%, but at just 11% of Colombian BPO sector turnover. The consensus view seems to be that the BPO, information technology outsourcing (ITO), and knowledge process outsourcing (KPO) sectors will see consolidation and generate greater economic benefit for the nation.

According to PTP, the estimated 2012 revenue of the 2,615 companies in the BPO, ITO, and KPO sector was at $14.6 billion compared to the 2011 figure of $3.6 billion. In 2012 the sector employed 319,038 people, up from 190,638 a year earlier according to Nearshore Americas. Some 53% of the industry is based out of the capital Bogotá, which includes most sub-sectors such as, “…Spanish language and bilingual contact centers, logistics, finance and accounting services, cloud computing and data centers, legal services and graphics design." Bogotá is followed by Medellín and Cali, which rule the roost for IT testing and KPO health services.

In fact, such is the volume of BPO business in Colombia, that the sector now has its own chamber. And as Carlos A. Mejia Quintero, Andean Region General Director of sector player Avanza explained to TBY, “Estimates on the number of workstations moving from the US to Latin America over the next couple of years is 60,000. If we take only 20% of that, it will be good for us."

TELEPHONY

Colombia's telecom market, a giant in Latin America, was valued around $10 billion in 2012, where, according to Pyramid Research, sector growth has doubled that of GDP, primarily driven by a strong expansion of the mobile market, which stumped up 61% of overall telecom service revenue in 2012. That year also saw penetration exceed the 105% level.

Mobile penetration in 4Q2013 stood at 106%, up notably from 98.4% in 1Q2013. By 1Q2014, Colombia had 51.59 million mobile lines, up 11% YoY to just 7.15 million landlines. The Colombian market hosts five Mobile Network Operators (MNOs) and six Mobile Virtual Network Operators (MVNOs). Of these 11 mobile suppliers, the bulk of the market share, at 96.9%, is accounted for by three firms: Claro (the trading name of Comcel), Movistar, and Tigo (the trading name of Colombia Móvil), on respective shares of 57.61%, 24.10%, and 15.19% in 4Q2013. Reflecting socioeconomic realities, for the quarter pre-paid lines outweighed post-paid by 78.62% to 21.38%. In 4Q2013 the three firms accounted for 53.15%, 30.72%, and 11.66% of post-paid subscribers, and 58.83%, 22.30%, and 16.15% of pre-paid customers, respectively.

Colombia's ICT Minister Molano points out that while 65% of Colombians are unbanked, mobile telephony is enabling more citizens to enjoy financial inclusion, including micro-credits capable of funding entrepreneurship, thus contributing to the economy. Mobile payment is a vehicle of social inclusion among the unbanked—40% of Colombia's population is in reduced economic circumstances. By extension, such payment promotes growth by fostering a stable trading system. Deloitte research indicates that Latin America's current 18 million mobile banking users are anticipated to rise to over 140 million by 2015. In terms of national user patterns, according to leading mobile provider Claro, Colombians have twice as much to say as their Latin American counterparts, at 201 minutes on average per month in contrast to Argentina's 130 minutes. “I consider Colombian consumers to be highly price sensitive. For example, mobile rates are probably the lowest in the region and perhaps in the world. The average price per minute rate in Colombia is probably about $0.06, while Claro's is probably about $0.045," company president Juan Carlos Archila Cabal told TBY.

GET IT ON(LINE)

In 1Q2010 internet penetration in Colombia was at 7.3%, but had soared to 19.2% by 4Q2013. Total internet subscriptions as of 1Q2014 stood at 9.5 million, with respective broadband and narrowband figures of 4.6 million and 53,872. Meanwhile, the print for fixed and mobile connections was at 4.7 million and 4.8 million. As with mobile telephony, pre-paid access of 12.5 million subscribers vastly outweighed 2.4 million post-paid subscribers, by around six fold.

Meanwhile, corporate internet subscriptions by 1Q2014 had reached 1.1 million, compared to 284,384 in 1Q2010. Dedicated internet connections stood at 4.7 million for 1Q2014.

Broadband internet penetration is on the rise, championed by the government drive to bridge the digital divide and get every Colombian online. Colombia's 4G auction in June 2013 resulted in five successful bidders, namely Claro, Movistar, Tigo/ETB, Avantel, and new sector player DirecTV. The ICT Ministry's objective had been to spur competition in the mobile sector to boost internet user numbers. Exceeding government expectations, the auction generated revenue of around $400 million, roughly 70% in excess of the reserve price of $233 million set by the Ministry of Information Technologies and Communications.

While data popularity rises and smartphone and tablet prices have declined in recent years, these devices remain beyond the reach of many Colombians. Consequently, as of the end-2012, around 50% of total subscribers remained on 2G networks. This said, for the same period, data contributed 21.4% of total mobile revenue. And as gadget prices continue to fall, Pyramid Research foresees 4G-enabled mobile subscriptions in 2018 of 2.5 million, amounting to 5% of the population with mobile data services revenue of $2.7 billion, skyrocketing 107.6% from the 2012 print.

Colombia is reaping the benefits of systematic investment in ICT, and rising public uptake of the internet. Meanwhile, both private and public sector initiatives ensure that technology will remain a big employer and generator of revenue for the state coffers.