Telecommunication Projects for Regions of Per Technical Secretariat of FITEL FONDO DE INVERSIN EN TELECOMUNICACIONES FUND FOR INVESTMENTS IN TELECOMMUNICATIONS FITEL 2 Economic and Political environment 4 Broadband projects 3 Telecommunications market environment 5 Conclusions: Why investing in Peru? ndice 1 Introduction: FITEL FONDO DE INVERSIN EN TELECOMUNICACIONES Introduction FITEL FITEL lmontes@mtc.gob.pe www.fitel.gob.pe MISSION Promote access to and use of telecommunications services in rural areas and places of social interest VISION To achieve Country connectivity by means of high quality telecommunications services and articulating sustainability FITEL Projects formulation and financing for the provision of telecommunications services in rural areas or in places of social interest Promote and coordinate strategic partnerships with the private and public sectors to ensure sustainability of telecommunication projects OBJECTIVES FONDO DE INVERSIN EN TELECOMUNICACIONES Economic an political environment Stability and business climate Peru: economic growth (recent) high and stable Growth and stability (I) A. Central Ecuador Argentina Bolivia Brasil Chile Colombia Mxico Paraguay Per Uruguay A. Latina 0% 2% 4% 6% 8% 10% 2% 3% 4% 5% 6% 7% A v e r a g e I n f l a t i o n ( % ) High and stable Low and stable Low and unstable High and unstable During the period 2004-2013 Peru has grown at 6.6%, above the average for Latin America at 4.9% Peru had an average inflation of 2.9%, lower than the South American average of 5.4% ACGR GDP % 2004-2013 Annual compound growth rate of GDP (%) vs. Inflation (%) Peru 2004 -2013 Source: BCR, FMI, BM FONDO DE INVERSIN EN TELECOMUNICACIONES ACGR: Annual compound growth rate Peru: economic growth (future) high and stable too Growth and stability (II) Real GDP. Peru 2014-2019 (annual growth,%) Peru average 2014-2019 4% 6% Latin America average 2014-2019 Inflation. Peru 2014-2019 (average annual change,%) Peru average 2014-2019 4% 2% Latin America average 2014-2019 4.4% 6% 6% 6% 6% 6% 3,6% 4% 4% 4% 4% 4% 2014 2015 2016 2017 2018 2019 Per A. Latina 2% 2% 2% 2% 2% 2% 4% 4% 4% 4% 4% 4% 2014 2015 2016 2017 2018 2019 Per A. Latina Source: BCRP, FMI, FITEL FONDO DE INVERSIN EN TELECOMUNICACIONES Peru: attractive country for investment Investment grade Grado de inversin Pases Grado de inversin Pases Grado de inversin Pases Aaa AAA AAA Aa1 AA+ AA+ Aa2 AA AA Aa3 Chi l e AA- AA- A1 A+ Chi l e A+ Chi l e A2 A A A3 Per A- A- Baa1 BBB+ Per BBB+ Per Baa2 Brasi l , Col ombi a BBB Col ombi a BBB Col ombi a Baa3 Uruguay BBB- Brasi l , Uruguay BBB- Brasi l , Uruguay Ba1 BB+ BB+ Ba2 Paraguay BB Bol i vi a, Paraguay BB Ba3 Bol i vi a BB- BB- Bol i vi a, Paraguay B1 B+ B+ B2 B Ecuador B Venezuel a B3 B- Venezuel a B- Ecuador Caa1 Venezuel a C+ C+ Caa2 Ecuador C C Caa3 CCC+ C- Sin calificacin Argenti na Sin calificacin Argenti na Sin calificacin Argenti na Moodys S&P Fitch Countries above the line have investment grade Source: Moodys, S&P, Fitch C o u n t r i e s w h i c h h a v e i n v e s t m e n t g r a d e Chile FONDO DE INVERSIN EN TELECOMUNICACIONES Economic an political environment Political - Regulatory Widespread and increasing access, use and population ownership of broadband Source: Own analysis Law 29904 "Law for the Promotion of Broadband and Construction of the National Fiber Optic Backbone (RDNFO) and its Regulations Deployment of Optical Fiber Infrastructure RDNFO and Regional Projects Network Neutrality Freedomto use Foster E-Government ICT connection between the state and citizens Foster the creation of contents, applications and digital skills training Focused in areas as education, health, security Impulse to the National Network of State (REDNACE) More - National Plan for E-Government / e-Inclusion Plan - The Peruvian Digital Agenda Districts-localities Regions Per Provinces Broadband policy FONDO DE INVERSIN EN TELECOMUNICACIONES Favorable regulatory and political environment Regulatory Legal framework Measures to promote private investment in infrastructure; removes barriers to carry it out There are signed agreements with Regional Presidents which undertake to facilitate procedures. Agreements with each of the regional governments to ensure payment for services to be provided to Local Schools and Health facilities will be signed Agreements with power companies for use of their infrastructure Law30228 Agreements Law for the expansion of telecommunications infrastructure Agreements with key stakeholderss FONDO DE INVERSIN EN TELECOMUNICACIONES Market environment Internet Business Performance Fixed Internet market of Peru: level of development "emergent" Market: Internet Business Performance Paraguay Ecuador Uruguay Colombia Per 18% A. Central Brasil Venezuela Argentina Bolivia Mxico Chile A. Latina 18% 0% 10% 20% 30% 40% 50% 60% 70% 0% 5% 10% 15% 20% 25% A v e r a g e g r o w t h 2 0 0 9 - 2 0 1 3
( % ) Fixed Internet Penetration (%) Explosive Emergent Incipient Mature A. Central Argentina Bolivia Brasil Chile Colombia Ecuador Mxico Paraguay Per 5% Uruguay Venezuela A. Latina 9% 0% 5% 10% 15% 20% 25% 0 5.000 10.000 15.000 20.000 25.000 F i x e d I n t e r n e t
P e n e t r a t i o n ( % ) GDP per capita (US$) GDP per capita vs. Fixed Internet penetration (%). Peru 2013 Internet penetration (%) vs. average growth (%) Peru 2009 -2013 Source: UIT, MTC, FMI FONDO DE INVERSIN EN TELECOMUNICACIONES 1 Penetration: measured by the number of subscriptions to fixed Internet service on the total population 2 Growth: average growth rate of ubscriptions to Internet service from 2009 to 2013 Internet access per household: gaps for growing in rural areas A great opportunity! , A lot of work to do! Market: Business Performance by area Households with at least one PC. Peru 2012 Source: Statistics National Institute (INEI) Households with fixed internet connection. 2012 In rural areas 95% of households do not have PC 35% 19% 2% 20% 65% 81% 98% 80% Lima Metropolitana Resto urbano Rural Per In rural areas there is a gap of 98% of households without Internet service Households with PC Households without PC 46% 33% 5% 29% 54% 67% 95% 71% Lima Metropolitana Resto Urbano Rural Per Households with Internet connection Households without Internet connection FONDO DE INVERSIN EN TELECOMUNICACIONES Telecommunications market environment Consumption pattern Peru fixed Internet market: development level "emergent" Market: Data consumption pattern Average Internet speed (Mbps). Peru 2009-2013 Source: Akamai, OSIPTEL, FMI, Telecom operators Argentina Brasil Chile Colombia Mxico Per 2.4 Promedio 3.1% 2 2,5 3 3,5 4 4,5 10.000 12.000 14.000 16.000 18.000 20.000 A v e r a g e s p e e d ( M b p s ) GDP per capita (US$) GDP per capita (USD) vs. Average Internet Speed (Mbps). Peru 2013 0,9 1,3 1,3 1,8 2,4 2009 2010 2011 2012 2013 32 31 31 31 2010 2011 2012 2013 27% Internet ARPU (US$/conecction/month). Per 2010-2013 Average annual growth 2009-2010 FONDO DE INVERSIN EN TELECOMUNICACIONES Telecommunications Market environment Existing gap and growth opportunity To promote the development of telecommunications infrastructure nationwide Broadband Divide and opportunities Opportunity: Investment Business Internet subscribers (thousands): 1,600 Fixed internet penetration 1 per Region. Per 2013 Internet Per 5% Penetration Source: MTC, OSIPTEL FONDO DE INVERSIN EN TELECOMUNICACIONES 1 Penetration: measured by the number of subscriptions to fixed internet service over the total population. Figures from the Ministry of Transport and Communications - MTC Impact of the Internet on economic growth. Countries with the highest penetration level has a greater impact Broadband Divide and opportunities Source: Katz (2011) FONDO DE INVERSIN EN TELECOMUNICACIONES I m p a c t
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g r o w t h Broadband penetration 2011 Broadband Projects National Fiber Optic Backbone - RDNFO Source: MTC, FITEL, PROINVERSIN State Vision: Expanding high-capacity network Details of RDNFO: Kilometers of Fiber Optic: 13,500 Km Investment amount: USD 333 Millones Buena Pro granted: December 23, 2013 - Contractor/Operator: AZTECA COMUNICACIONES - Contract signed: june 17, 2014 - Termconcession: 20 years Start of installations: December 2014 End of installations of RDNFO: June 2016 National Fiber Optic Backbone- RDNFO FONDO DE INVERSIN EN TELECOMUNICACIONES Broadband projects FITEL's Projects for Regions For having transport and access communication networks of high transmission capacity to contribute to the integral development of the towns. Integration of State (sectors of education, health, security), Local Governments. Deployment of ICT broadband high capacity applications and services (e-government, tele-health, tele-education, etc.) To promote the development of telecommunications infrastructure nationwide Objectives of the Projects for Regions (I) FONDO DE INVERSIN EN TELECOMUNICACIONES Widespread and increasing access, use and population ownership of broadband Objectives of the Projects for Regions (II) Deployment of a Transport Optical Fiber Network from Provinces (Nodes of RDNFO) to district capitals of Regions. Deployment of a Wireless Access Network from district capitals to provide connectivity to rural areas of regions. Internet Intranet Infrastructure (Networks) Services and beneficiaries Transport Access Services Beneficiaries : Schools Health facilities Police stations And other institutions and users Regional Projects have three foundations: network, services and beneficiaries. FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Projects: Regulation Law 29904 "Law for the Promotion of Broadband and Construction of the National Fiber Optic Backbone (RDNFO) Article 3 of Law : Declaration of public necessity and national interest Declare of public necessity and national interest: Building a National Optical Fiber Backbone that integrates all the capitals of the provinces and the deployment of high- capacity networks that integrate all the districts in order to make possible the fixed and/or Mobile broadband connectivity and aggregation across the country, in terms of competition. i)Access to and use of the infrastructure associated with the provision of public services of electricity and hydrocarbons, including collocation, and the use of the right of way of the national road network, in order to facilitate the deployment of telecommunications networks required for the provision of fixed or mobile broadband. Terms and definitions: (.) Transport networks of Regional networks are part of RDNFO () FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Projects: Legal Aspects General Legal Requirements License for being Telecommunication Operator in Per granted by the Ministry of Transport and Communications is required for signing the Financing Contract. In case of an operator which is new in Per or in case of a new consortium, if granted with the buena pro, the License must be obtained for signing the Financing Contract. Share capital subscribed and paid-in minimum 25% Not to be prevented by law or temporarily or permanently disabled in the exercise of their rights to contract with the State. If consortium, applies to each partner. Experience in the provision of public telecommunications services. FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Projects: Contract (I) Financing Contract Object: a) Implementation of the transport network and the access network of the project; b) Operation and maintenance of the access network; c) Provide access to internet and intranet to Beneficiaries (Health, schools, police stations) Duration: Inversion Period (Installations, testing), Transport and Access networks + Period of Operation (Access network) = 11 years.(1 year + 10 years). The operation of the transport network of all regional projects, will be performed by a single operator which will be granted with a concession contract after another selection process. FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Projects: Contract (II) General aspects Ownership of assets: - Transport Network: State - Access Network: State (Infrastructure of sites) and operator (Telecommunication equipments). Refer to Technical Specifications and Contract. Extension of the project, will require at most 20% of the amount awarded: Access: new localities (during inversion period) Transport: new districts (during inversion period) Warranties: Advancement and Performance Bond Obligations of the Operator: to comply with the execution of the awarded project; payment of contributions to the special right to FITEL Duration of contract: Access network: Inversion Period (Installation and testing period) (1 year)* + Operation and maintenance period (10 years) Transport network: Inversion Period (Installation and testing period) (1 year)* + Trial period (to 1 additional year). Refer to the Contract. * The period of installation and testing of the project is one year for both networks, run in parallel. FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Fiber Optic Networks with districts connections 6.1 millions 1,516 district capitals 6,633 localities Districts connected to the OF beneficiary localities Beneficiary Population State Insitutions Educational (Schools) 6,979 Health 3,471 Police stations 566 21 Projects Regional Projects: Dimension of the total scope FONDO DE INVERSIN EN TELECOMUNICACIONES Fiber Optic Backbone (RDNFO) Possibility of interconnection with operators in Lima or in any of the 180 capitals of province where reaches the RDNFO Possible Output to Internet from Lima, supported by transport Network of RDNFO. Deployment of the Transport Network Regional Projects: Networks (I) FONDO DE INVERSIN EN TELECOMUNICACIONES HUANCAVELICA LAMBAYEQUE AYACUCHO APURIMAC CONSORCIO ENERGETICO HUANCAVELICA PRIVADO 21.13 Proyecto Especial Olmos Tinajones PUBLICO 82.16 ELECTRO CENTRO S.A PUBLICO 125.32 ELECTRICIDAD DEL PERU ELECTROPERU S.A. PUBLICO ELECTRO NOR OESTE S.A PUBLICO HIDRANDINA PUBLICO COMPAIA ENERGETICA VERACRUZ S.A.C. PUBLICO ELECTROPERU S.A PUBLICO RED DE ENERGA DEL PERU S.A PRIVADO 21.13 82.16 125.32 0 ELECTRO SUR MEDIO PRIVADO 240.85 ELECTRO CENTRO S.A PUBLICO 692.46 750.22 ELECTRO NORTE PUBLICO 416 ELECTRO SUR MEDIO PRIVADO 430.43 ELECTRO SUR ESTE PUBLICO 92.4 850 ELECTRONOROESTE - ENOSA PUBLICO GOBIERNO NACIONAL PUBLICO HIDRANDINA PUBLICO 933.31 416 1273.05 850 TOTAL RED DE MEDIA TENSIN REDES ELECTRICAS ALTA TENSIN TOTAL RED DE ALTA TENSIN MEDIA TENSIN Electrical networks supporting Fiber Optic Cable FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Fiber Optic Project Deployment of the Access Network Regional Projects: Networks (II) FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Projects: data rates Description Data rate Schools Type 3 Health Type 3 Police stations Type 3 other public entities and households Type 1 Data rate (speeds) Description by type of Institutions 40% of the rate contracted by institutions in regional projects will be ensured Description Downstream Nominal (Kbps) Upstream Nominal (Kbps) Guaranteed (Kbps) Assured Downstream (Kbps) Assured Upstream (Kbps) Type 1 In evaluation Type 2 1,024 256 40% 410 102.4 Type 3 2,048 512 40% 819 204.8 Type 5 4,096 1,024 40% 1,638 409.6 Refer to technical specifications FONDO DE INVERSIN EN TELECOMUNICACIONES Regional Broadband Projects Currently 4 Projects promotion Regional Fiber Optic Network connecting districts 765 Thousand 295 District capitals 1,169 Localities Districts connected to the OF Beneficiary localities Beneficiary population State Institutions Educational (Schools) 1,543 Health 759 Police stations 107 04 Projects 04 Regional Projects: Dimension of the scope FONDO DE INVERSIN EN TELECOMUNICACIONES Lambayeque Regional Project District capitals with Optical Fiber: 35 Length of Optical Fiber: 567 Km Beneficiary localities: 309 Beneficiary population: 320 thousand inhabitants Beneficiary Institutions: 478 Access network: PEN 66 millions Transport network: PEN 38 millions FITEL total subsidy: PEN 109 millions The project has been granted with the approved environmental instrument: Environmental Impact Statement (DIA) which means that the project do not involve significant environmental and social impacts. FONDO DE INVERSIN EN TELECOMUNICACIONES P r o m o t i o n Year Year Year 1 5 10 Total Households 79111 81253 84012 Internet Broadband 2,84% 5,85% 11,22% Beneficiary households 2247 4752 9422 Description Huancavelica Regional Project District capitals with Optical Fiber : 86 Length of Optical Fiber : 1,327 Km Beneficiary localities: 308 Beneficiary population: 142 thousand inhabitants Beneficiary Institutions: 658 Access network: PEN 79 millions Transport network: PEN 76 millones FITEL total subsidy: PEN 210 millones The project has been granted with the approved environmental instrument: Environmental Impact Statement (DIA) which means that the project do not involve significant environmental and social impacts. FONDO DE INVERSIN EN TELECOMUNICACIONES P r o m o t i o n Description Year Year Year 1 5 10 Total Households 34607 35276 36131 Internet Broadband 1,03% 2,97% 8,43% Beneficiary households 355 1047 3046 Apurimac Regional Project District capitals with Optical Fiber : 73 Length of Optical Fiber : 1,409 Km Beneficiary localities: 248 Beneficiary population: 119 thousand inhabitants Beneficiary Institutions: 602 Access network: PEN 68 millions Transport network: PEN 72 millions FITEL total subsidy: PEN 185 millions The project has been granted with the approved environmental instrument: Environmental Impact Statement (DIA) which means that the project do not involve significant environmental and social impacts. FONDO DE INVERSIN EN TELECOMUNICACIONES P r o m o t i o n Description Year Year Year 1 5 10 Total Households 26243 26464 26743 Internet Broadband 1,45% 3,58% 8,84% Beneficiary households 381 946 2363 Ayacucho Regional Project District capitals with Optical Fiber : 103 Length of Optical Fiber : 1,890 Km Beneficiary localities: 304 Beneficiary population : 164 thousand inhabitants Beneficiary Institutions: 671 Access network: PEN 86 millions Transport network: PEN 95 millions FITEL total subsidy: PEN 240 millions The project has been granted with the approved environmental instrument: Environmental Impact Statement (DIA) which means that the project do not involve significant environmental and social impacts. FONDO DE INVERSIN EN TELECOMUNICACIONES P r o m o t i o n Description Year Year Year 1 5 10 Total Households 46304 48070 50372 Internet Broadband 1,14% 3,26% 8,93% Beneficiary households 527 1568 4499 Regional Projects: Timeline Period Description 2014 2015 2016 Jul Ago Sep Oct Nov Dic Ene Feb Mar Abr May Jun Jul Ago Sep Oct Nov Dic Ene Feb Mar Abr May Jun P R O M O T I O N Fitel instructs PROINVERSIN to carry out public contests for granted regional projects to operators Preparation of 1st version of Bases Preparation of 1 st Version of Contract Announcement and Publication of Bases Publication of 1 st Version of Contract Reception and responses to questions regarding the Bases Reception of suggestions to the Contract Reception of envelope Number1 Reception of envelopes Number 2 and 3 Aperture of envelope Number 3 Signing od Financing Contract I N V E R S I O N Engineering studies Procurement environmental impact studies Agreements with power companies for use of their infrastructure and the use of the right of way of the national road network Implementation of Transport and Access networks Commisioning December 2015 December 2014 FONDO DE INVERSIN EN TELECOMUNICACIONES Conclusions Why investing in Per? Key ideas Summary Why investing in Peru? Fixed broadband market in Peru: development level "emergent" Fixed broadband penetration: emergent at the regional level due to the concentration of telecommunications infrastructure on the coast Potential data consumption growth (Mbps) with a stable ARPU Structure of fixed broadband market: emerging operators as potential customers of the regional operator Market structure of Mobile Broadband: emerging operators as potential customers of the regional operator Economic attractiveness for investment in a favorable environment Business Opportunities in wholesale and retail, emerging segments Per: high and stable economic growth Investment grade: Peru, attractive country Political and Regulatory Environment: Favorable Economic and political environment Market environment FONDO DE INVERSIN EN TELECOMUNICACIONES Fund for Investments in Telecommunicactions Luis Montes Bazalar Secretario Tcnico del FITEL E-mail: lmontes@mtc.gob.pe Fijo: (511) 6157815 www.fitel.gob.pe