Despite its huge market share in Peru, Spanish cell phone provider Movistar wanted a free ride on renewing its operating licenses. Peruvian authorities have handed the telecom giant a bill of nearly a billion bucks.
Authorities in Peru have slapped Movistar, a cell phone operator, with an $830-million bill, urging the Spanish multinational to pay up or ship out. According to Ospitel, a telecommunications supervisory organization, that's what Movistar Peru owes for continuing to use two bandwidths after the company's operating licenses expired earlier this year.
The pricey phone bill hit Movistar like a cold bucket of water. Outraged, the company insists the concession renewal should be free. "The contracts didn't include anything about having to pay once the 20-year concessions expired," says Carlos Huamán, the executive director of consulting firm DN Consultores. "That's because the government at the time was only interested in attracting investment for the sectors that were to be privatized."
Huamán explains, however, that the 50 Mhz in question are indeed of great value to Movistar. Just two years ago, the same company paid $220 million to renew its concessions in Ecuador. And it did so without raising prices for consumers.
"The Ecuadorian and Peruvian markets are similar in the sense that in both places, just two operators control roughly 95% of the market," says Huamán. "What Movistar agreed to pay there was about right considering the scale of business it does there."
Nevertheless, Movistar's spokespeople insist that in the case of Peru, the cost of renewing its concessions should be zero – for the simple fact that the terms and conditions of the original contract included nothing about renewal fees.
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