FITEL Telecom Projects for Regions of Peru

Telecommunications as a tool fordevelopment and social inclusion

Telecommunication Projects for Regions of Per

Technical Secretariat of FITEL

FONDO DE INVERSIN EN TELECOMUNICACIONES

FUND FOR INVESTMENTS IN TELECOMMUNICATIONSFITEL

2 Economic and

Politicalenvironment

4 Broadband projects

3Telecommunicationsmarket environment

5Conclusions: Why investing in Peru?

ndice

1 Introduction: FITEL


Introduction

FITEL

FITEL

[email protected] www.fitel.gob.pe

MISSIONPromote access to and use

of telecommunications services in rural areas and

places of social interest

VISIONTo achieve Country

connectivity by means of high quality

telecommunications services and articulating

sustainability

FITELProjects 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


Economic an political environment

Stability and business climate

Peru: economic growth (recent) high and stable

Growth and stability (I)

A. Central

Ecuador

Argentina

BoliviaBrasil

Chile

ColombiaMxico

Paraguay

Per

Uruguay

A. Latina

0%

2%

4%

6%

8%

10%

2% 3% 4% 5% 6% 7%

Ave

rage

Inflation

(%)

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


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


Peru: attractive country for investment

Investment grade

Grado de

inversinPases

Grado de

inversinPases

Grado de

inversinPases

Aaa AAA AAA

Aa1 AA+ AA+

Aa2 AA AA

Aa3 Chile AA- AA-

A1 A+ Chile A+ Chile

A2 A A

A3 Per A- A-Baa1 BBB+ Per BBB+ PerBaa2 Brasil, Colombia BBB Colombia BBB Colombia

Baa3 Uruguay BBB- Brasil, Uruguay BBB- Brasil, Uruguay

Ba1 BB+ BB+

Ba2 Paraguay BB Bolivia, Paraguay BB

Ba3 Bolivia BB- BB- Bolivia, Paraguay

B1 B+ B+

B2 B Ecuador B Venezuela

B3 B- Venezuela B- Ecuador

Caa1 Venezuela C+ C+

Caa2 Ecuador C C

Caa3 CCC+ C-

Sin calificacin Argentina Sin calificacin Argentina Sin calificacin Argentina

Moodys S&P Fitch

Countries above the line have investment gradeSource: Moodys, S&P, Fitch

Co

un

trie

sw

hic

hh

ave

inve

stm

ent

grad

e

Chile


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 InfrastructureRDNFO and Regional Projects

Network NeutralityFreedom to use

Foster E-GovernmentICT connection between the state and citizens

Foster the creation of contents, applications and digital skills training

Focused in areas as education, health, securityImpulse 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


Favorable regulatory and political environment

Regulatory Legal framework

Measures to promote private investment ininfrastructure; removes barriers to carry it out

There are signed agreements with RegionalPresidents which undertake to facilitateprocedures.

Agreements with each of the regionalgovernments to ensure payment for services to beprovided to Local Schools and Health facilities willbe signed

Agreements with power companies for use oftheir infrastructure

Law 30228

Agreements

Law for the expansion of

telecommunications infrastructure

Agreements withkey stakeholderss


Market environment

Internet Business Performance

Fixed Internet market of Peru: level of development "emergent"

Market: Internet Business Performance

Paraguay

Ecuador

UruguayColombia

Per18%A. Central

BrasilVenezuela ArgentinaBolivia Mxico

Chile

A. Latina18%

0%

10%

20%

30%

40%

50%

60%

70%

0% 5% 10% 15% 20% 25%

Ave

rage

gro

wth

20

09

-20

13

(%

)

Fixed Internet Penetration (%)

ExplosiveEmergent

Incipient Mature

A. Central

Argentina

Bolivia

Brasil Chile

Colombia

Ecuador

Mxico

Paraguay

Per5%

Uruguay

Venezuela

A. Latina9%

0%

5%

10%

15%

20%

25%

0 5.000 10.000 15.000 20.000 25.000

Fixe

dIn

tern

et P

en

etra

tio

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


1 Penetration: measured by the number of subscriptions to fixed Internet service on the total population2 Growth: average growth rate of ubscriptions to Internet service from 2009 to 2013

Internet access per household: gaps for growing in rural areas A greatopportunity! , 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%

LimaMetropolitana

Resto urbano Rural Per

In rural areas there is a gap of 98% of households without

Internet service

Households withPC

Householdswithout PC

46%

33%

5%

29%

54%67%

95%71%

LimaMetropolitana

Resto Urbano Rural Per

Households withInternet connection

Households withoutInternet connection


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

Per2.4

Promedio3.1%

2

2,5

3

3,5

4

4,5

10.000 12.000 14.000 16.000 18.000 20.000

Ave

rage

spee

d(M

bp

s)

GDP per capita (US$)

GDP per capita (USD) vs. Average Internet Speed (Mbps). Peru 2013

0,91,3 1,3

1,82,4

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


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 penetration1 per Region. Per 2013

Internet

Per5%

Penetration

Source: MTC, OSIPTEL


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)


Imp

act

of

Bro

adb

and

on

GD

P g

row

th

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

- Term concession: 20 years

Start of installations: December 2014

End of installations of RDNFO: June 2016

National Fiber Optic Backbone- RDNFO


Broadband projects

FITEL's Projects for Regions

For having transport and access communication networks of hightransmission capacity to contribute to the integral development ofthe towns.

Integration of State (sectors of education, health, security), LocalGovernments.

Deployment of ICT broadband high capacity applications andservices (e-government, tele-health, tele-education, etc.)

To promote the development of telecommunications infrastructure nationwide

Objectives of the Projects for Regions (I)


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 ofregions.

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.


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 broadbandconnectivity 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 oftelecommunications networks required for the provision of fixed or mobile broadband.

Terms and definitions: (.) Transport networks of Regional networks are part of RDNFO()


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.


Regional Projects: Contract (I)

FinancingContract

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 ofOperation (Access network) = 11 years.(1 year + 10 years).

The operation of the transport network of all regional projects, will be performed by a singleoperator which will be granted with a concession contract after another selection process.


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.


Regional Fiber Optic Networks with

districts connections

6.1millions

1,516 districtcapitals

6,633 localities

Districts connected to the OF

beneficiarylocalities

BeneficiaryPopulation

StateInsitutions

Educational (Schools)

6,979Health

3,471Police stations

56621 Projects

Regional Projects: Dimension of the total scope


Fiber OpticBackbone (RDNFO)

Possibility of interconnection with operators in Lima or in any of the 180 capitalsof province where reaches the RDNFO

Possible Output to Internet from Lima, supported by transport Network ofRDNFO.

Deployment of the Transport Network

Regional Projects: Networks (I)


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 850TOTAL RED DE MEDIA TENSIN

REDES ELECTRICAS

ALTA TENSIN

TOTAL RED DE ALTA TENSIN

MEDIA TENSIN

Electrical networks supporting Fiber Optic Cable


Regional Fiber OpticProject

Deployment of the Access Network

Regional Projects: Networks (II)


Regional Projects: data rates

Description Data rate

Schools Type 3Health Type 3Police stations Type 3other public entities and

householdsType 1

Data rate

(speeds)

Description by

type of

Institutions

40% of the rate contracted by institutions in regional projects will be ensured

DescriptionDownstream

Nominal (Kbps)

UpstreamNominal (Kbps)

Guaranteed(Kbps)

AssuredDownstream

(Kbps)

AssuredUpstream

(Kbps)

Type 1 In evaluationType 2 1,024 256 40% 410 102.4Type 3 2,048 512 40% 819 204.8Type 5 4,096 1,024 40% 1,638 409.6

Refer to technical

specifications


Regional Broadband Projects

Currently 4 Projectspromotion

Regional Fiber Optic Network

connecting districts

765Thousand

295Districtcapitals

1,169 Localities

Districts connected to the OF

Beneficiarylocalities

Beneficiarypopulation

StateInstitutions

Educational (Schools)

1,543Health

759Police stations

10704 Projects

04 Regional Projects: Dimension of the scope


Lambayeque Regional Project

District capitals with Optical Fiber: 35Length of Optical Fiber: 567 Km Beneficiary localities: 309Beneficiary population: 320 thousand inhabitantsBeneficiary Institutions: 478

Access network: PEN 66 millionsTransport network: PEN 38 millionsFITEL total subsidy: PEN 109 millions

The project has been granted with the approvedenvironmental instrument: Environmental ImpactStatement (DIA) which means that the project do notinvolve significant environmental and social impacts.


Pro

mo

tio

n

Year Year Year1 5 10

Total

Households 79111 81253 84012Internet

Broadband 2,84% 5,85% 11,22%Beneficiary

households 2247 4752 9422

Description

Huancavelica Regional Project

District capitals with Optical Fiber : 86Length of Optical Fiber : 1,327 Km Beneficiary localities: 308Beneficiary population: 142 thousand inhabitantsBeneficiary Institutions: 658

Access network: PEN 79 millionsTransport network: PEN 76 millones FITEL total subsidy: PEN 210 millones



Pro

mo

tio

n

Description Year Year Year

1 5 10TotalHouseholds 34607 35276 36131InternetBroadband 1,03% 2,97% 8,43%Beneficiaryhouseholds 355 1047 3046

Apurimac Regional Project

District capitals with Optical Fiber : 73Length of Optical Fiber : 1,409 Km Beneficiary localities: 248Beneficiary population: 119 thousand inhabitantsBeneficiary Institutions: 602




Pro

mo

tio

n



Ayacucho Regional Project

District capitals with Optical Fiber : 103Length of Optical Fiber : 1,890 Km Beneficiary localities: 304Beneficiary population : 164 thousand inhabitantsBeneficiary Institutions: 671




Pro

mo

tio

n



Regional Projects: Timeline

Period Description2014 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

PR

OM

OTIO

N

Fitel instructs PROINVERSIN to carry out public contests for granted regional projects to operators

Preparation of 1st version of Bases

Preparation of 1st Version of Contract

Announcement and Publication of Bases

Publication of 1st 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

INV

ERSIO

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

December2015

December2014


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


Fund for Investments in Telecommunicactions

Luis Montes BazalarSecretario Tcnico del FITELE-mail: [email protected]: (511) 6157815www.fitel.gob.pe

FITEL Telecom Projects for Regions of Peru

Documents

Transcript of FITEL Telecom Projects for Regions of Peru