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The Impact in Telecoms if Latin America Acted Like a Big Region

By | June 22, 2018

Telecommunications is one of the fundamentals tools to drive a country’s development. With more coverage, there is more access to information, more integration, better opportunities, and more equality. And in the Latin American countries which have great geographical complexities, the new generation of satellite connectivity services, which are more cost accessible, easy to implement and with a performance getting closer to land solutions, offer an excellent alternative to drive telecommunications coverage and consequently the region’s development.

But there are situations that make it more difficult for companies that drive these types of solutions to be efficient and competitive. One of them is that Latin America doesn’t behave as a big region, but rather as a conglomerate of countries that share history, borders, common interests, language (with the exception of Brazil), but in terms of legislation and tax matters that regulate service providers like those of satellite connectivity, they act like they did not share any of the aforementioned.

Developing the capabilities to provide these services is a completely different business venture from one country to another. What in one country requires a certain type of licensing, in the neighboring one may be different. Procedures that in some countries take weeks, in others may take months or years. While these procedures have reasonable costs in some countries, they are prohibitive in others. In some countries, applying for licenses by fulfilling all the requirements are knowingly going to be approved, in some others, without any explanation whatsoever, they might never be approved. Operation taxes in certain cases are associated with the total capacity used, in others with income, and in others with every link installed. Taxation varies in concept, rates, in the type of items taxed, etc.

All of these situations lead to significant costs associated with understanding and being able to operate in every single different business environment. The permanent need of local experts in legislation, procedures, logistical issues, and taxes is unavoidable.  Inefficiency due to delays, to trying to adapt products and services to specific requirements, and to trying to properly comply with many different type of reports, is very expensive.

The bigger costs that result from this complete lack of uniformity have two impacts. One, increasing the cost of the services with the consequent impact to end users; but in many cases it is not feasible for the providers to transfer these higher costs to the customers and the providers end up reducing their profit in order to be able to operate. Second, when doing business in big size markets, it’s possible to try to compensate smaller margins with more business volume, but when companies are dealing with small size markets, which happens in most of the region, the incentives to invest and develop these markets are very low.

How different the picture would be if countries as a whole could see the opportunity to boost their growth and development by standardizing legislation, regulations, and procedures. It would help a lot if the Latin American countries decide to renew and strengthen efforts done in the past, like the sub regional agreement named Pacto Andino, which among other advantages, allowed for licenses obtained in one country to be valid in other countries, to have tax compensations, and provided incentives to share technologies across borders.

How different the picture would be if Latin America acted like a big region…

Miguel Eduardo Rodriguez is founder partner and vice president of countries and strategic accounts at Axesat. He has more than 35 years of successful experience in administration, business development, sales and marketing. Electronic engineer with a master’s degree in marketing and a specialization in commercial strategy. After more than 20 years working with multinationals in the IT industry, in 2003 he became one of the founding partners of Axesat S.A., a company specialized in satellite communications for corporate clients in Latin America.