Peru Agrees to Renew Telefonica Licenses for Almost 19 Years

Peru’s government said it will renew the operating licenses for the local unit of Spanish telecommunications giant Telefonica. The renewal is for close to 19 years, following the company’s commitment to invest more than $1 billion to increase coverage and improve services.

Transport and Communications Minister Carlos Paredes made the announcement Monday night following some 18 months of negotiations between the government and Telefonica for an extension to its licenses.

“This issue was very complex,” Paredes said Tuesday, according to state news agency Andina. “It required a very exhaustive technical analysis, that’s why it took more than 18 months to decide on the renewal.”

Paredes said the company agreed to all of the government’s terms, which include increasing telecommunications coverage throughout Peru and improving its services.

Among the terms is that Telefonica, which goes by the name of Movistar for marketing purposes, will decrease rates for pensioners, while also providing coverage to 1,842 towns.

Paredes said that Telefonica agreed to invest 3.02 billion soles ($1.18 billion) in order to meet its commitments. “The majority of this future investment will be in the next 48 months,” he said.

Telefonica is the biggest telecommunications operator in Peru. It first entered Peru in the 1994 privatization bid when it paid US$2 billion for the shares in the national telecommunications company, ENTEL, and the Peruvian telephone company, CPT.  

The sale revolutionized the country’s telecommunications system, making fixed telephone lines available and affordable in most cities where waiting lists had been often more than two years long for a line that could cost up to $5,000.  Mobile phone service wrought an even greater change as an effective tool for social inclusion —from having to walk several blocks to the local bodega to use a public landline phone if you were not lucky enough to have your own phone line, today there are approximately 32 million cell phones in use, in a population of 30 million.

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