It costs about 30 cents to check your email in Peru if you duck into one of thousands of grimy internet cafés that also offer photocopying, scanning, printing and international phone calls. In a country with low levels of internet penetration and service providers that charge like wounded bulls, these little “cabinas” are essential.
But they – and big internet providers Telefonica and Telmex – are about to face a new challenge with the arrival of US-based China Tel.
In August, China Tel – which got its start in 2008 deploying wifi in Beijing for the Olympics - plans to roll out 4G broadband networks in seven of Peru’s biggest cities via its Peruvian subsidiary PeruSat.
“The cabinas are offering one sol (about 30 cents) per hour, so we’re trying to either beat that or meet that,” Ryan Alvarez, vice president of strategic planning, told beyondbrics.
Unlike the cabinas, China Tel’s services will allow customers to get on the internet at home, using USB memory sticks and so-called MiFi cards – stand-alone devices that create mobile wireless hotspots. Most business will be pre-paid, as most Peruvian customers have no credit history.
China Tel expects to get only 16,000 customers in its first year of operation in Chiclayo, Trujillo, Ica, Arequipa, Cusco, Piura and Chimbote, but hopes to become profitable within three years.
The cherry on top for China Tel would be Lima, the capital, home to 9m people – a third of the country’s population. Although it currently has concessions only for the seven regional centres, it has factored in the cost of a Lima network in its $42m investment plans.
The company is also actively seeking acquisition targets throughout Latin America. Peru was the obvious entry point, however, given its “ripe” combination of rapid economic growth, 3 per cent internet penetration, rising per capita income and expensive incumbent providers.
Peru’s trade agreements with the US and China were also a factor – the network equipment will arrive in customs from ZTE of China any day now, and will not be subject to hefty tariffs.
“We’re not here to take someone else’s piece, we’re here to make the pie bigger,” Alvarez says.
But if China Tel can successfully roll out its service at these prices, Peruvians could soon be reaping the benefits of real competition in a sector marked by overblown fees, terrible customer service and mediocre product.
