US embassy cable - 05LIMA3534

UNCLAS LIMA 003534 
 
SIPDIS 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/CIP 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR KENNETH SCHAGRIN, JONATHAN MCHALE 
FCC INTERNATIONAL BUREAU FOR ETALAGA 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, ETRD, EINV, PE 
SUBJECT: AMERICA MOVIL BUYS PERU'S SECOND LARGEST MOBILE 
OPERATOR 
 
REF: LIMA 2025 
 
1.  (SBU) Summary.  America Movil, one of the largest mobile 
telecommunications providers in South America, expanded its 
infant operations in Peru on August 11 with the $503 million 
purchase of TIM Peru.  Although TIM, Peru's second largest 
mobile provider with 31 percent of the market, recently 
completed an aggressive campaign to attract new customers, 
Telecom Italia decided to reduce its footprint in Peru. 
With the acquisition, America Movil becomes Peru's second 
largest mobile operator.  GOP officials believe that the 
competition between America Movil and Telefonica will drive 
down costs and stimulate competitiveness in the market.  End 
Summary. 
 
And Then There were Three 
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2.  (U) America Movil, a Mexican company owned by Carlos 
Slim that entered the Peruvian telecommunications market in 
March with the $21.1 million purchase of the fourth band 
(reftel), expanded operations by acquiring TIM Peru's 
operations.  America Movil paid Telecom Italia, the owner of 
TIM Peru, $503 million on August 11.  TIM is the second- 
largest mobile company in Peru, with approximately 31 
percent of the market and more than 1.5 million subscribers. 
According to Telecom Italia officials, the company was 
looking to reduce its operations in South America.  With the 
TIM Peru sale, Telecom Italia earned a $135 million profit. 
 
3.  (U) According to Vice Minister of Communications Juan 
Pacheco, America Movil's acquisition of TIM should improve 
competitiveness in the telecommunications sector.  America 
Movil, he asserted, has successful operations in many Latin 
American countries and should be able to compete with 
Telefonica MoviStar, Peru's largest mobile operator with 65 
percent of the market.  Pacheco also indicated that Peru's 
mobile market is underdeveloped, with only 14 percent of 
Peruvians with mobile connectivity.  The market, therefore, 
should attract several new mobile operators over the next 
few years.  The Ministry of Transportation and 
Communications (MTC) expects telecommunications companies to 
invest approximately $300 million in 2005 to expand and 
improve services. 
 
Comment 
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4. (SBU)  Peru's telecommunications industry, particularly 
the mobile sector, is underdeveloped.  While America Movil's 
purchase of TIM reduces the number of mobile providers in 
the market, it should spark improved competition with 
Telefonica, perhaps culminating in lower prices for 
consumers. 
 
STRUBLE