Argentina cancels wireless auction, favours state company

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Arsat will seek joint venture partners to develop wireless network, minister says.

Argentina’s government has canceled long-delayed plans to auction wireless spectrum to private-sector investors and instead will give it to a state firm, a top government official said Wednesday.

The federal communications company Arsat will seek joint venture partners to develop its own wireless network to bring more competition and lower rates to the mobile phone industry, Planning Minister Julio De Vido said at a press conference.

“We’re going to define how we’ll move forward with the use of these frequencies and their profitability will be given to all Argentines through Arsat,” Mr. De Vido said.

Arsat will get 20% of Argentina’s available 3G spectrum. Mr. De Vido didn’t take questions from reporters and it wasn’t clear how the government would come up with the billions of dollars Arsat will need to build its mobile network.

Argentine President Cristina Kirchner has greatly expanded the state’s role in the economy since she took office in 2007.

Ms. Kirchner shocked investors earlier this year when she seized a controlling stake in Argentina’s biggest oil company, YPF SA, from Spain’s Repsol SA.

Now telecommunications appears to be the next sector that will see an increased government presence. Argentina boasts one of the highest rates of mobile-phone ownership in the world, with about 55 million wireless subscribers in a country of almost 41 million people.

The canceled spectrum auction is a blow to Argentina’s four incumbent wireless carriers–Telecom Argentina SA and subsidiaries of Mexico’s America Movil SAB de CV, Spain’s Telefonica SA and U.S.-based NII Holdings Inc.–that submitted bids.

Carriers have called on the government to free up more spectrum so they can meet the growing demand for bandwidth-intensive data services.

The government called off the auction due to anti-trust concerns and because none of the companies that submitted bids met the minimum requirements, Mr. De Vido said.

Spokesmen for the companies declined to comment or weren’t immediately available to do so. Telecommunications analyst Enrique Carrier said the government’s decision is especially bad news for NII Holdings’ Nextel Argentina unit, which had been hoping to buy spectrum as part of a broader plan to update its technology.