The transition follows a public tender led by Colombia’s Ministerio de Tecnologías de la Información y las Comunicaciones (MinTIC). Registry.co,  a consortium including Team Internet Group PLC (LON: TIG, OTC: TIGXF), will now manage the domain registry until 2035.

The technological infrastructure supporting the domain is provided by EdgeUno, a company specializing in connectivity, cloud services, and data centers.

Gerardo Aristizábal, director of the consortium operating the.CO domain characterized the migration as an “unprecedented operation in the history of top-level domains. We managed to move more than 3.3 million records without damage or interruptions, complying 100% with the technical and security standards required by the ministry.”

Mehmet Akcin, founder and CEO of EdgeUno (photo: EdgeUno/PRNewswire)

Aristizábal stated that more than 3.3 million records were moved “without disruptions or incidents”. He also confirmed that the process met “100% of the technical and security standards required by the Ministry”.

Mehmet Akcin, founder and CEO of EdgeUno, commented on his company’s role as the infrastructure provider. “Our mission has always been to strengthen the Internet across the region with resilient, secure, and high-performance infrastructure.

Supporting the operation of the.CO domain means reinforcing Colombia’s digital future and empowering thousands of entrepreneurs and businesses that use this extension to project themselves to the world.”

The operator claims the transfer “sets a new world record for the number of domains successfully transferred.” A statement from the company noted the event positions “Colombia as a global benchmark in the technical and operational management of high-traffic domains”.

Headline Photo: Gerardo Aristizábal, director of the consortium operating the.CO domain. Photo credit: Registry.co.

Uber is very popular in Colombia, especially in Bogotá, where many taxi operators have earned a very low reputation for service & honesty.

Hated by taxi syndicates, Uber has approximately 2.3 million users in Colombia and almost 90,000 drivers. While the Superintendencia has sided with taxi unions and declared Uber illegal, the Ministerio de Tecnologías de la Información y las Comunicaciones, Colombia’s Technology Ministry has declared that Uber and other ride hailing platforms are legal and cannot be banned under Colombia’s open-access internet laws. In other words, individual drivers may be violating the law, but the mobile application and platform itself, as an internet communications platform cannot be banned.

Read the actual order by clicking here (in Spanish)

Uber issued a statement saying: “This decision reflects an act of censorship and infringes on the Interamerican Convention on Human Rights, which has already condemned attempts to block Uber for violating the neutrality of the web, liberty of expression and freedom of internet.” The company’s Colombian subsidiary has already filed an appeal in the civil division of the Superior Court of Bogotá.

Read:

• Uber Offices Closed and Sealed by Bogotá Authorities
• Guest Opinion: A Signal of Caution For Direct Investment in Colombia—Über VP of Global Public Policy

The lawsuit was filed by Bogotá taxi dispatcher Cotech S.A. against Uber, for unfair competition, and diversion of clientele under articles 8 and 18 of Law 256 of 1996. The judgement applies to Uber, Uber X and Uber VAN but does not apply to food delivery service Uber EATS.

A source with knowledge of the proceedings suggests SIC head Andrés Barreto was pressured by the administration of President Ivan Duque in order to prevent taxi operators from joining the recent strike actions and protests against the already deeply unpopular government. Not that the government is necessarily anti-Uber but wishes to quiet discontent among even another sector angry with the status quo.

Above photo: Video footage where SIC head Andrés Barreto rules Uber illegal in Colombia

In Colombia, Colombia Telecomunicaciones S.A. E.S.P. (ColTel) operates the Movistar brand name.

Key Rating Drivers

Improving Financial Profile: ColTel’s financial profile, particularly leverage, has improved drastically in the last three years, with EBITDA net leverage having improved from 5.3x at YE2015 to 2.4x at YE2018. In 2017 the company’s owners, the Colombian government and Telefonica SA, recapitalized the company, curing it of its PARAPAT and MINTIC liabilities. The capitalization also freed approximately COP $500 billion per year for investments or debt reduction. Fitch expects the company to de-lever by another approximately .5x over the medium term, to around 2.0x, as revenue growth translates into EBITDA expansion. As part of wider Telefonica initiatives throughout the region, Fitch expects ColTel to divest non-core assets, which should further improve financial flexibility.

Colombia Telecomunicaciones S.A. E.S.P.

Fitch has upgraded the following ratings:

• • FC IDR to ‘BBB-‘ from ‘BB+’;
  • LC IDR to ‘BBB-‘ from ‘BB+’;
  • 2022 USD Senior Unsecured Notes to ‘BBB-‘ from ‘BB+’;
  • Subordinated Perpetual Note to ‘BB’ from ‘BB-‘.

Improving Cash Flow Generation: Despite the competitive environment in Colombia, the company has grown revenues in the low single digits consistently for the last several years. Fitch expects this trend to continue as the company harvests its network investments in both fixed and mobile. Stable EBITDA margins around 31% should translate into positive free cash flow (FCF) for the company as capital intensity moderates. Fitch expects capex of 15%-16% of revenues over the medium term, in line with 2018, down from 20% from 2015-2017. Investments focused on higher value services, along with network sharing agreements, should help the company optimize its capital deployment going forward.

Steady Market Position: ColTel is the second largest telecommunications operator in Colombia, in terms of the revenue market share, behind America Movil S.A.B. de C.V.’s Claro Colombia. The company has a diversified service portfolio with a nation-wide operational footprint and improving 4G and broadband networks. The diverse revenue streams are supported by subscriber shares of around 25% in mobile, 18% in broadband, and 10% in Pay TV share, according to March 2019 data from the Ministerio de Tecnologias de la Informacion y las Comunicaciones (MinTic). These market shares have been generally stable over time and Fitch expects carriers to largely match each other’s commercial offers.

Diverse Revenue Streams: ColTel boasts a relatively well diversified revenue stream, which improved with the consolidation of fixed-line operations in Bucarmaranga and Baranquilla following the PARAPAT resolution. Fitch expects broadband and pay TV’s revenue share to grow to approximately 30% by 2022, up from 19% in 2015, with mobile contributing around 58%, down from 62%, as the company moves away from its traditional voice offerings through the expansion of its mobile and fixed data services. The company’s service diversification is offset by its single country focus, and the high level of competition in Colombia.

Competitive Environment in Colombia: The Colombian telecom space remains very competitive, as carriers offer aggressive data packages to defend market share. Fitch expects that the cost pressures should contain margins around 31% for ColTel, in line with peer UNE EPM (approximately 30%) – operating under brand name Tigo, both of which lag America Movil’s Claro Colombia at greater than 40%. Claro’s relative dominance has brought regulatory scrutiny, though it has not yet translated into sustainable gains in market share for the other two main players. Positively, low broadband penetration relative to regional peers presents an opportunity for growth, although all carriers are expected to invest heavily in their broadband offerings.

Parent Subsidiary Linkage and Government Related Entity Criteria: A linkage exists between Telefonica SA (TEF; BBB/Stable); however, Fitch’s ratings of ColTel are on a stand-alone basis and do not assume any further support from either the Colombian government (BBB/Stable), or TEF. The Colombian government does not exert control over the management of ColTel, and has announced its intention to divest its 32.5% stake in the company, which does not impact the ratings.

 Derivation Summary

Compared with Colombian operators, ColTel’s overall business profile is similar to that of direct competitor UNE EPM Telecommunications (Tigo UNE; BBB/Stable), with similar revenue shares of the overall Colombian telecom market. UNE EPM has a longer history of maintaining lower leverage, and a stronger broadband network. ColTel’s greater scale, diversified revenue streams compare favorably with Colombian fixed-line provider Empresa de Telecomunicaciones de Bogota (ETB; BB+/Stable). ETB maintains a ‘BB+’ rating on the strength of its conservative financial structure.

Sister company Telefonica del Peru (TdP; BBB/Stable), has a stronger business profile, owing to its leading market shares in both fixed (approximately 70%) and mobile (approximately 35%). Leverage at the two is broadly similar, following TdP’s international bond placement in 2019. The Peruvian telecom space has been even more competitive than Colombia’s, due to two new entrants since 2015. Compared with Telefonica Moviles Chile (TMCH; BBB+/Stable), ColTel has weaker market shares and a less conservative financial structure.

ENTEL (BBB-/Negative) has seen its leverage approximately double since entering the Peruvian market nearly five years ago. While the company benefits from its status as the largest Chilean telecom operator with leading post-paid market shares and ARPUs, the Negative Outlook on its ratings reflect the leverage that is high for the rating category.

 Key Assumptions

 Fitch’s Key Assumptions for the Issuer

• Mobile revenues growing around 1%-3%, as mobile service revenues averaging approximately 1% due to competitive pressures on ARPUs being offset by growing equipment revenues. Fitch expects the post-paid/prepaid split to remain around 25%/75%;
• Fixed revenues growing by 3%-5% as broadband and PayTV revenues offset declines in fixed-line voice. Fitch expects the company to pass around 500,000 homes in 2019, for a total of one million, with a take-up rate improving from 18% to 25% over the long-term;
• EBITDA margins around 30%-31%, as competitive pressures and efficiency efforts offset to largely keep margins stable;
• Capex of 15%-16% of revenues.

Rating Sensitivities  

Developments That May, Individually or Collectively, Lead to Positive Rating Action: Total debt/EBITDA falling below 2.0x or net debt/EBITDA falling below 1.75x on a sustained basis due to a strengthening of the competitive position and/or FCF being used to pay down debt, along with an improvement in the strength of the company’s broadband and pay TV market position;

Developments That May, Individually or Collectively, Lead to Negative Rating Action: Total debt/EBITDA rising above 3.0x or net debt/EBITDA rising above 2.75x on a sustained basis due to a weakening of the competitive position and/or debt-financed acquisitions.

 Liquidity

ColTel’s liquidity has improved after the capitalization process that paid the PARAPAT liability and afforded the company increased financial flexibility. ColTEl proactively undertook liability management initiatives to reduce debt and extend its amortization schedule.

Fitch expects the company to achieve FCF margins around 5%-6% in the medium term, in line with 2018’s 5.0%, which represents an improvement from consistently negative FCF generation pre-2018. The group’s liquidity position is bolstered by stable access to capital markets and lines of credit totaling COP $1.05 billion.

The company’s debt is approximately 21% fixed rate, and primarily consists of the USD $750 million notes (COP2.4 billion), along with local bonds totaling COP $500 billion due in 2024 and 2029. As of June 30, 2019, the company reported current debt of approximately COP $384 million, against cash of approximately COP $168 million. The company’s hybrid bond, to which Fitch applies a 50% equity credit, is callable beginning in first-quarter 2020.

In Colombia, there no longer will be a value-added tax (VAT, or IVA in Colombia) on software licenses for various programs commonly used in so-called “Orange Economy” content development fields such as graphic design, animation, and 3D printing, among others. The benefit is even more significant now given that a nationwide tax system overhaul raised the VAT from 16% to 19% in December.

There will also no longer be a VAT included for online educational services that help train people to enter these and other fields, including the development of analytics, big data, the internet of things, and video games, said the president.

“This is a great opportunity for all producers of this type of content,” said Santos, adding that “we know that these incentives are what boost the sector.”

The tax break is part of a wider push to kickstart innovation that Santos detailed in an hour-long address on Friday in Cartagena at Andicom 2017, the largest IT and communications conference in the country.

Colombia Creates Vice Ministry of Digital Economy

In addition to the VAT exemption, Santos also formally launched the nation’s new Vice Ministry of Digital Economy in a ceremonial signing with David Luna, minister of information technology and communications.

The stated goals of the new agency are to support Colombian companies undergoing digital transformation, promote public/private partnerships, advance the adoption of tech tools, and generally track various indicators and figures of the “digital economy.”

Under current measurements, the digital economy accounts for at least 100,000 jobs in Colombia, according to the government, and it generated some $4.5 billion USD (13 trillion pesos) in sales last year. By 2022, MinTIC estimates that there will be 300,000 direct jobs within the digital economy.

The new office will be run by Vice Minister Daniel Quintero Calle and fall within the Ministry of Information and Communication Technology (MinTIC).

“The digital economy is gaining momentum and preparing our industry, labor market, and regulation to allow us to better position ourselves in the global landscape,” said Quintero Calle during a presentation during the conference.

“Having access to technology transforms people’s lives,” said President Santos speaks at Andicom 2017 in Cartagena. (Credit: Jared Wade)

Expanded “Digital “Citizen Services”

On Friday, Santos also signed the new “Digital Citizens Services Decree,” which aims to give Colombians better access to the important forms and documents in their life. Through the creation of a “citizen folder” for each Colombia, people will now be able to have access their own medical history, employment records, and other administrative documents involving the government. They will also have a digital signature that allows for faster digital processing of official forms.

Additionally, the decree aims to improve the inter-departmental communication between governmental agencies so that people do not have to continually provide information two or three times during the administration of routine processes, as has long been the case. “It is a necessary evolution,” said Santos.

The addition of the citizen folder aligns with the county’s “No Más Filas” (No More Lines) initiative to streamline processing times across governmental agencies that oversee everything from immigration and taxation to licensing and legal matters

“We seek to facilitate users’ relationship with the state,” Luna told Finance Colombia in an interview this week. “Therefore, we have made available the webpage No Más Filas, which was previously called Sí Virtual. This is a national government, multi-channel platform where the general public can find state services and perform transactions completely online. In total on this website, there are 714 online transactions and 3,485 partially digitalized transactions available to Colombians.”

President Santos was joined on stage by indigenous Colombians who have benefitted from improved connectivity in their rural Amazon community. (Credit: Jared Wade)

The Benefits of Connectivity in Colombia

Throughout Andicom 2017, the president, David Luna, and other public officials praised the recently released results of the country’s “First Great ICT Survey,” which through polling across the country found that almost two-thirds (64%) of Colombians now have an internet connection in their home and 75% of Colombians used the internet within the past year.

Of the 36% surveyed who do not have a connection in their home, only 8% said it was because their community has no access in logistical terms. Nearly half of those without a connection (48%) say it is because connectivity is too expensive, while roughly one-fourth (24%) say they don’t consider it necessary.

The governmental push to increase connectivity numbers in Colombia has focused on its Vive Digital (Live Digital) initiative that, among other investments, has brought digital kiosks to both poor urban areas and lowly populated jungle, coastal, and mountain communities. In the Amazon/Orinoco Basin region, 56% of people have used these kiosks, according to the MinTIC study. This is compared to an 11% usage rate nationwide.

The government says that the kiosks are also intended to help teach Colombians how to use the internet. Among the 25% who had not accessed the web in the past year, the top reason given was that they don’t know how to use the internet.

To put a face to how these and other tech-focused initiatives can improve the lives of Colombians, Santos invited several Colombians to join him on stage. A woman and young man from the Amazon, using both Spanish and their native language, explained how they have begun to sell clothing and products online thanks to Vive Digital bringing internet connectively to their small indigenous community. A young woman who is studying to be an electrical engineer, with the help of public financial aid, also spoke to the audience about her desire to work in technology .

“Digitizing the country means deepening the state/citizen relationship through the use of the internet,” said Santos. “Having access to technology transforms people’s lives.”

(Photo credit: Jared Wade)

Unified Messaging Systems (UMS) is one company that is bringing new technology to the task. The Oslo, Norway-based firm helps first responders and auhtorities communicate better with one another and the general public during an emergency.

Photo: Anand Anupam of Unified Messaging Systems gives a presentation on his companies services during Andicom 2016 in Cartagena. (Credit: Loren Moss)

To better understand how the systems work and are being used in Colombia, Loren Moss, executive editor of Finance Colombia, recently sat down with Leon Hausman and Anand Anupam of UMS. They discussed their operations, their experience at Andicom 2016, and their outlook on the Colombian market.

Finance Colombia: What is Unified Messaging Systems and what leads you to come to conferences in Colombia?

Leon Hausman: UMS is a Norwegian company founded in 1997. From our beginnings we have been dedicated to the development and implementation of critical messaging solutions and national alert systems. Nowadays we are leaders in the world market in this kind of industry.

At Andicom, we had the honor of presenting the different technologies that are available nowadays on the market for attention to disasters. We discussed how these technologies are integrated into the different channels of communication and existing infrastructure in the country to communicate notifications of emergency alert messages to certain segments of the population. They also go out to groups of authorities so as to be able to attend to a disaster and minimize any kind of risk and safeguard the greatest number of lives in the face of any eventuality.

Finance Colombia: Fascinating. And how does the communication work?

Leon Hausman: Generally, the area of attention to disasters has been handled by radios, handsets, LBS, and the authorities. In many countries, this all works with handsets, walkie-talkies, and radios.

Finance Colombia: What challenges do you face in the fascinating digital world where the radios handle data? They are connected to internet instead of an antenna?

Anand Anupam: Right, so the radio technology that you are talking about is essentially used for first responder communication. For example, within the police force, among themselves. So there are two kinds of technologies that you’re talking about. One is public warning, which is to people, to citizens. Everyone doesn’t have a radio phone, right?

The other is the communication between first responders. And what is happening across the world now is you have the same systems communicating to radio channels and to the walkie-talkies. You have tetra radios now, so you have the same system communicating to tetra radios as well as to the public communications channels on phones and whatnot.

In fact, today in some of the European countries we work with technologies that allow you to have conference calling between a person with a radio on the ground, with a person who has a cellphone on the ground, and with the emergency operations center that is on a fixed-line phone. So you see more and more technologies converging these days, especially on the kind of use cases that we talked about.

Finance Colombia: Why Colombia? You guys obviously are global. What did you see in the Colombian market that made you decide to establish here? Are your operations here specific to Colombia, the Andean region, South America, and the Americas?

Anand Anupam: We’ve been working in the Latin American market for the last five years, across countries from Mexico and all the way to Argentina. The reason why we have a focus on Colombia is primarily because of the kind of engagements that we are having here, mostly with MinTIC — the ministry of communication — as well as the civil defense organizations.

We’ve been in discussions with them over the last couple of years around multiple technologies, our experiences, and use cases. And looking at the kinds of disasters in Colombia, I think systems like ours make a lot of sense.

Finance Colombia: In what kind of applications have you seen success? For example, In India we have seen there has been recent flooding. Here in Colombia, of course, we have floods and we have earthquakes. We don’t have tornadoes or hurricanes, but what use cases have you seen specifically where your system has been employed and you’ve been able to find success?

Anand Anupam: We have worked with systems and incidents from those as localized as something seen in a campus or an event in a particular community to events that have an impact on the beaches.

Earlier in the presentation we were talking about multi-hazard systems that are able to handle communication and incidents at the local level as well as the national level. So our systems work, for example, on tsunamis, earthquakes, flooding, cyclones, as well as man-made disasters like bomb-blasts, terror attacks, large-scale demonstrations, or public accidents. So use cases include systems capable of handling all of these various catastrophes and disasters.

Sheraton Bogota credit Miguel Angel Prida – Wikimapia

Unscrupulous hotel operators have been known to do this in the past as a way of maximizing revenues by forcing hotel guests and event attendees to purchase the hotel’s internet service. In 2014, the US Federal Communications Commission fined hotel operator Marriott $600,000 USD ($2.045 billion COP) for blocking signals at its Gaylord Opryland Hotel in Nashville, Tennessee. That hotel was caught after charging guests and exhibitors up to $1,000 USD ($3.4 million COP) per device for internet access.

“Bettering the quality of telecommunications services is the responsibility of telecommunications operators, but this ministry implements measures that bring guarantees to them, as well as to the citizens so that this service improves substantially,” said MINTIC head David Luna (pictured above). “For that we have come working to identify the barriers that exist so that we can take measures against them on the matter.”

Signal blockers are generally illegal in Colombia, with very few exceptions, such as certain prisons that have obtained prior authorization. The devices were prohibited by law 2774 of 2013.

Charges have also been brought against three more entities, but have not yet been finally adjudicated. Those charges are against Inmobiliaria (Real Estate) Tonchala in Cúcuta, for 18 minimum wages, Lozano Muñoz y Cia, operating in Bogotá as “D Norberto Peluquerás” according to the ANE, for 90 minimum wages, and Hotel Aeropuerto SAS in Bogotá for 66 minimum wages.