Telefónica launches new infrastructure sharing solution with Sion for southern Argentina

RIO DE JANEIRO, BRAZIL – Telefónica continues to forge partnerships related to the management of fixed telecommunications networks.

The company announced an infrastructure sharing agreement with Argentine company Sion, comprising a US$97.5 million investment over a 3-year period to upgrade and develop network infrastructure, mainly in the southern part of the country.

Unlike agreements signed by the company in Chile and Colombia, where the infrastructure division incorporated KKR as one of its shareholders, this deal aims to share infrastructure in an unprecedented way in the world until now, considered the first of its kind.

It does so with the help of a small telecommunications company which began by reselling services of large operators, but which in recent years has changed its business focus and concentrated on Argentine provinces and, in particular, in their hinterlands. Namely, in areas with a poorer and lower quality connectivity penetration.

This explains the difference between the agreement signed in Argentina and what occurred in Chile and Colombia. In this case, Sion has been developing a support service to cable companies in the provinces that want to go digital in order to improve their services.

Therefore, in a way, this operator has become the coordinator between Telefónica’s network and some 15 cable operators located in the south of the country. Patagonia is the operator’s natural area as it was awarded in the early 90’s when the National Telecommunications Company (ENTEL) was privatized, divided into two zones, north and south.

The infrastructure sharing agreement includes the aforementioned investment to be executed over a period of 3 years and will be the responsibility of cable operators which, in general, rely on hybrid networks that will need to be upgraded, as well as copper cable networks still owned by Telefónica in the country.

This agreement will allow old networks to be converted into bidirectional connections because most cable operators used to provide CATV, but only a few Internet, with wireless technology in some cases, thus proving the urgent need to upgrade.

In some areas of southern Patagonia, users’ Internet speeds range between 1 and 3 mbps and, based on this agreement, investments will be determined to convert these networks into bidirectional connections, install Docsis technology and upgrade these services to speeds of 15 to 50 mbps and, in some cases, even to 100 mbps. This will be the case where wireless networks are converted directly to fiber optics or where no networks are available, which will have to be built from scratch using this technology.

“One of the works now starting is in Comodoro Rivadavia where there is no partnership with any cable operator or local ISP. And we are relying on Telefónica’s infrastructure. Movistar makes the adjustments in the connections to support this traffic and expands with IP MPLS. Each one contributes what they know and together we provide the services,” explained Sion’s CEO Alejandro ap Iwan during an online conference.

In this first stage, the plan involves the conversion of a network that reaches 250,000 customers located in southern Argentina. The first 50,000 users to be covered are located between Tierra del Fuego and Comodoro Rivadavia, one of the main cities in the province of Chubut, in the Argentine Patagonia, where part of the country’s hydrocarbon extraction is concentrated.

The pilot project has now been implemented on the island and the goal as of September is to upgrade some 600 customers per month by the end of the year and to increase to some 700 users per month from 2022 onwards. Thus, 100,000 customers will be covered in the first stage and the remaining 150,000 in the second.

Sion and its partner companies will be in charge of the deployment, while Telefónica will be in charge of the new services’ commercial management and technical aspects, and will ultimately be responsible for the network.

Broadband in Argentina has a penetration rate of 68%, which is higher than this level in the provinces mentioned above. However, connection speeds are uneven, averaging 42 mbps in the country, but in places where the old technologies prevail they are far from that level, as in certain areas of the south of the country. Fiber optic networks have the least participation in this sector, still dominated by cable modem and ADSL.

“With this agreement we want to make investments more efficient. We have a flow of funds that enables us to make a certain amount of investments and meet deployment needs. We do not prevent investments but rather make them elsewhere,” said Movistar Hispam’s wholesale director Luis Delamer.

The executive explained that with this agreement, what was budgeted for the south will be redirected to other areas, thereby preventing the construction of two overlapping fiber networks in the same area. The areas where Movistar’s investment is focused are the Metropolitan Area of Buenos Aires (AMBA), Mendoza, Neuquén and Mar del Plata.

Sion’s president Luis Quinelli said that “large companies are very efficient with large scales. In the interior, Argentina is faced with the challenge of connecting few people who live far away. That is why we are working in cooperation with local operators, combining the best of what each one does. They know the location and we know the scale, articulating the infrastructure with those operations.”

As a result, an international operator (Telefónica), an integrator (Sion) and the 15 cable operators combine their infrastructures, technologies and knowledge at different levels to improve networks and efficiencies. Both Delamer, app Iwan and Quinelli agreed that it is necessary to improve people’s connectivity and that this agreement is intended for each of them to contribute what they do best.

Telefónica launched its fiber optics services two years ago, during which time it has reached over 2 million homes connected by fiber in the country. With the model it is now inaugurating in Argentina together with Sion, the company seeks to share fixed infrastructure not only in remote cities, but is also open to other modalities such as wholesale fiber or fiber exchange with other providers.

The agreement between Telefónica and Sion was completed in 2020, as can be found in Sion’s annual report for that year. Through this agreement, Sion provides last-mile network and other services in inland areas of provinces in the interior of the country where it operates, in addition to expanding to other areas in the interior of Argentina.