The rollout of the 5G network in Chile is bringing about significant changes in the telecommunications market. This technology, which promises improvements in speed and connectivity, has also brought to light certain financial dynamics and concerns within the sector.

WOM, ENTEL, and Movistar have taken the lead in this technological race, but their progress has not been without controversy. The Supreme Court’s recent decision, which blocked VTR’s entry into the 5G market, shows that the rules of the game aren’t always clear. This situation creates legal uncertainty and could discourage infrastructure development.

A clear reflection of the tensions in the sector is the situation at WOM, which failed to deliver the towers it had committed to within the agreed-upon timeframe. This raises questions about the company’s financial situation and the consequences of this failure to deliver.

The bond market offers further indications of the financial health of companies in the sector. Specifically, VTR’s bond maturing in 2028 has recently traded at around 15 cents, a price that suggests a challenging financial situation. Meanwhile, the WOM bond has been trading around 57 cents, which also indicates certain difficulties.

Given this situation, entering the 5G market represents a key opportunity for ClaroVTR. The recent auction held by the Undersecretariat of Telecommunications for the 3.5GHz spectrum could serve as its gateway to this market, which could provide a significant boost to its financial and operational standing.

Meanwhile, other market players, both domestic and international, are assessing the situation and seeking opportunities related to 5G. Regulatory decisions, the necessary investments, and the consumer market’s response will play a decisive role in the development and consolidation of the network in Chile.

The upcoming 5G spectrum auction in Chile is not just a technological milestone. It represents a crossroads for various companies, such as WOM and ClaroVTR. Their decisions and outcomes in this process will reflect the tensions and challenges facing the industry. Each company’s ability to adapt to and respond to 5G will be crucial in determining its trajectory and relevance in the coming years.

Cristián Zañartu

Latin America Fixed Income Analyst