(Updated with official confirmation, date of new auction and comments from the head of Chile's telecommunications regulator.)
SANTIAGO -(Dow Jones)- Chilean cable-television and broadband operator VTR SA and mobile-telephony company Nextel Chile will compete for 90 megahertz of third-generation wireless spectrum in a new tender after a technical tie in the first auction, telecommunications regulator Subtel said in a statement Monday.
VTR and Nextel were the only companies to submit bids Monday for three bands of 30 MHz. However, as both bids obtained the same number of technical points, Subtel will take 60 days to review them before inviting the companies to participate in a closed tender, the statement said.
Provided both pass the technical review, the companies will submit economic bids in the new tender during September, with the three 30 MHz blocks to be awarded by year-end, the statement said.
"The projection is that by mid-2010 the companies [VTR and Nextel] will be ready to start service," the statement said.
Chile's three main mobile-telephony companies, Empresa Nacional de Telecomunicaciones SA (ENTEL.SN); Movistar, a unit of Spanish firm Telefonica SA (TEF); and Claro, a subsidiary of Mexican firm America Movil SA (AMX), opted not to participate in the auction after the supreme court ruled in January that each company can have no more than 60 MHz of spectrum.
Entel already has 60 MHz of 3G spectrum, while Movistar and Claro each have 55 MHz, so bidding on the new blocks means they would have been forced to sell some of their existing spectrum to make room, which they decided not to do.
Subtel's intention with the new auction was to allow at least one new player to obtain spectrum and thereby increase competition in the mobile broadband business. This is now guaranteed, given that VTR and Nextel will both win at least one 30 MHz block, and one of them will get two blocks.
"We are satisfied because we are fulfilling one of the government's objectives, which is that more companies should enter the telephony and 3G mobile broadband market so consumers have more options to choose from," said Subtel's head, Pablo Bello, in the statement.
Mobile broadband is growing fast in Chile with the number of users, through computers and cellular phones, soaring 500% to 250,000 at the end of 2008 from the previous year, a person close to the 3G auction told Dow Jones Newswires.
The convergence of broadband and mobile technology is seen as an important opportunity to increase Internet access for Chileans, about two-thirds of whom don't have broadband Internet access via cable.
However, 3G mobile broadband is still much slower than broadband via cable and will eventually be replaced by the fourth generation of wireless broadband, 4G, which can transmit data at speeds similar to broadband via cable, the person said.
But that won't happen in Chile until next year at the earliest and, in the meantime, VTR and Nextel will compete with Entel, Movistar and Claro in the profitable, and growing, mobile broadband business.
Moreover, since the new 3G spectrum is between 1,700 and 2,100 MHz, which is the same band used for 3G services in the U.S., VTR and Nextel can take advantage of economies of scale in the U.S. market, the person said.
VTR, the largest cable-television and broadband provider in Chile, is owned by the U.S.'s Liberty Media Holding Corp. (LINTA) through its international subsidiary UnitedGlobalCom Inc.
Nextel Chile, which offers push-to-talk mobile-phone services using its Direct Connect technology, is owned by Virginia-based NII Holdings Inc. (NIHD), which provides mobile-communication services in Latin American markets including Argentina, Brazil, Mexico and Peru.
-By Julian Dowling, Dow Jones Newswires; 56-2-820-4241; julian.dowling@dowjones.com