Telecom Startup Takes On Carlos Slim Via $1 Billion Colombia Bet
(Bloomberg) -- WOM, an upstart mobile phone firm, is setting its sights on expansion in Colombia with a $1 billion investment that will allow it to take on competitors including billionaire Carlos Slim’s Claro brand.
The company, owned by Icelandic tycoon Bjorgolfur Thor Bjorgolfsson’s private equity firm Novator Partners LLP, is rolling out its low-cost cellular service across the country of 50 million, where roughly half of cell customers use Claro, the dominant brand of Slim-owned America Movil SA. WOM sees potential to gain about 25% of the market within five years by offering an alternative to higher-priced competition, said Chief Executive Officer Chris Bannister.
“People here are disappointed with their telcos, with the big businesses,” Bannister said in a video interview from Bogota, sporting a “Womster” t-shirt. “The consumers in Colombia are tired of the high prices, the poor service.”
WOM Colombia’s sister company in Chile, also controlled by Novator, has won about 22% market share in the five years since launching. Despite Covid-related lockdowns, it grew revenues by 20% and subscribers by 13% in the third quarter, compared to a year earlier, according to a note from Lucror Analytics.
WOM Chile’s bonds due in 2024 have returned 41% this year, the best performing among the more than 800 corporate bonds tracked by a Bloomberg Barclays Emerging Markets index, which has returned an average of 5.8%.
The company’s focus on so-called postpaid accounts – which amount to more than 90% of service revenues -- and its “solid customer value” helped it show resilient operating performance this year, said Sebastian Hofmeister, a Lucror analyst.
WOM is one of five telecommunications companies bidding for 5G licenses in Chile, which the government is scheduled to award in February.
Novator last year laid plans to enter the Colombian market, winning a government bandwidth auction and buying a majority stake in struggling telecom Avantel, which it’s restructuring with support of more than 80% of creditors, Bannister said.
Bannister, who has launched companies in Myanmar, Poland and, most recently, spent more than four years leading WOM in Chile, said the company will spend heavily to build a network across Colombia in coming years.
It plans to set up 8,000 antennas, about 70% of which it will contract with third-party companies and the rest of which it will build itself, and eventually hire 2,500 employees from around 1,200 currently. Under its license, it’s obligated to provide service to 674 rural areas that are currently not connected.
The Colombian market, with nearly 65 million cellular subscribers, is currently dominated by Claro, Telefonica SA’s Movistar, and Tigo. A study by consultancy Arthur D. Little found that the Colombian market is among the most concentrated and costly in the world, when comparing prices for data.
Bannister said that makes it ripe for a new operator. He eventually sees WOM expanding to other countries in the region.
“There are more countries in Latin America like Chile and Colombia where we believe the WOM model will work,” he said.
“But first we have to eat Colombia.”
By Ezra Fieser