Three Telecom Leaders Announce Southern Cone Fiber-Optic Network In Argentina and Chile - Company Business and Marketing

Cambridge Telcom Report, May 29, 2000

Three telecommunications leaders from different continents Monday announced creation of Southern Cone Communications Company, S.A., a major new broadband fiber-optic network linking Argentina and Chile. Investing in the US$220 million joint venture are U.K.-based electric and telecom utility National Grid Group (NYSE: NGG; London); Chilean carrier Telefonica Manquehue; and Williams Communications (NYSE: WCG), a U.S.-based global provider of services to the carrier market. *(Photo: http://www.newscom.com/cgi-bin/prnh/20000522/HSM044 )

Williams Communications' US$24.5 million investment commitment represents a 19.9 percent stake in Southern Cone. National Grid, which partially owns the Argentine electric company Transener, is investing US$61 million and will own 50 percent. Telefonica Manquehue, which will invest $37 million for 30.1 percent of Southern Cone, operates a broadband network in Santiago, Chile, and is constructing additional fiber routes in that city.

In a related move, National Grid is investing $80 million in Telefonica Manquehue for a 30 percent interest in the Chilean carrier. Williams Communications already owns 16.4 percent of Manquehue.

The 4,300-kilometer (2,660-mile) Southern Cone network initially will link the major Argentine cities of Buenos Aires, Las Toninas, Rosario, Cordoba, Mendoza and Neuquen with Santiago and Valparaiso, Chile. Some of Southern Cone's 48 fibers will be available for sale to other carriers as dark fiber or dedicated capacity.

The end points of the Southern Cone network will connect to the landing points of international submarine cables planned to circle South America. When complete, the system will link Argentina and Chile with cables to Peru, Colombia, Panama, Venezuela, Brazil and the Caribbean -- and ultimately to Williams' network in the U.S. (Map provided).

The Southern Cone "land bridge" network will facilitate long-distance voice, video and Internet communication; enhance competition as the Argentine market prepares for deregulation this November; increase regional capacity; and potentially lower costs in Argentina by connecting with the Chilean market, where rates for outbound international traffic are lower.

"These two investments build on National Grid's growing experience in start-up telecom ventures, which began with Energis in the U.K. and has since been transferred to Intelig in Brazil, a new project in Poland and now Chile and Argentina," said National Grid Group Chief Executive David Jones. "The investments are complementary. Manquehue can provide last mile access for the Southern Cone network, and the Southern Cone network can provide long distance and international access for Manquehue's customers in Santiago."

Juan Carlo Gonzalez, chairman of Telefonica Manquehue, commented that his company's "investment in Southern Cone has many synergies which will enhance Telefonica Manquehue's abilities to serve its customers with international voice, data and Internet services."

"Southern Cone represents an expansion of Williams' presence in South America," said Miller Williams, senior vice president of International Investments for Williams Communications. "Coupled with our wireless investments in Brazil and wireline investment in Telefonica Manquehue in Chile, Southern Cone will connect our growing presence in South America with our leading U.S. network."

Williams explained that Southern Cone is also an extension of Williams Communications' global strategy. "Williams has undersea cables capacity linking China and Japan with North America; an Asian broadband network; a fiber-optic network partnership in Australia; transatlantic undersea cable capacity; capacity agreements in Europe, Canada and Mexico; and satellite capacity with footprints on virtually every continent."

Each partner brings substantial expertise to the Southern Cone project. The three companies contribute their interests in two existing ducts across the Andes Mountains. Installation of fiber has already begun along the northern route through one of the two ducts that parallels the Gas Andes pipeline and in other ducts along highway routes to Buenos Aires.

National Grid has the option to access 18 fibers already installed along Transener routes in the southern half of the network. Both National Grid and Williams are providing network construction, operations and maintenance services. Manquehue will provide operational support services. Williams Communications has twice designed, built and operated leading carrier networks that enabled competition in the U.S. and is investing in global infrastructure to extend competition around the world.

National Grid -- one of the UK's largest 100 companies -- builds, owns and operates electricity and telecommunications networks around the world, focusing on liberalising markets. Headquartered in London, the company's growing portfolio of telecommunications businesses includes a minority stake in UK company Energis, which National Grid created; operations in Brazil and the U.S.; and a joint venture being developed in Poland. The world's largest independent electricity transmission company, National Grid operates electricity networks in England, Wales, Argentina, Zambia and the U.S.