BUENOS AIRES (WiMAX Day) by Joachim Bamrud. With the recent acquisition of WiMAX operators Ertach and VeloCom by foreign operators with deep pockets, competition in the Argentina wireless broadband market is expected to increase, experts say.

Telmex is now acquiring Ertech for a reported US$22.5 million. Ertech operates one of the two WiMAX networks in the country in the 3.5 GHz band. Meanwhile, Nextel, the Latin American subsidiary of US-based Sprint Nextel, has signed a preliminary agreement to acquire VeloCom and is currently awaiting regulatory approval, according to Nextel spokeswoman Claudia Restrepo.

The move by Telmex also will increase its competitive advantage in Argentina, where it has invested heavily. Wally Swain, senior vice president for emerging markets at the Yankee Group, notes that “Telmex is definitely a competitive threat to Telefonica and Telecom Argentina.” Thomas Abreau, an analyst at Pyramid Research added that, “Telmex is definitely the challenger going against two incumbents, [and] has nothing to lose by using WiMAX.”

In July Ertach expanded its WiMAX network to cover Tucuman and Bahia Blanca, following services launched in Buenos Aires in 2004, which now includes 100 municipalities. VeloCom launched WiMAX services in December in the city of Buenos Aires and Mar del Plata, and according to Adrián González Aón, a spokesman for the company, the network was later expanded to other cities, including Rosario, Córdoba, San Luis, Mendoza, Bahía Blanca and General Belgrano.

Apart from Telmex and Nextel, other foreign companies are also looking at entering Argentina.

“Argentina is a great market,” says Douglas Haffer, President and Chief Executive Officer of US-based Websky. “Most people think Brazil is the best market in Latin America for WiMAX, but the demographics are better in Argentina.”

Websky plans to acquire 95% of two Argentine companies, including Infotel Argentina, which own the licenses for a combined 42MHz of bandwidth in the 2.5GHz spectrum.

The increased competition from the WiMAX operators will not necessarily mean that the two incumbents, Telefonica and Telecom, will rush to offer WiMAX.

“They could compete with WiMAX through DSL,” Abreau says.

However, Betina Faure, spokeswoman for Telefonica de Argentina, says that the operator is still only studying WiMAX with no immediate plans to launch any services.

“There are still no technological standards for this in Argentina,” she says. “Telefonica is doing several tests with different technologies on a regional level.”

In all likelihood, the incumbents will face stronger competition in areas outside the big cities, experts say. “WiMAX is a broadband technology… is better suited to low-density situations than DSL or cable modem,” Swain says. “This makes it interesting in secondary cities and fringe urban areas [in Argentina] but neither of these will make a huge difference to basic demand.”