Financial Diary – Santiago
High costs, lack of available users and no commercial appeal. These were the arguments used by the vice president of WOM Corporate AffairsEduardo Jara, to request the Delaware Bankruptcy Court, in the United States, for authorization for the company to renounce the 26 GHz band, one of the four concessions granted by the Undersecretariat of Telecommunications (Subtel) to the company in 2021 .
At the beginning of April, the firm linked to the investment fund Novator Partners requested a reorganization of its operations under Chapter 11, after registering liabilities of US$1.6 billion. Now, WOM is preparing to present on May 22 all the reasons they analyzed for making the decision.
In fact, a requirement of restructuring processes in the United States is that companies are obliged to report or request authorizations for all their strategies. An example was when Judge Karen B. Owens gave the go-ahead for JPMorgan grant a loan for US$210 million, despite the fact that the company already had the agreement with the investment bank.
An “obsolete” technology
Former Undersecretary Pamela Gidi put together a 5G contest in 2021 with four macro bands: 700 MHz, AWS, 3.5 GHz and 26 GHz. The idea was to present a portfolio with different technical capabilities that would allow Chile to make a technological leap in the future.
With this letter of introduction, WOM participated on all frequencies and was awarded a block on each of them. According to the story that Jara presented in Court, WOM sought to obtain licenses for the millimeter band in “anticipation” of its commercial success and profitability.
“Unfortunately, 26 GHz technology has become obsolete throughout the telecommunications market. Since 2021, “The applicable technology has evolved and the demand for the 26 GHz spectrum for 5G has decreased precipitously,” he told in his writing.
The millimeter macroband is a high frequency that requires a large capillarity of radio bases to function, and former undersecretary Gidi included it in the contest as a way to anticipate connectivity needs. However, three years after the tender There are no commercial uses developed, except for some satellite experiments at the military level, according to one source.
“Nowhere are WOM's past, current or future business or operations dependent on the operation of the 26 GHz licenses. The debtors currently have no customers using the 26 GHz frequency band since the 26 GHz licenses were never used due to lack of technology or commercial appeal,” WOM said at the hearing.
According to the operator's calculations, to launch this technology A minimum of US$10 million is required. “The request to renounce unused concessions in the 26 GHz band is due to the fact that this technology is still very preliminary for this business and this frequency has not been exploited worldwide. It is important to clarify that there are no operational services, consequently, there are no clients who use it,” said the telecommunications company.
The risks of continuing
The operator warns that it must renounce the concessions as soon as possible. The reason? Pressure will soon come from Subtel to activate the 26 GHz WOM band.
The ignition process is done through a request to the Undersecretariat of Telecommunications, and within a period of 45 days the authority must give approval for the antennas to be turned on. However, the company explains that, by contract, they must submit this request on May 23, because the deadline for the first concession is July 29. And from that period onwards, WOM must have 16 regions ready.
According to Eduardo Jara, the operator faces serious risks if it continues with the 26 GHz block. The problems start with economic sanctions, but the most serious is the cancellation of the company as a bidder in tenders for a period of time. “WOM and its representatives would also be disqualified from bidding on any public contract for the same type of service for a period of five years,” the executive indicated.
Jara stated that a measure in favor of “abandoning and surrendering the 26 GHz licenses is a reasonable exercise of the debtors' commercial judgment.” and in the best interest of the debtors, their assets and their creditors.”
