COMMUNICATIONS
A number of recent announcements have underlined the development of the power company as a major force in the telecommunications sector, notably in North America and the developing world.
Enron of the US has announced plans to sell some assets in order to finance its push into the telecomms sector. According to Kenneth Lay, chief executive of Enron, the company intends to divest assets outside Europe and North America to become less asset driven and to push into the broadband telecommunications arena. The energy giant plans to spend between $600 and $650 million for each of the next two years on the development of its telecomms business. Enron is to be joined by a number of other companies, traditionally associated with the energy sector, which are moving towards the eventual trading of bandwidth capacity.
El Paso Energy Corp has announced its intention to invest between $1.5 and $2 billion to build its own telecommunications business. El Paso, which operates an extensive pipelines network in the US, intends to spend the investment mostly on acquisitions through its specially created unit, El Paso Global Networks.
Those utilities actively pursuing a strong telecommunications presence believe that the trading of bandwidth could eventually even overshadow the core energy business as the chief money earner, fuelled by the rapidly growing demand from internet traffic. However, while some companies expect a liquid market to evolve over the coming years, other observers suggest that the analogy between success in the trading of energy and potential success trading communications bandwidth is a misconception and have expressed concern. This hasn’t stopped other companies beyond the shores of the US from extending their operations into the telecommunications sector.
Siemens of Germany recently announced that it is to develop a mobile telephone network in Brazil, where the company plans to invest more than $700 million on the project. The company intends to become the market leader in Brazil, which with a population of some 170 million people is potentially the largest market for such services in Latin America. In addition to its role in Brazil, Siemens also intends to expand its telecomms role into other Latin American countries.