THE BATTLE FOR MINUTES.

Iplan Networks is one of 26 new companies vying for a share of Argentina's US$9 billion telecommunications market.

PABLO SAUBIDET SETTLES INTO A LEATHER RECLINER and stares into the video camera perched atop a 30-inch Sony television. His face flashes across fiber optic cable to a screen in another office building blocks away, where one of his co-workers marvels at the high-resolution image and can't resist the urge to give his boss a little grief. "Che, you could have at least shaved for the occasion," the colleague says of Saubidet's characteristic stubble and tousled hair.

The 36-year-old Argentine entrepreneur has participated in more substantive video conferences, but none quite so memorable. It is the first ever to be transmitted over a network created by his company, a start-up telecommunications provider called Iplan Networks. The video conference is also the first in Argentina to be transmitted locally on a network built entirely according to Internet Protocol (IP), the language of the Internet. Though such technology has been used for years to transmit data and voice packets across long distances, Iplan is one of the world's first operators to cast away the traditional circuit switch and rely entirely on IP for local service as well.

More amazing than the technology is the fact that 18 months ago, Iplan was just a rough idea inside Saubidet's head. To convert the concept into a reality, he teamed with Daniel Nofal, 28, and 61-year-old American George Stewart, his former colleagues at Fibertel, the company that introduced high-speed Internet access to Argentina in 1996. Armed with little more than a Palm Pilot filled with contacts and a keen understanding of the telecommunications market, the trio drafted a business plan to satisfy the gamut of communication needs for small and medium-sized businesses.

It didn't take long for the partners to find financial backing--three hours to be exact. On the first day of a New York road show, they walked away with a US$60 million check from the private investment firms of Madison Dearborn Partners and LPL Investments Group; the latter is a fund linked to U.S. cable entrepreneur Lawrence DeGeorge. Commitments for another $440 million over five years came several weeks later. In exchange for the generous funding, the trio agreed to relinquish 80% control of their company. "It was love at first sight," recalls Saubidet. "Within 15 minutes of our presentation, they were sold."

Big business calls. Paramount in the minds of Iplan's backers, says Saubidet, was last November's deadline marking the end of the 10-year telephone duopoly of Telefonica de Argentina, a unit of Spain's Telefonica, and Telecom Argentina, controlled by France Telecom and Telecom Italia. Along with rapidly growing demand for the Internet, deregulation is expected to generate investments totaling $10 billion over the next three years, recent studies predict. By comparison, Telefonica and Telecom invested a combined $17 billion during their decadelong stranglehold over local and long-distance traffic, the bulk of which was used to overhaul the state-owned grid and boost telephone penetration from a dismal 2% of the population in 1990 to the current 23%.

The overwhelming majority of new investments, however, are geared toward providing value-added services to the lucrative corporate market. And in that field, Iplan and its 110 employees are hardly alone. In addition to the well-entrenched incumbents, global heavyweights such as AT&T, Comsat, BellSouth and Verizon are among 26 firms that have solicited a telecommunications license from the government. Slues of regional players such as Mexico's Telefonos de Mexico and Argentina's Impsat Fiber Networks are vying for a piece of the action, too.

Deep pocket financiers such as Goldman Sachs and Fidelity Investments are also funding start-up ventures with names like Diveo and MetroRed. Some analysts predict that a glut of players will surely cause consolidations within a few years. "With so much competition it's only natural that some people will go home disappointed," says Enrique Carrier, director of the Buenos Aires-based telecommunications consulting firm Prince & Cooke.

The low-hanging fruit is the local affiliates of U.S. and European multinationals. They were among the first to seek high-quality telecommunications services, paying hefty prices for dedicated Internet lines, Web hosting facilities and even such bygone innovations as central switchboards. These large companies tend to be heavy consumers of such services but comprise only 1% of the estimated 1 million businesses in Argentina, says Jonathan Tirone, analyst for Cambridge, Massachusetts-based Pyramid Research. Now, however, they are increasingly bound by pan-regional contracts, as is the case of many Spanish-owned banks and energy companies that are exclusive clients of Spain's Telefonica.

New service providers will battle for small and medium-sized Argentine businesses, many of which are operating in the Stone Age, depending on fax machines and dial-up Internet access to conduct business. While some 80% of companies with fewer than 200 workers already have access to the Internet, Carrier says only a handful reap the full benefits of this service. For example, a recent Prince & Cooke survey revealed that only four of every 15 employees with workplace computers have access to the Internet.

Internet surf charges. Argentina is struggling to resume growth after nearly two years of recession, but the telecommunications market potential is spurring investment. In fact, telecommunications is one of the few areas that has not suffered from the recession. "The price of not being able to communicate is too high for any company to pay," says Prince & Cooke's Carrier.

To be sure, part of the reason for the technology gap has been the cost of hooking up to the Internet. Unlike in the United States, where consumers pay a fiat connection rate for each local call, Argentines are charged according to the duration of each local call. That means the cost of surfing the Internet adds up fast. Moreover, prior to deregulation, most small and medium-sized enterprises were just plain ignored. For example, until the year 2000, businesses wishing to connect to the Internet were forced to choose between corporate suppliers that charged $1,000 a month and Internet service providers that offered inexpensive, but shoddy service directed toward the less-demanding residential market. "The great opportunity and challenge for operators lies in developing affordable solutions for the vastly underserved market," says Tirone.

To compete on price, start-ups like Iplan rely on state-of-the-art networks that circumvent the existing telephone grid and connect users directly to the Internet at speeds far superior to dial-up servers. Although alternative networks dedicated to data transmission have been allowed for years, deregulation will permit new operators like Iplan to carry voice traffic as well. with competition expected to drive long distance rates down by as much as 60% in 2001, plain old telephone service will increasingly be sold as part of a package deal. "In the future, the telephone will be a commodity like the fax machine already is, something essential for every operator to offer but not a huge revenue driver by itself," says Carrier.

While many experts predict the Internet's efficiency will kill the telephone, the obituary is premature. Some 58% of the $9 billion in telecommunication services sold in 2000 came from local and long distance telephone services (90% if wireless telephone is included) while Internet and data-transmission related services generated only 5%.

Saubidet knows he faces major challenges in a market with at least 26 companies already vying for customers. And, to obtain economies of scale, his company will also have to follow its competitors into other regional markets like Brazil, where it recently announced plans to invest another $500 million. "Now is the moment of truth to see whether or not we'll really be able to create a paradigm shift in the way businesses communicate," Saubidet says.

                             ARGENTINE TELECOM
                               NEW ENTRANTS
COMPANY        BACKERS                                      INVESTMENT
                                                            US$ millions
Movicom        BellSouth, Motorola, BGH                     1,000
Impsat         Pescarmona, British Telecom, Morgan Stanley  600-700
               Dean Witter, CS First Boston
Iplan Networks Madison Dearborn Partners                    500
CTI Movil      Verizon, Clarin, Blackstone, Morgan Grenfell 450
Tecoop         Telephone and Electricity Co-operatives      450
Techtel        Techint, Telmex                              400
Diveo          Goldman Sachs, Alta Communications,          300
               Norwest Venture
MetroRed       Fidelity, Metro Communication BVI            240
Comsat         Lockheed Martin Global Telecom               120
COMPANY        MARKET
Movicom        Corporate and Residential Voice
Impsat         Corporate Data Services, Corporate and
               Residential Voice
Iplan Networks Corporate Data Services, Carriers
CTI Movil      Corporate and Residential Voice
Tecoop         Corporate and Residential Voice
Techtel        Corporate Data Services
Diveo          Corporate and Residential Voice
MetroRed       Corporate Data Services, Carriers
Comsat         Corporate Data Services, Carriers
Others: Velocom, I-Basis, Redalternativa,
Urvicom, Ursus, Uunet, Embratel