Costa Rica Bandwidth Sale Pulls Wide Interest
January 26th, 2010 | by admin |Latin America’s mobile phone companies will have a rare chance to move into virgin territory as Costa Rica breaks a 40-year state monopoly and invites bids for a bandwidth auction.
Aside from Cuba, Costa Rica operates the last remaining state telecommunications monopoly in Latin America and an open telephone market was a condition of joining CAFTA, the free trade agreement binding the US with Central America and the Dominican Republic.
The country may only have a population of 4.5 million people but living standards are relatively high. Costa Rica and Panama are the only Central American countries within the World Bank’s category of upper middle income countries. But while Panama has 112 mobile-phone subscriptions per 100 inhabitants, Costa Rica has 42, the lowest penetration in the region.
Attracted by the potential for growth, the five leading Latin American and Caribbean cellular operators have already begun to hold talks with the Costa Rican regulator, Sutel.
The companies are América Móvil, the market leader controlled by the Mexican billionaire Carlos Slim; Spain’s Telefónica; the Luxembourg-based specialist in emerging markets Millicom; and two Caribbean operators: Digicel, the Jamaican operator controlled by the Irish magnate Denis O’Brien, and CWI, the international division of UK-based Cable & Wireless.
América Móvil, trading under the Claro brand, operates in all the other Central American countries. Telefónica, known to its consumers as Movistar, is in all countries except Honduras. Millicom’s Tigo brand is present in Honduras, El Salvador and Guatemala. Digicel, a relative newcomer to Central America, has operations in Panama, Honduras and El Salvador. CWI operates mobile services only in Panama, but is dominant there.
All five are described by the International Telecommunications Union as strategic investors. “No other region has such a strong presence of multinational mobile groups,” it said in a recent study. “Collectively, these five strategic investors account for some three out of every four mobile subscriptions in Latin America and the Caribbean.”
Other, smaller, competitors could also emerge. Yota, a Russian company, which is building a Wi-Max network in Costa Rica and Huawei of China has installed Costa Rica’s recently launched thirdgeneration network.
George Miley, the Sutel president, has made it clear that there can be only three winners of the auction, one for each of the bandwidths on offer. If all goes well, the results should be known on May 5.
The three newcomers will only be allowed to offer wireless services in Costa Rica - rather than the triple- and even quadruple-play services available in other markets. And the winning companies will then have to compete alongside the state monopoly, the Costa Rican Electricity Institute (ICE).
That will not necessarily be easy.
One of the main benefits provided by ICE has been price. “It is one of the cheapest cell phone services in the hemisphere,” says Fred Blaser, publisher of Costa Rica’s business daily, La República. “Another advantage is coverage throughout almost the entire country, which is not always the case in the rest of the region,” adds Mr Blaser.
But ICE has been hamstrung by clumsy customer service, a near-non-existent pre-payment option, a patchy service at busy times and not a single modern store offering options to buy phones
