Central America’s cellular market, although smaller and representing somewhat riskier investment than other parts of Latin America, remains largely untapped and is expected to present a bundle of cellular opportunities in the near future.
Cellular subscribers numbered less than 50,000 for the whole region at mid-1995, representing just 1 percent to 2 percent of the total subscriber base for Latin America. Cellular doesn’t exist yet in Honduras and Panama. And in Belize, El Salvador, Guatemala and Nicaragua, only one carrier is licensed.
Nearly all of these countries have plans for introducing cellular or adding cellular concessions. Analysts say that investing companies definitely must weigh the risks of entering these markets, but that the revenue potential is there. Where cellular exists, growth so far has been slow, but introduction of competition and resulting lower prices could boost take-up rates.
Inversiones Rocafuerte S.A., a consortium including equity partner Motorola Inc., signed a contract in August with government-owned Empresa Hondurena de Telecomunicaciones (Hondutel) to develop a cellular system in Honduras. The consortium originally was awarded a cellular license in January 1995.
At press time, the contract between Hondutel and the consortium still was awaiting approval by the Honduras legislature, which is necessary because all telecom operations in the country currently are under government control. Honduras is moving toward telecom privatization.
Two cellular licenses are planned for Panama. As of September, eight companies had prequalified to bid for the A-band license, with the B-band license reserved for the company that wins the concession to operate government-owned National Tele-communications Co. (Intel S.A.).
Panama plans to sell up to 49 percent of Intel. The bulk of the shares will be sold to a single company, which will operate Intel. In November, the government said it planned to complete the sale of the shares by this June.
Before the sale can be completed, however, the government must pass a new telecom law that will set guidelines for a regulatory organization. Additional cellular licenses also are being considered by Nicaragua and El Salvador. A licensing process for a second operator was in the works for Guatemala in 1995, but the tender was canceled in September.
Up until mid-1995, two carriers existed in Costa Rica: the dominant operator Instituto Costarricense de Electrodad-the government-owned telecom and utility monopoly-and Millicom de Costa Rica. But the government revoked Millicom’s operating authority in May.
Costa Rica’s high court had ruled in 1993 that the government exceeded its authority in awarding Millicom a cellular license and that ICE was the only carrier authorized to operate under the Costa Rican constitution.
The court said Millicom could try and work out a solution. After that, Millicom tried to negotiate a joint venture relationship with the ICE subsidiary that provides long-distance services. Millicom had to halt service to its 4,500 subscribers in May when negotiations with the subsidiary ended. Millicom’s network was not back in service as of mid-January.
