Latin Finance - May/June 2011 - 38

centam telecom

penetration rate of 50%, according to SUTEL, will give the company a presence in every nation in the region. Telefónica, which operates primarily under the Movistar name in the region, also plans to enter the Costa Rican market. At that point, it will be operating in five of the six Central American countries, excluding only Honduras. Yet despite América Móvil’s clout, Millicom, which operates under the name of Tigo, holds majority market share in El Salvador, Honduras and Guatemala, the only three regional countries where it offers cellular coverage. According to the Telecommunications Superintendent of Guatemala (SIT), the number of Tigo subscribers surpassed Claro subscribers in Guatemala in 2009. Currently, Tigo holds a 43% share of the Guatemalan market, trailed by Claro’s 34% share and Movistar with 22%. Tigo also provides service to 65% of the over 9.5 million cell users in Honduras, according to the Honduras National Commission of Telecommunications (Conatel). Tigo is also the market leader in El Salvador, with a 44% share, according to the El Salvadorian Electricity and Telecommunications Superintendent (Siget). Tigo, however, chose not enter the Panamanian or Nicaraguan markets and, after flirting with the idea of entering Costa Rica, elected to avoid the $70 million investment, the minimum amount the central bank of Costa Rica and SUTEL require of new entrants. “The most important thing we look at is establishing ourselves as a leader in a market,” Emily Hunt, a Millicom investor relations officer says. “We have plenty of opportunities to grow in our existing markets and we don’t feel the need to expand our geographical footprint unless we can see the opportunity to develop a market leading position.” In 2010, Millicom, which has operations in 13 countries, including three in South America and seven in Africa, earned over $3.9 billion, a 16% increase from 2009. According to Millicom’s yearend financial presentation, the company had over 13 million users in Central America in 2010, a 5% improvement from 2009. Regional revenues grew 7.7% in 2010, increasing from $1.315 billion to

$1.416 billion in 2010. The third regional power, Telefónica, does not hold a leadership position in any of the Central American nations, though it accounts for 7 million subscribers and 14% of all regional users. The Madrid-based giant, like Claro and Tigo, continues to grow in Central America. According to the company’s year-end financial presentation, Telefónica earned revenues that exceeded $85 billion in 2010, a 7.1% increase from 2009. The company has 184 million subscribers in LatAm. Telefónica, which operates in 25 countries in Europe and LatAm, claims to have increased the number of cell

in 2011, according to Magaña at Pyramid Research. In the region’s biggest market, Guatemala, growth in cell users fell from 15% in 2009 to just over 4% in 2010, according to SIT. Market penetration has reached 123%, meaning each resident owns an average of 1.23 phones. In Panama, where Cable & Wireless is the dominant provider, market penetration hovers around 185%, making it one of the world’s top 10 most penetrated markets, according to the International Telecommunication Union (ITU). Growth in the market has remained steady due to the entrance of Jamaica-based provider Digicel in 2008 and Claro in 2009. While the biggest growth opportunities still exist in Nicaragua, which has 62% market penetration, and Costa Rica, which had a 52% market penetration rate prior to the entrance of América Móvil and Telefónica, the boom years when the number of cellular users grew in some countries by 50%-60% are a thing of the past. In El Salvador, for example, the cell phone market grew 60% in 2006, 62% in 2007, 12% in 2008, 9% in 2009 and less than 3% in 2010, according to Siget. As the market matures, the struggle for market share will soon take on a different complexion. According to Magaña, with little room left for user expansion, companies will begin to make moves and adapt strategies to push ahead of their competitors.

Am Móvil intends to be the market leader: García phone users in Central America by 10.3% in 2010, according to its year-end shareholder’s presentation. Regional revenues for Telefónica totalled $788 million during the year. In January, Telefónica committed to invest $95 million in infrastructure and development in the Costa Rican market, outbidding América Móvil’s $77 million of promised investment. Osman Rodríguez, the CEO of Telefónica in Central America, tells LatinFinance the company is looking to improve its market share in each country in the region.

Gobbling Up the Competition

A Maturing Market

Demand for cell phones in the region is showing sings of slowing as the market approaches 100% penetration, expected

Undoubtedly the most significant move in the region during the first quarter of 2011 was América Móvil’s announcement that it would acquire the operations of Digicel in Honduras and El Salvador. Digicel has operated in El Salvador since 2007 and in Honduras since 2008 and was well received in both markets, earning over 20% of the market in each nation. If the move is approved by both governments, which is expected in the second quarter of 2011, Claro will move ahead of Millicom as the region’s largest provider by acquiring more than 3 million Digicel users in the two countries. In return, Digicel will receive all of Claro’s Jamaican users. In addition to América Móvil’s acquisition of Digicel, with Claro’s increasing dominance in the Nicaraguan

38 LatinFinance

May/June 2011

Latin Finance - May/June 2011

Table of Contents for the Digital Edition of Latin Finance - May/June 2011