Telecom giants enter C.R. cell phone market

December 17, 2010

George Miley, president of the Telecommunications Superintendency (SUTEL), was beaming Tuesday as two new providers bid to offer cell phone service in Costa Rica by mid-2011. The two companies, regional giants América Móvil and Telefónica, committed to at least a $70 million investment to compete in Costa Rica. Their final bids will likely be much higher.

This week’s bidding was part of a long and arduous process for Miley and SUTEL, who needed nearly two years to define the regulations for market entry, assure that adequate frequencies were available, and wrestle with the Costa Rican Electrical Institute (ICE) for use of existing cell phone towers. Last year’s passing of CAFTA dissolved the long-standing telecommunications monopoly held by ICE, which currently provides cellular service to an estimated 2.6 million Costa Ricans.

“This has been a long process to provide Costa Rican consumers a wider selection of cellular options,” Miley told The Tico Times. “But we consider today to be a great success and first step in opening the market that the people of Costa Rica have been waiting for.” 

On Tuesday at the Hotel Intercontinental in Escazú, west of San José, Miley opened the bidding at 10 a.m., and allowed bidders one hour for their presentations to a SUTEL panel. Near the end of the hour, Mexico-based América Móvil, known locally as the company Claro, and Spanish provider Telefónica, which will become Azules y Platas, approached the panel and submitted their secret bids. Each company also paid a $3.5 million deposit to the Central Bank of Costa Rica.

SUTEL will keep the bids private until next month. A formal offer is expected on Jan. 26. According to Miley, the two new providers will offer service by September 2011.

“Costa Rica will be the 19th country we will offer service to,” Claro Costa Rica’s executive director, Ricardo Taylor, told The Tico Times. “We hope Costa Ricans will be as pleased with our services as are our other 217 million Latin American customers.”

“In the end, I think the big winner in this entire process is the Costa Rican consumer, who will now have more options and can choose for themselves who their provider will be,” Taylor said.

Despite the event’s upbeat environment, some attendees were surprised that only two companies submitted bids. Throughout the two-year process, SUTEL representatives suggested that three companies would join the market and compete with ICE.

Representatives from the company Digicel were present Tuesday, but did not submit a bid. Tigo, which provides service to three other Central American countries, also sat out Tuesday’s bidding.

“We simply didn’t find the conditions or opportunities necessary to continue the process,” said Tigo spokesperson Alberto Raven in a statement.

Spain’s Telefónica, which provides cell service in El Salvador, Guatemala, Nicaragua and Panama, grossed an estimated $81 billion in 2009 and had 265 million customers worldwide.

América Móvil, which is owned by the world’s wealthiest man, Mexican Carlos Slim, will now provide service in six of Central America’s seven countries. Belize is the only country where América Móvil does not operate. América Móvil’s profits for 2009 exceeded $30 billion.

“If all goes as planned, we will have two world-class companies offering Costa Rican consumers cellular service by next year,” Miley said. “This will finally give consumers a choice for their cellular services, which has been the goal of this process from the beginning.”

The opening of the Costa Rican cell phone market is anticipated to create 3,000 jobs and generate up to $3 billion in revenue for the Costa Rican economy in five years. 

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