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EVENT SPOTLIGHT
On June 27, Bermuda-based Digicel announced it will start operations in Guatemala in the next few months, after regulator SIT gave the company one year to begin offering services. Digicel absorbed Digicel Holdings, which operated in El Salvador and had a GSM mobile license for Guatemala.
The market in Guatemala is one of the most competitive in Central America, and Digicel may face tough competition from established providers: America Móvil (Claro), Telefónica (Movistar), and Millicom (Tigo). This already fierce war gives Guatemala one of the lowest average revenues per prepaid subscriber (ARPS) in Central America, at $10.13 in 2006. With a new player entering the market, we believe the competition will become even more intense, but it will accelerate mobile penetration as voice ARPS keeps declining. Pyramid Research believes this new environment will stimulate operators to offer new value-added services and specific segmented proposals.
ANALYSIS SUMMARY
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Digicel is entering the already crowded mobile market in Guatemala. We believe the added competition will help lift penetration, push down voice costs for users, and accelerate the development of new value-added services.
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In the short term, we expect the existing operators to deploy new offerings in advance of further competition, including lower per-minute prices and reduced handset costs. Those offerings may help keep current market shares stable.
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Data revenues will show strong growth in the upcoming years, particularly from SMS traffic. We believe existing operators will develop new services and other offerings to benefit from that trend and intensify the transformation toward non-voice services, such as ringtones, 3G connections, corporate access, and messaging.
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