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November 4, 2009
Nicaraguan telecom regulator TELCOR recently announced that the Russian firm Yota won the spectrum auction for bands 2500 and 2690MHz, paying US$729,000. The company might eventually offer fixed wireless telephony and broadband services, challenging current market leader Claro. TELCOR hopes that more competition will increase voice telephony penetration and broadband penetration — which, according to our Q3 2009 Fixed Communications Forecast for Nicaragua, stood at 21% and 2.8% of households, respectively, in 2008, the lowest in Central America.
Yota disclosed that it would use WiMAX to deliver the services, a fitting choice for a country with low fixed infrastructure, low penetration of the population and a need for a cost-efficient technology to help connect more users. The low penetration of the Nicaraguan fixed services market is the result of several factors: The low affordability of services for the majority of the population; the high cost behind expanding the network; and the fact that Claro has no real competitor, thus eliminating any incentive for the incumbent to invest into lower-income segments. Yota’s challenge will be to develop a business model that balances lost ARPU with the investment needed to fulfill the promise of increasing service coverage.
It’s clear that more competition is needed to increase penetration levels and make services more affordable in a country with a nominal GDP per capita of just $6,365 in 2008. However, more competition is only one piece of the puzzle. As reported in Pyramid Research’s Q3 2009 Mobile Demand Forecast, mobile penetration stood at 46% in Nicaragua at the end of 2008, by far the lowest in Central America. By comparison, neighboring Honduras closed 2008 with 81% penetration.
As has been demonstrated in other markets, the addition of new operators leads to greater uptake of services. In that respect, Nicaragua will likely increase connectivity by bringing more competition to the mobile sector, where currently Claro and Movistar are the only operators. But along with bringing more players to the arena, there are other critical areas Nicaragua needs to improve to boost connectivity. For example, Nicaragua must strengthen its legal framework with powerful, independent watchdogs and with clear rules for auctioning spectrum. A system that allows legal disputes to be easily discussed also would reduce uncertainty and help to promote private investments. In addition, regulation should be friendly to new competition and harsh to monopolistic practices.
Adding a potential WiMAX operator is a start to modernizing Nicaragua’s telecom service infrastructure, but more work is needed.
— Jose Magana, Senior Analyst
Related resources:
Latin America Mobile Demand Forecast
Forecasts published quarterly
Our Mobile Demand Forecast products provide complete pictures of demand trends for 19 geographical markets in Latin America. The Excel output includes five years of historical data and five years of market projections for metrics such as GDP, mobile penetration, subscriptions (by operator, type of package, technology), ARPS and total mobile service revenue (data and voice). The Forecasts are based on extensive field research and use a consistent methodology across all markets, aiming to capture the total spending, from an end-user perspective, on mobile communication services in each market.
Latin America Fixed Communications Forecasts
Forecasts published quarterly
Our Fixed Communications Forecast products provide a complete picture of wireline voice and data communications in each of 19 Latin American markets. The Excel output includes five years of historical data and five years of market projections for metrics such as demographics and economic trends, penetration of broadband and narrowband lines, Internet users, business users, voice telephony lines, VoIP, PCs, IPTV and revenue. We believe our Fixed Communications Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.
Communications Markets in Nicaragua
Country Intelligence Report published June 2009
The Nicaraguan telecom market generated $502m in 2008, and it’s expected to grow at a 6.3% CAGR over the next five years. The sectors that will drive the expansion are fixed broadband and mobile services. While there’s opportunity in the underpenetrated Nicaraguan market, adoption will be curbed by the absence of a real competitive challenge to telecom incumbent Claro. This Country Intelligence Report analyzes Nicaragua’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.
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