Cellphone growth booming in Central America
By Fiona Ortiz
MEXICO CITY, Feb 24 (Reuters) - Just two years ago, cellular phones were status
symbols for the business and professional elite in Central America, a region still scarred by
decades of civil war.
But today, taxi drivers, street peddlers and students -- Everyman -- seem to pack a wireless phone.
Cellphone use was up an explosive 180 percent in 1999. A flood of foreign investment, prompted by government deregulation,
has slashed the cost of cellphones and made prepaid phone cards available to low-income users who don't qualify for monthly
phone service contracts.
The rapidly growing number of wireless subscribers is bound to soon surpass the number of fixed-line phone clients in Central
America -- a region until recently shunned by foreign investors frightened by guerrilla insurgencies.
Atlanta-based BellSouth Corp. (NYSE:BLS - news) has walked point in the incursion to the Central America. Now, European
telephone giants like Britain's Cable and Wireless (quote from Yahoo! UK & Ireland: CW.L), France Telecom and Spain's
Telefonica (NYSE:TEF - news) are jostling to expand their footholds in the mushrooming market.
Government and corporate tallies of cellphone use in the region show subscribers in Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, and Panama totalled 1.24 million at the end of 1999, skyrocketing from 442,745 in 1998.
CENTRAL AMERICA GROWTH FAR OUTSTRIPS U.S.
These growth rates are not unusual in Latin America, where decades of inefficient, state-run phone companies stunted
expansion in conventional phone lines. But they are spectacular compared with cellular growth of around 25 percent in the
United States last year.
Poor-quality conventional phone lines and long waits for installation of new land lines have helped generate the cellphone craze
in the region, industry analysts say.
In Guatemala, Central America's most populous nation with some 11 million people, there are only 5.5 conventional phones per
100 people. But in just a few years, mobile phone penetration has mushroomed to 3.4 cellulars per 100 people.
Industry players see mobile phones catching up with land phones in the region, by next year in some cases.
''I think that by the end of this year or beginning of 2001, mobile will overtake over land lines (in Panama),'' Luis La Rocca,
vice president of business development for BellSouth Corp., told Reuters.
La Rocca said he saw the rate of growth in cellular subscribers continuing its 1999 pace this year in the region.
BELLSOUTH EXPANDING QUICKLY IN REGION
BellSouth's international division has a cellular company in Panama, which saw growth of 140 percent in subscribers last year.
The company's Nicaragua venture saw 127 percent growth. And BellSouth has also acquired a license for Guatemala, where it
will launch service in the third quarter.
Even though three other wireless companies, all controlled by foreign firms, are in Guatemala, BellSouth still sees huge potential
there.
The company figures that for cellphone penetration to reach 10 percent in Guatemala, some 800,000 people still need
cellphones.
''We're still catching the beginning. The market is not saturated by any means,'' La Rocca said.
Like other Central American countries, Guatemala has seen a wave of foreign investment in the past year.
Until 1999, Comcel -- controlled by Luxembourg-based Millicom International Cellular (NasdaqNM:MICC - news) -- offered
the only cell service in Guatemala.
But with government auctions of frequencies, new companies have rushed into Guatemala. Former state monopoly Telgua, now
operated by Mexican telephone giant Telmex (NYSE:TMX - news), began cellular services last year, as did Spain's
Telefonica.
EUROPEAN TELEPHONE GIANTS ALSO DIVE INTO MARKET
In Panama, Britain's Cable & Wireless PLC and a Millicom subsidiary divide the cellular pie. In Nicaragua, the BellSouth
affiliate controls the whole market. El Salvador has three companies, Millicom affiliate Telemovil, a Telefonica affiliate, and a
unit of France Telecom. Honduras has one company, Celtel.
The only state-owned holdout is Costa Rica with one cellphone company, and it saw the lowest growth rate in the region in
1999: 30 percent.
La Rocca said that lawmakers in Costa Rica have worked for years to open the telephone market, but it was still not clear
whether private investment would be allowed any time soon.
Elsewhere in the region competition has spurred growth.
''Even though these are countries with small populations and low GDP (gross domestic product) per capita, when you
introduce a second and third carrier you see prices come down and that's why you see large growth,'' said Cristiane Mahler,
Latin America wireless telephone analyst for Yankee Group.
Mahler said prepaid services -- cellphone minutes paid for before being used -- has fueled the boom, especially because most
of the countries have calling party pays, so cellphone users do not pay for incoming calls.
The only country in Central America where clients have a wait of more than a few days to get a new cellphone account is Costa
Rica. But relatively long waits for new land lines persist throughout the region.
While European and U.S. firms have dominated the cellular phone offerings in Central America so far, Mahler said she saw
more Latin American corporations becoming interested in operating licenses, and some could move in soon, following the
example of Telmex in Guatemala.
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