Share Square: Costa Rica

Costa Rica had a population of 4.9 million people and 6.9 million mobile subscriptions by the end of 2013, giving a penetration rate of 150% - one of the highest in Central America, alongside Panama and El Salvador.  Around 83% of subscribers had a pre-paid account.

There are three Mobile Network Operators (MNOs) serving the Costa Rica market, of which Kölbi (ICE) was the clear market leader with 4.3m subscriptions– 63% market share (See figure 1), significantly ahead of Claro (América Móvil) which had 1.31m subscriptions and Movistar (Telefónica) with 1.27m.

 

Costa Rica is one of the last countries in Latin America to sanction the liberalisation of the telecoms market, in 2008. This marked the end of the national operator Grupo ICE’s 46 year monopoly and led to the creation of a new regulatory body, the Superintendencia de Telecomunicaciones (SUTEL), a move intended to promote and stimulate market competition.

After market liberalisation, the number of subscriptions started to increase dramatically. Rapid subscription growth continued until 2010 and has since slowly tapered off.

In 2010 a spectrum auction took place, and in Q4 2011 two new players – Movistar and Claro – launched services. While three concessions were available, only Movistar and Claro made bids for spectrum - with Movistar offering US$95m for 60MHz of spectrum in the 850, 1800 and 2100 bands, and Claro offering US$75m for 60MHz spectrum in the 1800 and 2100 bands.

Kölbi has also since signed agreements with the 2 mobile virtual network operators (MVNOs), Tuyo Mobile and Fullmóvil, which together account for 2% of subscriptions.

As of April 2014, all three MNOs in Costa Rica are providing 3G and 4G LTE services. Kölbi is providing GSM on the 900 MHz/1800 MHz band, 3G on the 850 MHz band and the 4G at 2.6 GHz. As for the other operators, Movistar and Claro are providing 3G services respectively on 850/2100 MHz bands and at 2100 MHz and 4G services on the 1800 MHz band. Costa Rica has 750 MHz of spectrum spread over 6 bands dedicated to International Mobile Telecommunications with 81% of which is owned by ICE.

Internet access in Costa Rica is dominated by mobile services which account for 88% of all access. This is principally due to ICE having focused investments on mobile network infrastructure at the expense of fixed line development (indeed fixed line penetration has been in steady decline).

To stimulate the development of data services, the government has recently announced a new spectrum auction of 40MHz in the 1800MHz, and 30MHz in the 1900MHz/2100MHz bands. Kölbi declared it has no intention of bidding, but the previous calls to auction more spectrum by Movistar and Claro could indicate their interest in increasing their spectrum. It is also important to note that this auction is not restricted to existing local market players and the potential entry of a fourth player is possible.

While law 8660 article 77 clearly describes Sutel’s competences to promote infrastructure sharing or act ex officio to resolve differences or disputes, there is currently little sign of regulatory activity to drive sharing.

Operators have heavily invested in infrastructure to expand their coverage and have been expressing their frustration at the difficulty of building new infrastructure when faced with current legal structures - which give local communities the legal autonomy to establish their own conditions when companies request permits to install telecom towers.

Spectrum band allocation represents another issue for Claro and Movistar, regarding the expansion of their footprint, as the spectrum allotted requires more towers to achieve an equivalent coverage to networks operating on lower frequencies - which provide better cellular penetration and coverage with fewer cell sites.

Nevertheless, in order to sustain their development while being competitive, Claro and Movistar have already been using the services of TowerCos to build and manage towers in Costa Rica.

In 2011, Global Tower Partners purchases 250 towers from Centennial Towers in Costa Rica. GTP was later acquired by American Towers - which owns a total of 498 towers in Costa Rica at present.

Alongside AMT, two other TowerCos are present in the market: SBA Communications, which manages a portfolio of 417 towers, and Centennial Towers with a portfolio of 140 towers.

Since its liberalisation, the Costa Rica telecommunication market has been very dynamic, driven by the entrance of key new players which are part of groups with extensive experience in Latin American markets – Movistar and Claro. The pace of technological development has also been rapid in the last 2-3 years, with an LTE service launched in 2013 – putting Costa Rica close to the 4G forefront in Latin America. Mobile penetration is high as well as the number of post-paid subscribers, which could help to drive the take-up of mobile data services and the infrastructure required to enable them.

Such market conditions help to explain why several leading TowerCos are already active in this market. However, a key to the market’s future potential for TowerCos lies in the path taken by ICE – given it dominates the market with 63% market share. Any moves by the regulator to address its dominance, including requirements to release or share infrastructure, or any strategic moves in that direction by ICE itself, will significantly boost the potential for existing TowerCos as well as providing opportunities for others to enter the space.