Share Square: Nicaragua

Nicaragua had a population of 6.2 million people and 7.4m mobile subscriptions at the end of 2014, giving a SIM penetration rate of 120% - about average for Central America. Around 81% of subscribers had a pre-paid account.

There are currently two Mobile Network Operators (MNOs) serving the Nicaragua market, of which Movistar was the narrow market leader with 3.9m subscriptions – 52% market share (See figure 1), slightly ahead of Claro (América Móvil) which had 3.6m. Movistar has been growing slightly faster than Claro over the last two years – adding 850,000 subscribers in the period, although quarterly net additional subscriber growth has been slowing for both operators.

 

At the end of 2014, 77% of subscriptions were 2G, with 23% 3G and no LTE thus far. However, 4G testing has been underway.

Nicaragua has until recently been unusual in Latin America, and indeed in terms of most global markets, by nature of having only two mobile operators. This situation looked set to change in 2012 when Nicaraguan telecoms regulator, the Instituto Nicaraguense de Telecomunicaciones y Correos (Telcor), launched a tender for two new mobile licences in the 1785MHz-1805MHz band – aiming to challenge this duopoly. Xinwei was subsequently awarded a mobile licence utilising the 1785MHz-1805MHz spectrum band in November 2012, after beating off competition from a number of unspecified companies from Asia.

However, only in January 2015 did Xinwei finally start to roll out its mobile network in Nicaragua –over two years after receiving its telecoms concession from the government. According to local news site La Prensa, the Mateara municipality in Managua was one of the first places to see deployment. Telcor has stated that a commercial launch is likely by the end of 2015, although the timing has yet to be confirmed.

Some doubts have been expressed over the operational strategy of the firm – which is known for its multi-carrier wireless in the local loop (McWiLL) technology and which intends to roll out a nationwide network based on Time Division Synchronous Code Division Multiple Access (TD-SCDMA), previously rolled out by China Mobile.

There were question marks over the circumstances of the award to Xinwei – which Xinwei’s website announced had been made in November 2012, although it wasn’t revealed in the Nicaraguan press until January of the following year. At the time there was speculation linking the company to Laureano Ortega, son of President Daniel Ortega, and the head of investment agency ProNicaragua, which was reported to  have had a hand in the deal. Moreover, the price of the concession is said to have been slashed from US$90m to US$20m, again triggering accusations of nepotism. At the time Telcor told the media that Xinwei had promised to invest US$700m in the first stage of launching operations, rising to US$2bn by 2015.

However, this level of investment has not materialised. Indeed, in 2014, according to TeleSemana, the company considerably reduced its promised year one investment from US$700m to US$300m. When roll-out did start in 2015, it was clear that the scale of deployment was vastly lower than the scale laid out in its original licence conditions. According to Nicaraguan website Confidencial, Xinwei planned to launch mobile telephony and broadband connectivity in seven isolated communities in the North Atlantic Region. It also transpired that Xinwei’s initial rollout has in fact been funded by the World Bank, which has supplied it with US$800,000. The project stands to benefit around 15,000 people in the Region Autonoma del Atlantico Norte (RAAN).

The links to Laureano Ortega were also decried by some commentators when it emerged in in early 2013 that Nicaragua’s National Assembly was planning to resume its discussion of laws governing the installation and location of mobile BTS, which had been pending since 2003. The law, dubbed ‘Article 11’, concerned the proximity of cell sites to heavily populated areas. Eliseo Nunez, deputy leader of the Nicaraguan Liberal Alliance (ALN), commented: “I find it suspicious that you are changing telecommunications laws at the same time as you are introducing a new company that has ties to the current [government].”

Xinwei also received attention in June 2013 when its owner Wang Jing secured the rights to build and operate a US$40bn shipping channel through Nicaragua – with the idea of competing with the Panama Canal. Eyebrows were also raised in October 2013 when Wang Jing was quoted in the South China Morning Post, stating that roll-out would start by mid 2014 – starting with cities with a large population and demand. According to TeleGeography, this urban build strategy was at odds with the conditions attached to Xinwei’s 1785MHz-1805MHz licence. Prior to the concession’s award Orlando Castillo, head of Telcor, said that the decision would be geared towards companies that were prepared to focus on the deployment of rural-focused services.

In mid 2014, Xinwei was awarded six new telecoms concessions by Telcor – local, domestic long-distance (DLD) and international long-distance (ILD) licences valid for twenty years; and data transmission, IPTV and ‘cellular telephony’ concessions, which are valid for ten years apiece. It is unclear how the cellular licence differs from Xinwei’s original licence.

In addition to Xinwei, it originally looked as if Costa Rica-based Grupo Instituto Costarricense de Electricidad (Grupo ICE) might enter the mobile market. In fact, the company had requested bidding documents from Telcor but in the end it announced that it would no compete for a licence. However, in 2014 it did announce plans to offer business services in Nicaragua, using the transmission network belonging to utility company Enatrel.

A Russian backed WiMAX operator was awarded a fixed-wireless telephony licence in September 2009, which was replaced by a data transmission licence in September 2014.

Telcor is the telecoms regulator, and in general its stance towards sharing is positive – with regulatory reform favourable to infrastructure sharing underway (such as simplified permit procedures and stipulations regarding tower registration and construction standards, for example). Moreover the regional association FOPREL has made a number of regulatory recommendations which will further facilitate the activities of towercos.

However, it has not all been plain sailing with Telcor – in 2013 it issued a new decree demanding that all private telecoms companies needed to get government approval for their managers, directors, newsroom chiefs and systems managers, giving the telcos 30 days to comply with the request. However, both the Superior Private Business Council (COSEP) and the Nicaraguan-American Chamber of Commerce (AMCHAM) claimed the decree was in direct violation of the Constitution, the Law of Telecommunications and other national laws and regulations that govern free enterprise. After a month-long standoff, the government and the operators reached a compromise, when Telcor agreed to modify the decree.

There are estimated to be around 900 towers in the Nicaragua market, and about 530 of them are owned by towercos – giving around 60% penetration, the highest level in Central America. SBA is the market leader with around 285 towers. Torrecom has 93 towers and NMS and Continental about 75 each.

Telefónica sold the majority of its Nicaraguan towers to SBA, and Claro has retained approximately 300. To date Xinwei has used 100% co-location in its very limited launch in the North Atlantic Region.

There is a possibility, in theory, that in future Claro might consider rolling its towers into a towerco – like the Telesites venture in Mexico – but no indication of this is on the immediate horizon.

4G testing has started in Nicaragua which should mean more BTS projects for towercos as MNOs seek to ensure there is adequate capacity in urban areas and sufficient coverage in underserved regions.

Nicaragua is a small market but one with good potential for growth – in terms of subscriber numbers as well as thanks to the advent of 4G on the horizon. Politically and economically it is a very different country from ten years ago, and has seen healthy growth and investment in the last few years. The regulatory conditions are broadly favourable to sharing, and look set to improve further.

The fact that the market remains to all intents and purposes a duopoly does limit opportunities to a degree – and whilst Xinwei offers potential on paper, its market entry has been slow and levels of investment lower than hoped. It should also be noted that the market already has four active towercos, meaning there is not much room for additional players. However, there may be opportunities through M&A activities.