Share Square: Guatemala

Guatemala had an estimated population of 16.3mn people and 16.9mn mobile subscriptions at the end of 2015, giving a mobile penetration of 102% - the third lowest level of penetration of the seven countries in Central America (slightly ahead of Honduras at 101%). Guatemala also has the third lowest GDP per capita in Central America at US$7,454. Around 96% of subscribers have a pre-paid account, the highest amongst the Central American countries.

There are four mobile network operators (MNOs) serving the Guatemala market (See figure 1), with one dominant company – Tigo (Millicom) with 8.4mn subscribers – and two other significant players – Claro (América Móvil) with 5.1mn subscribers and Movistar (Telefónica) with 3.1mn. The 4th player Red had fewer than 300,000 subscribers at the end of 2015.

When compared with Costa Rica (160%) and Panama (148%), Guatemala has a relatively low level of mobile penetration for the region (104%), and recent growth has been relatively slow with an average of just under 100,000 of new additions per quarter in 2015. 3G services were first rolled out by Movistar back in May 2005 and it was the sole provider of 3G services in Guatemala until Claro and Tigo enhanced their service offering in 2008. 3G coverage by population increased from 50% in 2008 to 80% by the end of 2010. There were 4mn 3G subscriptions at the end of 2015 (24% of subscriptions).

In 2011, the Guatemalan telecommunications regulator Superintendencia de Telecommunicaciones (SIT) attempted to stimulate the rollout of 4G LTE services and identified seven suitable bands, including 450MHz, 800MHz, 900MHz, 1700MHz-1800MHz, 1700MHz-2100MHz, 1800MHz-1900MHz and 2000MHz. However it took until 2014 for an operator to rollout a 4G service. As was the case with 3G, Movistar was first to reach the market with 4G. In Q4 2014, Movistar announced that it had switched on its 4G service on its 1900MHz LTE network in a number of main cities and tourist sites. Telefónica reported that it had invested US$100mn in the launch. In Q2 2015, Tigo also launched LTE services in major cities and municipalities whilst the two remaining MNOs (Claro and Red) are yet to provide an equivalent service offering, although reports suggest Claro are in the process of rolling-out a 4G service.

According to el Periódico, the head of public policy of the GSMA has identified Guatemala as lagging behind in the provision of spectrum for 4G – with the 700MHz band being used currently for television, for example. In May 2014, the GSMA released findings of a new report, “The AWS Situation in the Americas”, which highlighted the positive economic impact of allocating the AWS spectrum band (1700/2100MHz) to 4G mobile services in the Americas – including countries such as Guatemala where it has yet to be licensed. In May 2015 CentralAmericaData.com reported that SIT has converted two frequencies reserved for the State into regulated frequencies, which will be auctioned – although the legality of doing so has been questioned.

As of the end of 2015, GSMA estimates that there were 154,000 LTE subscribers in Guatemala (<1% of subscriptions), with Tigo leading the way with 90,000 subscribers (58%) followed by Movistar with 64,000 (42%).

Movistar (Telefónica) has invested substantially in its network in recent years. In 2014 Movistar invested US$100mn into its network in order to reach the market first with LTE services using its allocation in the 1900MHz band. In 2014 Movistar also invested US$5.4mn to improve its coverage in key tourist resorts, deploying 3G capable antennas on a number of sites. At Q4 2015 GSMA estimates that Movistar’s 3G network coverage reached 95% of the Guatemalan population.

Tigo (Millicom), the country’s largest mobile operator by subscribers, was the second MNO in Guatemala to offer LTE, however in under a year Tigo has rapidly gained a leading 4G market share. In recent years, Tigo has pursued growth through targeting corporate customers, providing voice telephony, broadband and data transmission services through its new business unit Tigo Business. Following success in other Central American markets, Tigo also recently launched its Tigo Star product bundle in Guatemala which is aimed at the standard consumer and also offers a multi-service package.

The Claro brand was launched in Guatemala in Q3 2006 as a rebranding of the previously privatised state owned operator. Despite the fact that it holds the second largest market share of 30% behind Tigo, Claro is yet to launch an LTE service. According to the operator, it is currently in the process of doing so, however it is unclear which areas will be covered.

Red (Intelfon) is an operator founded with capital from Guatemala, El Salvador and Panama, which uses Motorola iDEN technology.

It is understood that in recent years negotiations have taken place between IBW (a Costa Rican based Pan-Central American WiMAX operator) and operators in Guatemala regarding the introduction of a mobile virtual network operator (MVNO) business model, however there has been no evidence of an agreement to date.

Following the passing of the Ley General de Telecomunicaciones (General Telecommunications Law) by the Guatemalan Congress in 1996, the formerly state owned telecommunications company was privatised opening the way for competition. Although its name and ownership have changed numerous times, the original company is still in operation under the name of Claro.

It is reported that the regulatory framework in Guatemala is accommodating to operators, meaning that the processes for gaining the permits required to build and develop sites is relatively straightforward. Despite this and the desire for increased coverage from consumers, it is reported that greenfield development projects are sometimes met with protests from municipalities who oppose such development – meaning that building in some areas can be difficult and even dangerous.

Minimal state and provincial government investment into fixed line communications infrastructure has led to the country having one of the lowest fixed line tele-densities in the region. Subsequently uptake in the mobile telephony market has benefitted and although government investment has also been scarce in mobile infrastructure, the market has benefitted through investment from the international MNOs that are active in Guatamala.

In an attempt to reclaim inactive mobile phone numbers, the Guatemalan government and regulatory body, Superintendencia de Telecommunicaciones (SIT), introduced a GTQ5 (US$0.64) tax per number on each operator at the end of 2014. This encouraged the MNOs to hand back a total of six million numbers.

There are approximately 3,400 telecommunications towers in Guatemala, the vast majority of which (80%) are owned by the operational MNOs. Tigo, the country’s largest operator by market share, owns the vast majority at c. 2,000, whilst Claro and Movistar account for 500 and 200 towers respectively.

Three Towercos currently occupy the remaining towers. Having entered the market in Q4 2011, SBA Communications now operates around 600 towers across Guatemala, having also established itself in Costa Rica, El Salvador, Nicaragua and Panama.

The second operational towerco in Guatemala is Torrecom which owns and operates 155 towers. Established in 2008, Continental operates in Guatemala with approximately 100 towers. Initially Continental confined its operation to five countries in Central America including Guatemala, however following growth ambitions and a successful loan application for US$120mn in 2012, Continental has expanded its operations into Colombia.

Conclusions

With a population of around 16mn people and mobile penetration only just above 100%, there is considerable room for subscriber growth in the Guatemalan mobile market. 4G services have been launched and consumer appetite is growing, therefore there is likely to be demand for the infrastructure required to support 4G. The number of subscribers per tower (approximately 5,000) is also relatively high, which could drive a demand for new towers. However, protests affecting the safety of employees during site development have caused some difficulties for network expansion, and more spectrum for 4G will need to be made available in the long term.

The degree of market dominance of Tigo is not favourable from a towerco perspective. On the other hand, if Tigo decides to pursue a future strategy which compliments a leaseback agreement then this could pave the way for towercos to realise substantial growth in the Guatemalan market Three towercos currently operate in Guatemala however none has been able to establish a substantial foothold in the market and the three of them account for just over 20% of the country’s infrastructure. There is certainly scope therefore for existing or new towercos to play an increased role.