Complexity and contradictions of the Guatemalan telecom industry

Towercos are yet to fully penetrate the country… But is worth it (and is it safe)?

Read this article to learn:

  • An overview of Guatemalan telecom sector and its dynamics
  • Troubles for Tigo and the attempted entrance of Digicel
  • The saga of the 2015 telecom tax
  • The tower sector: active players, penetration rates and tower counts
  • The role of Mario López Estrada in Guatemala’s telecom and tower industry

Guatemala is not an easy country to do business in, with its history of contradictions and civil uprisings. And its telecom sector isn’t free from trouble either. In this article, TowerXchange analyse the current status of the telecom industry with a specific look at its sometimes complex dynamics and interactions with politics and social discontent.

The Guatemalan telecom landscape is dominated by three active carriers, Millicom’s Tigo (formerly Comcel) Telefónica’s Movistar and América Móvil’s Claro. There have been various attempts to introduce a fourth player in the country such as Digicel back in 2007 and more recently Intelfon’s Red, which currently has a few hundred thousand subscribers. In a country defined as “complicated” by many commentators, some carriers haven’t been exempt from troubles either.

This past October, the rating of Tigo – Guatemala’s number one carrier – has been put under review for downgrade by Moody’s in light of bribery allegations. According to news outlets, both Tigo and Millicom are under scrutiny for improper payments and Moody’s is following the investigation to estimate the overall risks from a financial and operational perspective.

And the story of Digicel’s attempt to enter the country is simply bizarre. Back in 2007, Digicel acquired Digicel Holdings Limited, a separate entity that had operated in El Salvador and had held an unused mobile license in Guatemala since 2003. Digicel received a full authorisation from the Superintendencia de Telecomunicaciones (SIT), the local regulator, and installed as many as 300 telecom towers across Guatemala. However, eight years have passed and Digicel has since ceased to operate in the country.

To fully understand Guatemala’s complexity, it’s important to remember that the country experienced an extremely violent civil war from 1960 to 1996. Since the end of the war, the country enjoyed democratic elections, experienced a steady economic growth and saw the opening of many commercial sectors, including telecommunications. However, Guatemala’s ongoing struggles with poverty and crime are far from solved.

In fact, over 50% of the population live below the poverty line but at the same time, Guatemala enjoys a comparable GDP per capita in Central America. This extreme unequal wealth distribution makes the Guatemalan economy one of the most complex and heterogeneous of the region.

In the telecom sector, the investment of strong international operators such as Tigo, Movistar and Claro has contributed to extensive network upgrades and infrastructure investments. In fact, all three carriers now offer, or are in the process of launching, 4G services across major metropolitan areas. In the case of Tigo, the company is expecting as many as 700,000 users to move to 4G per year and is investing an estimated US$50mn each year on network upgrades.

However, the lack of strong initiatives from either the government or the regulator has so far prevented rural areas from being fully covered. On the contrary, mobile coverage in areas deemed commercially unviable is still extremely low.

In early 2015, a newly introduced tax on mobile lines resulted in the disconnection of six million dormant lines by the network operators. However, shortly after the introduction of the US$0.65 tax, the Constitutional Court suspended the collection after an appeal submitted by the three carriers along with the Chamber of Industry. To date, the tax hasn’t been reinstated and Guatemalan attorney Annie Dougherty told Prensalibre.com back in February 2015 that “…There is no clarity as to who should pay the tax for call centres or concentrated lines. Also, if the tax was transferred to the user, specifically prepaid services, this would increase the cost of services by over 50%.” Moreover, opponents of this measure commented that the tax represents a form of double taxation as carriers already pay for the administration of lines.

Who owns Guatemala’s towers?

Guatemala-towers

Guatemala’s tower industry

There are over 3,400 telecom towers in Guatemala but the level of towerco penetration is still fairly low; just above 20%. In fact, both Tigo and Claro still own most of their passive infrastructure portfolios and towercos are mostly involved in BTS activities.

SBA Communications, the number one towerco in Central America, holds a portfolio of 600+ towers as a combination of the acquisition of most of Telefónica’s towers, the acquisition of Mobilitie, and organic growth. Torrecom operates over 150 towers and is currently receiving a high volume of orders from the likes of Claro, as recently disclosed by Maria Scotti, its CEO. TowerXchange estimates that Continental Towers owns approximately 100 towers in the country out of its portfolio of ~700 sites in CALA.

Local communities as well as municipalities themselves are crucial stakeholders in the tower industry. In fact, in spite of the efficiency of SIT in granting permits, towercos face problems at a local level where sometimes violent protests have been able to delay projects by weeks or even months.

Security is an aspect that local players take into serious consideration and recent political troubles have contributed to a series of vocal protests. In fact, this past September President Otto Pérez Molina resigned over allegations of fraud and bribery. While Molina was charged and awaits trial in prison, new Presidential elections took place and saw the win of Jimmy Morales who, prior to launching his political career, was a comic actor.

Morales is now tasked with the attempt to improve things for Guatemala, starting with its economy. As explained by the World Bank, Guatemala collects the lowest taxes in the world and spends the least on health, education and infrastructure as a proportion of its economy.

In a recent editorial, the New York Times quoted Mario López Estrada, minority owner of Tigo and the first Forbes billionaire of the country, stating that “businesses should support the social movements that emerge from the nation’s soul.” Mr López Estrada was referring to the recent protests that saw over 10,000 people taking the streets of Guatemala City and were the drivers behind Molina’s resignation.

Citing the New York Times, Mr López Estrada “was half-serious when he joked that Tigo’s drive to switch Guatemalans to smartphones made the street movement possible, and he seemed to think that the new push toward greater accountability would continue.” And TowerXchange can only hope that local communities and municipalities realise how big of a change towercos can bring to the country by improving the level of coverage across the nation and empower the people to drive the change – also – via their smartphones.


The role of Mario López Estrada in Guatemala’s telecom and tower industry

Guatemala’s richest man and former Minister of Communications (1986-91) Mario López Estrada is President of Tigo Guatemala, in which he owns a significant minority stake. Tigo is Guatemala’s leading MNO with 50% market share. Mr López Estrada also owns a significant proportion of the land under Tigo’s towers, making him effectively Guatemala’s largest towerco with around 2,000 towers. However, Tigo Guatemala seems to have a strong preference to rollout their own tower network, seldom co-locating on third party towers and almost never entering into swaps or commercial co-location arrangements to allow other tenants onto their sites. As a result, Guatemala has a significant amount of parallel infrastructure, which cannot help tensions with local communities developing a NIMBY mentality.


 

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