Costa Rica: from 69% to 151% penetration rate in less than four years

A sound regulatory environment, openness to foreign investors and universal access promotion

Read this article to learn:

  • From 69% to 151% penetration rate: keys to the country’s success
  • The General Telecommunications Law, its characteristics and the National Telecommunications Fund
  • A generally satisfied customer base and intrigued foreign investors
  • Movistar and Claro: two international players successfully breaking the telecom monopoly

The Financial Times Intelligence Unit awarded Costa Rica with the Caribbean and Central American Country of the Future 2011/12 for its successful record in attracting foreign direct investment (FDI) into the country, and being the number one destination in the region in terms of FDI project numbers since 2003. Additionally, the country ranked third in LatAm in the Networked Readiness Index (2010-2011) by the World Economic Forum, which measures the propensity for countries to exploit the opportunities offered by information and communications technology (ICT).

A small and yet prosperous country, Costa Rica has placed itself as a key player in the LatAm telecom arena, attracting investments by the likes of América Móvil, Telefónica, American Tower and SBA Communications. Still far from reaching its full potential and affected by a general lack of infrastructure, Costa Rica is being eyed by international companies seizing tax exemptions and benefits offered to foreign investors. Over the next few pages, we offer an insight on the country’s telecom sector and its development from 2010 onwards.

Mobile operators’ market share 2011-2013


The Costa Rican telecom sector opened up in mid 2010 and was the last Central American country to do so when SUTEL, the national telecommunications regulatory body, granted licenses for three frequency groups with concessions for twenty-five years. At the time, two companies placed successful bids and were granted one frequency group each, América Móvil’s Claro for US$ 75 million and Telefónica’s Movistar for US$ 95 million, with a third frequency group left unassigned.

The price paid by Claro and Movistar for their licenses aligned with the average of other regional auctions such as those in Panama and Honduras, however other regional players including Digicel and Millicom were reportedly considering bidding but eventually didn’t. It’s been speculated by news sources that the presence of a state-owned incumbent, Kölbi, might have discouraged players from bidding, along with delays in the auction process.

Once ready to open up to international carriers, the government issued the General Telecommunications Law which established rules with regards to permitting, competition and universal access. As part of this legislative effort, the government created the National Telecommunications Fund (FONATEL) to support licensed players in their plans to extend coverage and capacity in rural areas. In recent news, it’s been reported that US$14mn were currently being utilised from the Fund to provide services to least connected areas in the north of the country including villages in the San Carlos, Los Chiles, Guatuso and Upala municipalities.

This new set of rules and regulations didn’t affect the openness of the market to foreign players and investors. In fact, the telecom sector doesn’t present particular limitations in terms of foreign ownership, allowing international players to invest and operate in the country.

Thanks to its relatively modern regulatory environment and adaptability to international investments, the Costa Rican telecom sector has been thriving over the past three years and moved from a monopoly to a competitive market filled with opportunities and potential. At the conclusion of the monopoly phase, Costa Rica’s average penetration rate was just above 69% and less than four years later it’s now among the highest in the region at over 150%. Another clear sign of the positive evolution of the market is the overall mobile user satisfaction in the country, ranging between 71 and 82% as recently gathered by SUTEL in a national survey. These levels are comparable to UK’s 75% rate reported in a 2013 Ofcom’s satisfaction survey among mobile users.

In a continuous effort to improve QoS, Claro and Movistar recently launched their 4G networks and BMI has forecast that 3G and 4G connections will account for almost 62% by the end of 2018. The companies’ efforts to upgrade their services have so far paid off. In fact, as published in a recent official report by SUTEL on the status of the telecom industry for the period 2010-2013, 36% of all new subscriptions registered in 2013 were Claro’s and Movistar’s.

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