Costa Rica Cell Phone Industry of Interest to Multinationals

 Despite the fact that the Costa Rican Legislative Assembly just approved the bill that sets the stage to open up the telecommunications industry earlier this week, a few multinationals have had their eyes set on the market for several years now. While the country has a relatively small population, Costa Ricans are ranked 3rd in the world for the amount of minutes they talk on their telephones, after Japan and the United States, making them a very desirable market

The companies have been patiently waiting for the Costa Rican government to allow for outside competition to enter into the Costa Rica cellphone and Internet industries, which until now have been dominated by the state-run telecom monopoly ICE (the Costa Rican Institute of Electricity).

ICE, which does not have a great reputation for service, recently flooded the cellphone market offering over 340,000 GSM lines for the first time, in an attempt to remove the appeal of the cellphone industry for foreign companies. However, ICE lacks many of the services that are currently in high demand throughout the rest of Latin America, opening up plenty of room for competing companies.

One of the main niches that foreign companies are looking to fill is prepaid cellphones. This is a very popular, economical service for part-time visitors to a country, as well as parents who want to limit their children’s time spent talking on the phone.

America Movil, a Mexican company, was the first to look into the Costa Rican market when they registered with the Intelectual Property Registry in the country. Telefonica, a Spanish company, followed in their footsteps and registered their brand name in April of 2006 as well. Other companies that have their eyes on the market include AT&T, Digicel and the Chinese telecom company Huawei.

While competition is generally seen as a good thing in world markets, the opponents of the free trade agreement and the newly passed General Law of Telecommunications claim that prices for telephone services will rise, denying service to a large portion of the population. Others are much more optimistic and tired of ICE getting away with mediocre service. They say competition will drive down prices for cellphones. Currently, the cheapest cellphone in Costa Rica will cost you around $70, where as in a country such as Panama where multinationals such as Cable & Wireless and Telefonica (Movistar) reign, you can find a prepaid phone for $20.

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Filed under: Business on February 15th, 2008