Can ICE telecom survive?
Or will telecom powerhouses Telefónica and América Móvil soon wipe out the Costa Rican monopoly? Some experts see ICE telecom losing millions of dollars.From: http://www.ticotimes.net
Mobile voice and data technology packages are telecommunications companies’ most profitable products. It’s no different for the state-run Costa Rican Electricity Institute (ICE), which relies on mobile voice and data to make its profits in that sector. But potential shortcomings and an inability to compete with private competitors could drive ICE’s telecom division out of business in a few short years.
That is the conclusion of a market intelligence study conducted by the firm Pyramid Research for Costa Rica’s Vice Ministry of Telecommunications. The study predicts a 75 percent loss of telecom market shares for ICE in the next four years, meaning that most of its current telecom revenues will be divided between two competitors soon to enter the market: Spain’s Telefónica, known locally as Azules y Platas, and Claro, a subsidiary of the Mexican company América Móvil.
As a result, ICE could lose an estimated $623 million in potential profits by 2015 in a Costa Rican cell phone market that is expected to grow by 6.1 percent over the next four years, well ahead of the 3.7 percent average expected growth for all of Latin America.
América Móvil and Telefónica last January agreed to pay $77 million and $95 million, respectively, to operate cell phone frequencies during the next 15 years in Costa Rica’s recently opened telecom market (TT, Feb. 18).
According to the Pyramid report, ICE’s marketing strategy will likely target high-end customers who use the 3G brand Kolbi, before launching a 4G network around 2015. ICE will also likely focus on serving “post-paid” clients who are billed for use of services. Currently, the Latin America telecom market is trending towards pre-paid services. If that trend continues, most customers will switch to pre-paid lines by 2015.
“At this point, I cannot say what percentage of subscribers we are willing to keep, because that is confidential information that we are not revealing to competitors,” ICE Executive President Eduardo Doryan said. “What I can assure is that we are going to defend our income as much as possible, and we shall prevail as the main telecommunications company in Costa Rica.”
So far, details on how Doryan’s company will remain competitive are less than clear. Instead of talking strategy, Doryan prefers to mention marketing slogans from ICE’s past, when the state monopoly brought electricity to the darkest corners of the country: “Motivated by clients for the good of Costa Rica.”
The Pyramid study also provides some other insights on how the battle for telecom shares will take shape in the next five years. Broadband services will triple and paid television services will increase by 51 percent, resulting in even more pressure on ICE when local cable companies, Amnet and Teletica, enter into the Internet phone services arena.
The Tico Times asked ICE spokeswoman Monserrat Salas if the company’s future projects include investment in Internet television and Internet-based phone services, but Salas did not respond by press time.
The contrast between the study’s conclusions and optimism expressed in statements by ICE representatives is stark. ICE directors promise the company will continue as the leading provider of telecommunications solutions in the country. On the ground, repeated service failures are raising doubts.
The most recent service outage was Feb. 21, when 800,000 ICE customers were left without cell phone service because of a countrywide network failure.
“One reason ICE may become an unsuccessful competitor is that regulatory agencies lack the operative and technical capabilities to spot if private companies are not complying with concession terms or are getting involved in monopoly-like agreements,” said Gilberto Arce, economist and telecommunications columnist.
Arce believes that private competitors have several advantages over ICE. “One [advantage] is that they are multinational corporations, which help them meet marketing costs much better. They also know how to face competition, because they have been in business for more than 20 years, and it provides them with a fine understanding of Latin America economies,” he said.
Electricity: ICE’s Trump Card?
Regardless of how ICE’s telecom saga ends, public officials say that electricity generation and sales will keep the state company alive. But even that argument has some ICE supporters worried.
“If ICE fails to compete in the telecommunications market, that’s the end of it, because electricity and power generation is the kind of business where you have to invest millions of dollars, and profits may take several years to collect,” said a source at ICE who asked to remain anonymous because he is not authorized to speak to the press.
ICE President Doryan disagrees: “We are changing [ICE] into a true service company [that’s] efficient and agile and has excellent customer service. That’s how the best and most successful companies in the world function.”
Costa Rica is the 26th international market that Telefónica will operate in. The company has 280 million users and competes in 14 other Latin American countries, four of them in Central America.
América Móvil, owned by the world’s richest man, Carlos Slim, operates in 18 other countries, has 270 million customers and has generated more than $12 billion in revenue.
ICE says its network currently provides cellular service to an estimated 3 million of Costa Rica’s 4.5 million residents.
Word of the Day
Origin: Latin harena, arena sand, sandy place
First Known Use: 1600
1: an area in a Roman amphitheater for gladiatorial combats
2a: an enclosed area used for public entertainment; b: a building containing an arena
3a :a sphere of interest, activity, or competition <the political arena> ; b: a place or situation for controversy <in the public arena>
Powerhouse: n. a group of people or an organization that has a lot of power
Prevail: v. to gain ascendancy through strength or superiority
Saga: n. a long and complicated series of events
Shortcoming: n. a flaw or defect in something
Stark: adj. very obvious: very plain and easily seen
Subsidiary: n. a company that is owned or controlled by another company
Trend: n. a prevailing tendency or inclination
Love those Phrasal Verbs
Wipe out: to destroy completely; demolish
- The entire city was wiped out.
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