América Móvil to merge Enitel and Aló PCS

11 Feb 2005

Mexico-based América Móvil is reportedly planning to merge its two Nicaraguan operations, fixed and mobile services provider Enitel (Empresa Nicaragüense de Telecomunicaciones) and mobile operator Aló PCS, in a move that would create a new company with more than 220,000 fixed line and 450,000 mobile customers. The Mexican company is currently awaiting regulatory approval for the move, but according to BNamericas the outcome is anything but a foregone conclusion. América Móvil has fallen foul of the telecoms watchdog Telcor in the past. Most recently in June 2004 its purchase of Enitel was met with a warning from Telcor that it faced the prospect of losing its wireless licences if it did not keep Aló PCS and Enitel’s mobile arm, Enitel Móvil separate. In December 2004 Enitel launched a legal case against Telcor to appeal regulations published to ensure that market liberalisation took place by the end of the year as planned. Enitel threatened to pull out all its investment following Telcor’s publication, which it argued targeted companies wishing to invest in the country. The watchdog was subsequently overruled by the state which opted instead to delay deregulation until April 2005, allowing time for a new anti-monopoly law to be drafted and for the public services regulator Sisep to reorganise itself to assume certain responsibilities for the telecoms market. Nonetheless, Enitel spokesman Luis Perey says that there is nothing legal preventing the merger, but rather it is ‘a question of political will’ over whether common sense prevails at Sisep.

If the merger plan is ratified by Sisep once it takes over some of the functions of Telcor following market liberalisation in April, América Móvil will be better placed to take on regional rival Telefónica Móviles of Spain which has expanded its activities in Latin America in recent years. América Móvil will have control of the local loop, handing it a significant competitive advantage over its Spanish rival in terms of interconnection. At 31 December 2004 Aló PCS and Enitel Móvil claimed around 452,000 mobile subscribers between them, giving them a 62% share of the market, ahead of Telefónica Móviles with an estimated 280,000 users (38%). However, the two regional giants’ presence in Nicaragua will make it tough for any newcomers to gain a foothold from April and elsewhere, critics have expressed concern that the dual regulatory structure of Telcor and Sisep will create confusion – even though some regional neighbours such as Ecuador, Peru and Colombia have two bodies governing their telecoms markets.

In the run-up to market liberalisation Enitel has announced plans to invest USD100 million in adding 130,000 new main lines to expand the provision of basic voice telephony services in the country. As a result the incumbent hopes to renovate 50,000 lines prior to the market opening and aims to boost the number of land lines in Nicaragua to 300,000 by the end of 2005; 60,000 lines will be deployed in the first half of the year and a further 70,000 in 2H. In addition, Enitel plans to extend its public telephone network into all rural communities with populations of more than 1,000 people