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Opening of Cuba's mobile market has telcos salivating
CubaNews / May 2008

By Larry Luxner

Now that any Cuban who can afford it may sign up for mobile phone service — without resorting to the black market — Cuba’s wireless market is about to explode, and regional operators are taking note.

Etecsa, the state-run phone monopoly, says that since the new rule took effect Apr. 14, 7,400 new mobile accounts have been opened. Previously, handsets were offered only to foreigners and government officials, though many others already had cellphones through contracts signed for them by foreigners.

Etecsa spokesman Maximo Lafuente Vazquez told Juven-tud Rebelde that his government aims to have 1.6 million subscribers within five years — up from the roughly 300,000 cellular lines now in use.

David Hall can hardly wait to get his hands on that market.

“I think there are massive opportunities in Cuba, great pent-up demand, and we can provide fantastic service there. It fits our position in the Caribbean,” said Hall, CEO of Digicel Jamaica Ltd. “All around Cuba — in Jamaica, in the Cayman Islands, in Central America — we already have operations.”

Digicel, which was launched in 2001 by Irish entrepreneur Denis O'Brien, is present in 23 Caribbean markets as well as El Salvador, the South American nation of Suriname and four South Pacific countries: Samoa, Tonga, Vanuatu and Papua New Guinea.

One of the Caribbean’s fastest-growing companies, Digicel now has over six million subscribers, including 2.2 million in Haiti and 1.9 million in Jamaica. Its most profitable market is still Jamaica, which accounted for well over 50% of the company’s $1.5 billion in fiscal 2008 revenues.

Yet Cuba is one big blank spot on Digicel’s coverage map of the Caribbean, and Hall would love to change that.

“We were very interested to hear about the liberalization of the wireless market in Cuba,” Hall told us by phone from Digicel headquarters in Kingston. “If you look at the Jamaican experience, for example, we’ve gone from less than 10% mobile penetration seven years ago to 80% today. That brings great benefits to the people, regardless of whether the government in question is democratic or socialist.”

Digicel, which in 2003 became the first regional company to sign a roaming deal with Etecsa, has a 65% share of the Jamaican wireless market, with rival Cable & Wireless Ltd. commanding most of the remainder.

Yet no one knows if Cuba will be as lucrative as Jamaica, especially since few locals can afford the $120 activation fee, or the $20 a month it’ll cost to have cellphone service.

But this will change too, predicts Los Angeles Times columnist David Lazarus.

“Thanks to its communist government, Cuba has the lowest cellphone use in Latin America. Regional and European telecom companies will be pushing aggressively to fix that, and to be first on the scene with cheap phones and affordable service packages,” he writes.

“It’s only a matter of time before the Cuban government bows to the inevitable and permits its citizens to pay in local currency, and thus follow the example of people throughout the developing world in flushing their hard-earned money down a rathole of text messages and idle chatter.”

Meanwhile, Denver-based US National Telecom says it’s taking steps “to benefit from regime change in Cuba” by beginning interop testing of a voice traffic route to the island. The publicly traded USNT, formerly Yi Wan Group, says demand for voice traffic capacity to Cuba is at an all-time high, especially from prepaid phone card users in Florida and New York.

Millions of minutes of voice traffic are anticipated for these new routes, with the potential to bring in $550,000 in additional annual revenue. Due to the embargo with Cuba, USNT says it plans to legally operate like all other telcos by sending traffic to licensed non-U.S. carriers which in turn have direct connections to Cuba.

“Because of our experience in other Latin American countries, I am confident that the ability to handle voice traffic to Cuba will give us a decided advantage over many other telecom companies,” said US National Telecom’s president, Gregory Giagnocavo.

While execution and cost projections have proven the venture will be profitable, says USNT, the project is now currently pending corporate counsel’s review of current trade laws regarding the U.S. embargo.

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