Panama may find it tough to attract third telco

Panama’s telecom regulator has formally launched the process to licence a new third mobile operator, but given the circumstances of the contest it may not find it easy to attract interested parties.

The Autoridad Nacional de los Servicios Públicos (ASEP) revealed it will open up the prequalification phase of the contest on Thursday with a view to tying it up by mid-March. Presumably then the full licence tender process will follow, although that may well depend on how many companies seek prequalification.

It’s not much of a stretch to suggest that the difficulties experienced – and vocally expressed – by the previous holder of the licence could put off would-be market entrants.

Digicel, a major player in the region, announced plans to pull out of Panama and liquidate its operations there in April last year, citing an uncompetitive market.

The Irish-owned telco group is insistent that authorities made its market position untenable by allowing the merger of two of its four mobile operators: Cable & Wireless and Claro. Liberty Latin America, owner of the Cable & Wireless operation, agreed to acquire America Movil’s Claro Panama in 2021, brokering a US$200 million deal to boost its presence in the market.

The tie-up created a new market leader, ahead of Millicom-owned Tigo, and although there remained three mobile operators serving a country of fewer than 5 million people, Digicel claimed the tie-up made it impossible for small players – like itself, presumably – to compete effectively. Digicel railed hard against the regulatory environment in Panama, hitting out at the high cost of doing business there. It also admitted that it had tried to find a buyer for its Panama operation, but to no avail. Exit stage left.

Against that backdrop, it’s hard to imagine another hopeful operator willing to make the investment needed to establish itself in Panama.

That said, Digicel’s problems in Panama date back for some time, so there could be more than meets to the eye to its issues. When it announced its market withdrawal it noted that it had undertaken a number of strategic initiatives at Digicel Panama over a period of two years. The telco doesn’t provide financial figures, so we can’t dig through those for clues, but it could be that while Digicel was struggling with an unhealthy business, a new player could do things differently.

And similarly, depending on its desire to re-award that licence, the regulator could do things differently too. ASEP might find it needs to offer incentives to a new player, but we will find out that kind of information during the tender process.

For now, the regulator and Digicel seem to be playing nicely together, which should help the licensing process, from a PR perspective at least.

“Digicel will maintain its operations until the entry of the new operator and, in addition, it will accompany the new company in the transition process,” ASEP said, in a Spanish language statement.

It’s a tough call whether being helped by an angry Digicel is actually an incentive to any new licensee though.

Image courtesy of Google Maps

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