Leapfrogging Past Long Lines

Cell-phone use in Nicaragua, as in many other Latin nations, already exceeds that of fixed lines

The pace of life is pretty slow in Matagalpa, a

Nicaraguan city set among rolling hills and farmland. Out of a population of 79,000, less than 6,500 of households have phones. But something happened last December to shake sleepy Matagalpa awake. Mobile-telephone service arrived. Lester Rivas is already hooked. Although he earns just $200 a month working at a local electronics store, the 25-year-old happily forked over $289 for his Sony Ericsson T300 color-screen handset. And he spends $48 a month on prepaid phone cards. "People here are very proud. They all want to buy the fancy models, and they don't worry too much about the monthly expense," Rivas says.


Thanks to enthusiastic converts such as Rivas, Nicaragua is one of a growing list of countries leapfrogging directly to wireless telecommunications. This nation, one of the poorest in Latin America, with annual per capita income of $370, has just 180,000 fixed lines for 5.5 million inhabitants. The cost of installing a new line is around $150, and the waiting list in certain parts of the country is a year long.

No wonder that some 400,000 Nicaraguans have signed up for cellular service since the first wireless license was issued in 1997. Atlanta-based BellSouth Corp. (BLS ) had the market to itself until December, 2002, when two other operators joined the fray. They are Enitel, controlled by Sweden's Swedtel and a Honduran partner, and PCS Digital, a unit of Mexico's America Móvil (AMX ).

The new competition has forced BellSouth to slash its per-minute rates by as much as 38%. The carrier is also marketing refurbished mobile phones for as little as $9.95. "From the consumer's point of view, it's certainly good news because it makes the service more affordable," says Dennis Burke, Latin American telecom analyst at Pyramid Research in Cambridge, Mass. Experts estimate that the number of mobile subscribers in Nicaragua will grow by 9% annually through 2008, compared with 4% a year for fixed-line service.


Wireless has already bypassed fixed-line voice service in all but four Latin American countries. Around 46% of the region's households have no fixed-line service -- either because they can't afford the installation fees or because they live in rural areas. Pyramid estimates that revenues from those moving directly to mobile could reach $2.3 billion in the next five years. That figure understates the economic and social impact of this phenomenon. Mobile phone-toting plumbers and taxi drivers will be able to boost their incomes by having a number where customers can reach them. And the millions of Latin Americans who live in the U.S. will be more easily able to communicate with their relatives at home, rather than scheduling weekly calls to public phone booths.

Wireless operators believe that mobile-phone service will soon be viewed not as a luxury but as an indispensable tool for upward mobility by most Latin Americans. "It's an aspirational thing," says Ralph De la Vega, president of BellSouth's Latin America operations. The world's mobile operators and equipment makers are aspiring to win a chunk of the business.

By Geri Smith in Matagalpa, Nicaragua

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