Dominican Republic telecoms market

12 March 2014 | Ian Chard

The Dominican Republic occupies the eastern two-thirds of the island of Hispaniola in the Greater Antilles. It lies between the Caribbean Sea to the south and the Atlantic Ocean to the north.

Over the past decade, it has been one of the fastest-growing economies in the Caribbean and Latin America region, adopting policies of greater openness to international trade and investment as part of its quest for economic and social progress. This includes the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), which came into force in early 2007.

These policies have ensured foreign direct investment (FDI) plays a prominent role in the Dominican Republic’s economic development. FDI inflows hit $3.6 billion in 2012 (UNCTAD), driven primarily by renewed interest in sectors such as mining, tourism and telecoms.

According to telecoms market research firm TeleGeography, the Dominican Republic possesses a telecoms infrastructure befitting a far bigger, wealthier and more-populous nation. It has a well-developed network covering more than 95% of the country, four submarine cables (Antillas 1, ARCOS-1, FibraLink, and East-West), and four earth stations connecting with the Intelsat satellite constellation. The new América Móvil 1 (AMX-1 System) cable should be landing in Puerto Plata, although the Seahorse-1 concept has fallen by the wayside.

Former monopoly operator Claro, which is part of América Móvil’s Codetel, is the dominant provider of local, domestic and international long-distance services, as well as internet access and mobile telephony. Tricom is the nearest challenger, and operates a more limited wireless in the local loop (WiLL), copper and cable infrastructure. It also owns the country’s largest cableco, TCN Dominicana (TeleCable).

Other operators of note are US-owned cellular operator Trilogy Dominicana (Viva), which offers broadband services in the capital over a private fibre-optic network, and WiMAX operator Wind Telecom, which provides telephony services alongside its wireless broadband products.

The cost of telecoms services – due to high taxes for end-users and operators alike – have led to a disparity in levels of access between rich and poor, and the government prioritised provision of communications access in poor localities and rural areas in its 2012-2013 Biennial Plan. This has ensured strong growth in investment in emerging services, such as wireless broadband.

Analysts at BuddeComm report that the national regulator, Indotel, has made progress in projecting voice and broadband services to rural parts of the country. It has secured funding from the World Bank to support the roll-out of a national fibre-optic network and last year allocated digital dividend spectrum (700MHz band) for mobile services. However, Indotel’s proposals for a zero tax rate on internet services to promote usage have stalled, due to the question of what would not be taxed when considering broadband services taken as part of a bundled offering.

Nevertheless, internet use has grown rapidly, while the launch of an internet exchange earlier this year means that local ISPs can terminate traffic on other domestic networks, without having to use expensive international routes.

In November 2013, Luxembourg-based private equity firm Altice Group agreed not one, but two takeover deals in the Dominican Republic, reaching an agreement to acquire Orange Dominicana for approximately $1.4 billion, while also taking an 88% controlling stake in Tricom (Hispaniola Telecom retains the remainder). Altice is also finalising an agreement with Grupo León Jimenes to join as local partners.

“The Dominican Republic is a fairly solid market, so the divestment by Orange is more reflective of its strategy to focus on core markets rather than anything else,” says Tom Leins, research analyst at TeleGeography.

“Although the combination of Orange Dominicana and Tricom’s mobile units still leaves it trailing in Claro’s wake, both companies have already launched separate LTE networks, highlighting a likely future focus, and an area in which it is well-placed to take the fight to Claro. In addition, broadband penetration remains very low in the Dominican Republic (at 18.7% of users) and Altice will be confident that it can gain traction by leveraging Tricom’s various internet platforms,” Leins suggests.