Connecting the Northern Triangle 

Will investment bring light to Central America’s broadband dark spot? 

Nowhere else in Latin America is it harder to surf the net than in Central America’s ‘Northern Triangle’, that is El Salvador, Guatemala and Honduras. Millicom (Tigo), a US-based provider of fixed and mobile services in Latin America, is to invest some USD 700 million in upgrading the region’s broadband infrastructure. On the surface, this is welcome news. But, two key questions emerge, a) is it enough? and b) will local operators be hostile? 

A Central America-based Tigo executive explained, “The company is progressing a five-year plan which saw USD 500 million invested in El Salvador from 2019 which focused on implementing LTE 4.5G. This latest tranche of funding is part of that plan.”

“The company is progressing a five-year plan which saw USD 500 million invested in El Salvador from 2019 which focused on implementing LTE 4.5G. This latest tranche of funding is part of that plan.”

Central America-based Tigo executive

Take El Salvador for example, the region’s least developed country when it comes to broadband infrastructure. Tigo was attracted to the country in significant part because San Salvador has focused on establishing a well-defined digital strategy which is appealing to foreign companies wishing to invest significant sums of money.  

Indeed, during the pandemic, El Salvador continued to grant permits to several foreign companies to work on broadband infrastructure which paid off – coverage has expanded to areas where there was previously no internet connection. More rural and isolated areas of the country are now seeing a much higher concentration of users.  

Tigo has recently presented a study to close the digital gap given that during the pandemic, the closures of countries and the accelerated digitisation of the population and companies have generated new needs from remote working and digital working.   

The government’s digital agenda is fairly ambitious, El Salvador has created an ‘innovation secretariat’ which has given away tablets to students and for this reason Tigo and other operators have to create new ‘digital highways’ and expand the existing ones. This is the kind of immediate return on investment that companies like.  

The countries of the Northern Triangle could have recalibrated fiscal policy years ago in order to close the digital divide. Alas, digital literacy and infrastructure policy was short-sighted and plagued by a lack of innovation and ability to attract and retain investment and talent. It could be argued that the social media and tech-loving Nayib Bukele – El Salvador’s president – despite his authoritarian tendencies, is the kind of figure who recognises the need for the region to catch up.  

Ultimately, Central America would benefit from a super fast 5G network but that will take time and money. Indeed, 5G requires high-end phones that few across Latin America have the purchasing power to buy – only Brazil is implementing 5G in the region. For now, LTE4.5G will provide a significant digital boost to the region.  

On the commercial front, “It is known that CLARO acquired 40 MHz in the AWS band (2.1) and that it is making investments to expand its networks, since TIGO and CLARO have close to 80% of the market between them. DIGICEL has been making certain investments but there is no information on the amount committed. Telefónica has lagged behind because the sale process was complicated …,” explains the Tigo executive. 

“It is known that CLARO acquired 40 MHz in the AWS band (2.1) and that it is making investments to expand its networks, since TIGO and CLARO have close to 80% of the market between them.”

Central America-based Tigo executive

New investors will probably have to make significant investments, Tigo will likely find itself spending a lot more than the USD 700 million already committed and on the technological front will have to find a way to acquire radio spectrum in the 2.1 band. The Northern Triangle has a habit of snaring investors for longer than they had originally envisaged, the returns both financial and social can be significant – the risks however from lack of transparency and hostile local partners loom large.  

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