Joining the dots

Telecommunications investment in Central America provides a rare opportunity for the region.

Luxembourg-based Millicom, a Latin America focused telecoms group is planning to invest USD 3 billion on expanding mobile and broadband networks across the region over the next three years. What’s particularly interesting about the announcement is the group’s focus on improving communications infrastructure in Central America – a region of smaller economies and populations often overlooked by the telecommunications sector’s major investors.

A telecommunications consultant based in Central America said, “An investment of this size is critical to alleviating the region’s broadband infrastructure deficits. Whilst connectivity has improved, it lags far behind the rest of the region. Poor and inconsistent communication networks exert profound effects across the public and private sectors.”

“An investment of this size is critical to alleviating the region’s broadband infrastructure deficits.”

Telecommunications consultant, Central America

The region’s communications network is sparse, and the penetration of fixed broadband is limited and mostly concentrated in urban centres, exacerbating the region’s endemic digital divide. In comparison to the rest of Latin America, the density of mobile phone base stations per square km is lower.

The presence of backbone fibre networks – broadband nerve centres – that offer national connectivity is also scarce across Central America and can act as a connectivity bottleneck. Good news then that Millicom is to focus on extending its fibre network throughout the region and is currently developing a 4G network in El Salvador.

Millicom is already one of the biggest foreign investors in Guatemala, Honduras and El Salvador. The company has spent almost USD 5 billion on acquisitions since 2019 to become the leading mobile company across Central America. In November of last year, the company spent USD 2.2bn to buy out its joint venture partner in Guatemala and take full control of its Tigo-branded mobile operations – the largest investment of its size in the country.

Better telecommunications infrastructure will also pave the way for the much-needed modernisation of ports and airports – logistics infrastructure will thus improve significantly and new jobs will be created, importantly in more specialised roles including engineers and logistical specialists.

A Mexican telecommunications executive said, “There are few options for entrepreneurs in the region but better connectivity will improve the situation. Central America was the base for large companies such as Mexico’s Cinepolis or the bakery BIMBO – both have complained about lacklustre internet connectivity.”

“There are few options for entrepreneurs in the region but better connectivity will improve the situation.”

Telecommunications executive, Mexico

Central American economies are growing faster than the Latin American average. Record flows of dollar remittances since 2020 have helped to keep currencies stable. Perhaps not surprising then that Millicom is undertaking such significant capital expenditure. Such risks are buoyed by economic stability in administrations that have prioritised internet connectivity – a willingness to reduce user costs would make the deal even sweeter.

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