Strengthening the Dominican Republic’s ties with Central America was one of the foreign policy goals of the past administration of Leonel Fernández: a goal maintained by President Hipólito Mejía. But perhaps no Dominicans have courted Central America as directly as Tricom, the telecommunications company.
By the end of the year Tricom hopes to roll out its wireless operations in Panama, having overcome stiff opposition from incumbent operators and obtained regulatory approval. The Panama launch presages what Tricom hopes will be its construction of a cross-border Central American mobile telephony network using Motorola’s iDEN technology, which allows telephone interconnections, two-way radio communication, paging and data transmission.
Tricom, a majority of whose voting shares are controlled by the privately held Dominican GFN group, has emerged as one of the Dominican Republic’s most high profile companies, attracting capital from the likes of GE Asset Management and Mexican billionaire Carlos Slim. Motorola holds a 26.5% stake in Tricom also.
Tricom remains the only Dominican company with a stock market listing in New York, having issued a bond in 1997 and ADSs after an IPO in 1998.
Central America can hardly be considered a telecommunications hotbed, although levels of sophistication and competition vary considerably throughout the region. Nevertheless, Tricom – which has invested more than $40 million in the region to date, buying operating licenses in Guatemala and El Salvador as well as in Panama – believes the market as a whole is an attractive one, with low levels of wireless penetration and a need for easier cross-border mobile telephone roaming.
“It is the project that makes sense for the region,” says a Tricom spokesman. The company is negotiating also with potential local partners in Costa Rica and Honduras. It is already one of the largest players in the Dominican Republic’s own competitive telecommunications sector, which has had the highest growth rates of any part of the economy over the last five years – expanding by an annual average of more than 17% since 1996.
Over the same period the total number of telephone lines in the country more than doubled. The growth has been even more rapid in the mobile telephone market, where Tricom competes with long-time incumbent Codetel, a Verizon subsidiary, and with two newcomers: France Telecom’s Orange, and Centennial. Margins are tight and prices are falling but volume growth is strong. Mobile user numbers rose from 140,000 in 1997 to more than 705,000 at the end of last year, according to Indotel, the regulator.
But with still barely more than 10 phone lines for every 100 residents, the Dominican Republic still lags even by Latin American levels, according to a study by Indotel and the law firm Pellerano&Herrera.
Tricom now claims a 40% share of the Dominican mobile market and 17% of local access lines, which has helped to cut the company’s previous reliance on its international earnings: as a share of total revenues, international earnings have fallen from 53% of the total in 1996 to 38% today.
Tricom claims a 40% market share in the competitive long-distance traffic from the US, where it has tried to expand through pre-paid calling card sales aimed at specific ethnic groups. Call traffic from the US into the Dominican Republic is almost four times greater than traffic in the other direction.
Now Tricom is involved in two separate funding initiatives. First there is the expected launch of a $200 million medium-term note program (see box on page 29). There is also a rights issue of up to $100 million, giving all other shareholders the chance to buy more equity on the same basis as GFN, which has already committed $40 million to the issue.