DIGICEL GROUP TO CONFUSE SALVADORAN CELL PHONE USERS WITH

UNCLAS SAN SALVADOR 002472 SIPDIS SIPDIS C O R R E C T E D COPY MRN 02472 VICE 02416 PASS TO EB/CIP/BA Nicolas Fetchko E.O. 12958: N/A TAGS: ECON EINV ECPS ES SUBJECT: DIGICEL GROUP TO CONFUSE SALVADORAN CELL PHONE USERS WITH PURCHASE OF DIGICEL HOLDINGS LIMITED ¶1. Digicel Group, a telecommunications operator in the Caribbean, announced that it has entered into an agreement to acquire Digicel Holdings Limited (Digicel Holdings),an entirely separate company that operates a GSM mobile telecommunications business in El Salvador by the same name, Digicel. Digicel Holdings also has a mobile telecommunications license in Guatemala and currently employees 160 people in its Salvadoran subsidiary. The terms of the deal have not been released. ¶2. The Digicel Holdings acquisition represents a significant milestone for Digicel, marking the company's first entry into the Central American mobile telecommunications market. The acquisition will expand the company's existing Pan Caribbean GSM network, and increase its coverage to a population of more than 22 million people. The strategy is a significant step toward the roll-out of a seamless regional telecommunications network. -------------- DIGICEL'S PROFILE -------------- ¶3. Since its launch in 2001, Digicel has become the fastest-growing wireless telecommunications operator in the Caribbean. It is the largest GSM operator in the region, and has invested U.S. $1.2 billion in its networks. Digicel is incorporated in Bermuda and has operations in twenty markets, including Anguilla, Antigua & Barbuda, Aruba, Barbados, Bermuda, Bonaire, Curacao, The Cayman Islands, Dominica, French Guiana, Grenada, Guadeloupe, Haiti, Jamaica, Martinique, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad & Tobago & Turks & Caicos. Shareholders include U.S. citizens, Venezuelans, Europeans and Salvadorans. -------------- CHALLENGES -------------- ¶4. Currently Digicel Holdings has less than 9% market share in El Salvador, compared to Telefonica with 35.25%, Telemovil with 27.71%, and Telecom (America Movil) with 28.04%, in a market of 2.5 million customers. The Telecommunications regulator (SIGET),has estimated the market penetration at 35%. Currently Digicel Holdings only provides pre paid and contract mobile telephone services, covering 89 of Salvadoran territory. (The three main competitors have 100 national coverage). In order to reach 100 national coverage, Digicel is contemplating an estimated $11 million investment to install 115 transmission towers, doubling their current number. In comparison, Telecom has 300 towers, Telemovil 210 and Telefonica ¶155. ¶5. Comment: In order for Digicel to increase its market share the company will have to invest more in GSM technology, provide wider coverage and provide added value services, such as wireless internet access. While there is an opportunity for growth within the market, Digicel will need to invest to capture more market share from its rivals. End Comment. Barclay