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.

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DIGICEL'S PROFILE
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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.

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CHALLENGES
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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