Cablegate: Nicaragua: Telecom License Sends Bad Signal

VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #1034/01 2931904
ZNY CCCCC ZZH
R 201904Z OCT 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 4672
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 0202
RHEFDIA/DIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUMIAAA/CDR USSOUTHCOM MIAMI FL
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L MANAGUA 001034

SENSITIVE
SIPDIS

STATE FOR WHA/CEN, WHA/EPSC AND EEB
STATE PASS USTR
EEB FOR CIP/BA
TREASURY FOR SARA SENICH
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN

E.O. 12958: DECL: 10/20/2019
TAGS: ECON ECPS ETRD PGOV TINT RS NU
SUBJECT: NICARAGUA: TELECOM LICENSE SENDS BAD SIGNAL

REF: A. MANAGUA 562
B. MANAGUA 947
C. MANAGUA 959

Classified By: Ambassador Robert J. Callahan for reasons 1.4 b & d.

SUMMARY
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1. (C) On September 30, the Nicaraguan Telecommunications and
Postal Services Institute (TELCOR) awarded a license allowing
a Russian-Nicaraguan joint venture, Yota de Nicaragua (Yota),
to offer telephone and internet services via wireless
technology. Local reaction to the licensing agreement has
been highly critical and well-publicized in the Nicaraguan
media, amid claims of favoritism and a lack of transparency.
The local partners have close ties to the ruling Sandinista
National Liberation Front (FSLN) party. The involvement of a
Russian firm reflects Ortega's desire to strengthen bilateral
ties and presumably obtain further Russian assistance. The
non-transparent nature of the Yota award only serves to
further damage Nicaragua's already poor investment climate.

Russian Telecom Firm Awarded License
------------------------------------

2. (U) On September 30, TELCOR (the GON,s telecommunications
regulator) awarded a license to provide telephone and
internet services via wireless technology. A request for
proposals appeared on TELCOR's website on July 24 with an
abbreviated bidding window of July 27 to 30. In addition to
Yota, three other companies -- Movistar, Claro and Amnet --
competed for the license despite the tight deadline.

3. (C) The winner, Yota, is a Russian-Nicaraguan joint
venture that partners Russian state-owned Rostekhnologii with
Nicaraguans Jose Mojica Mejia and Jose Maria Enriquez
Moncada. According to press reports, Mejia is an associate
of President Daniel Ortega and First Lady Rosario Murillo,
while Moncada maintains close ties to Ortega,s chief
economic advisor, Bayardo Arce. Moreover, Mejia's ex-wife is
on staff at TELCOR as an advisor to President Orlando
Castillo.

4. (U) Yota claims it will offer the Nicaraguan market
fourth generation (4G) wireless technology, which allows
faster rates of data transmission compared to existing 3G
technologies. On October 5, Petteri Saarinen of
telecommunications company Ericsson AB told econoff that 4G
technology would require repeater station equipment to be
installed on existing or new telecommunication towers to
transmit wireless signals to Yota modems, making it
essentially a fixed line. Petteri suggested that the
licensed frequency (2500-2690 MHZ) would be practical only
for service in Managua where fixed line density is already
high. At present, Nicaragua's wireless sector is dominated
by a duopoly )- Claro, part of the Mexican tycoon Carlos
Slim's America Movil, and Telefonica de Espana's Movistar,
both of which have grown quickly in recent years with the
expansion of rural wireless service.

Local Reaction Critical
-----------------------

5. (C) Industry experts characterized the three-day bidding
period as highly unusual. Mario Gonzalez, a former TELCOR
Director, told econoff on October 5 that the process by which
TELCOR selected Yota for the new license lacked transparency.
Gonzalez cited Nicaraguan procurement and licensing norms,
which dictate that bidders' technical and cost proposals
publicly be compared. In reality, according to Gonzalez,
Yota's proposal was the only bid opened, and subsequently
selected, without review. Roger Arteaga, President of the
American Chamber of Commerce of Nicaragua, lodged similar
complaints. In addition, Gonzalez opined that given the lack
of transparency in the selection of Yota, it was likely that
the GON would continue to offer preferential treatment to the
company within the telecommunications market. He suggested
that the GON could compel competing companies to allow Yota
to place its repeater station equipment on existing towers
throughout the country.

6. (U) Both major daily newspapers have run front-page,
above-the-fold articles on the Yota licensing issue over the
last three weeks. La Prensa, the leading center-right daily,
published an article on October 6 citing an anonymous GON
source who stated that the Yota license opens the door for
the company to provide other telecommunications services as
well. The source suggested that TELCOR will grant Yota
additional lower frequencies without competition. With
additional frequencies Yota will then be able to tap into the
lucrative cellular, internet, and television markets.

Comment
-------

7. (C) Unfortunately, Nicaragua's telecom sector lacks a
regulatory environment that would truly foster a free and
competitive market (Ref A). The recent cancellation of the
Amayo wind generation permit without a clear explanation (Ref
B) and now the nontransparent awarding of a
telecommunications license to Yota demonstrate that doing
business in Nicaragua is increasingly contingent upon close
ties to President Ortega and First Lady Rosario Murillo. The
fact that Yota is a Russian company also serves Ortega's
geopolitical aspirations to recultivate close ties with
Moscow. However, Yota appears to be a legitimate provider of
4G wireless technology, and its presence in Nicaragua could
conceivably lead to increased consumer choice apart from the
existing telecommunications duopoly of Claro and Movistar.
CALLAHAN

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