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The telecommunications sector grew 15.8% during the last two years and has not stopped its pace. It is one of the most dynamic areas of the country that is kept in expansion due to the low price of the service, the competition and the massive use. For example, there are 53.6 cellular phones by every 100 Panamanians. Telecommunications grew by 17.1 percent, due to a significant increase in prepaid cellular mobile communications and contracts, subscribers to Internet and international long distance calls in the first quarter of 2008. According to data provided by the Comptroller’s General Office, the telecommunications sector generates a total of U.S. $427.6 million to the gross internal product. Panama is at the vanguard in Latin America in matters regarding telecommunications. The country is well equipped with an infrastructure made up of technical state of the art installations, being one of the first to introduce the G technology as well as launching the Blackberry and iPhone devices. These new advances create adequate conditions for the establishment of new multinational headquarters shopping around to invest in the sector. The National Assembly passed in August of 2008 Law 59, which promotes the Universal Service and Access to Information and Telecommunications Technologies for development. Focus is on promoting internet coverage of 100% throughout the country. It is estimated that this target will be achieved in 2012. The new legislation also requires companies in this sector to invest 1% of their annual gross income to establish infrastructure and services connecting rural areas. For example, implementation of telecommunication network of telecommunications services to marginal communities and investment in the info plaza system. Approximately a total amount of U.S. $ 8,000,000 will be invested this year, according to government estimates. Interconnection of the whole country through the Internet is developing by means of wireless technologies. It is a highly efficient model, especially considering costs of implementing Wifi and Wimax. An estimated 26% of the population has internet. According to the figures used by the Authority of Public Services (ASEP) with an approximate population of 3.3 million, the Republic of Panama has only 116,000 subscribers online. This is one of the most interesting markets for provision of services. In 2008, the University of Navarra in Spain, published the results of a study conducted in Latin America on the use Internet and concluded that 95% of children between 6 and 18 years use it and 83% have cell phones . The most sought after contents are: sports (33%), comedy (36%), games (50%) and music (78%). The Panamanian market is not far from this reality, with an increasingly growing Internet access in schools, internet cafes, and homes connections which are often combined with telephone and cable TV. Another aspect been contemplated by the government of Panama, in coordination with the Authority of Public Services (ASEP) is the modernization of communications by introduction of cables beneath the surface (creating an underground network) that currently are distributed by areal power lines. The first to propose a plan is Union Fenosa, attempting to initiate changes in several areas including Via España, Federico Boyd Avenue, 50th Street (Calle 50) and Via Brazil. The cost could amount 16,480,000, during the four years until termination of works, which would positively impact both visual and service quality. Panama's population is estimated at 3.4 million. Approximately 15% of Panamanian households have a telephone line. Local calls represent 73% of total communications, while the mobile communications market is growing at a considerable fast pace with more than 2,300,000 customers. PANAMA COMPETITIVE ADVANTAGE
SECURITY
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MARKET OVERVIEW Panama’s population is estimated at 3.4 million. Approximately 15% of Panamanian households have a telephone line. Local calls represent 73 % of total traffic, and the mobile market is growing very fast with more than 2,300,000 customers. The telecommunications sectors have great potential to contribute to the economic development of Panama via direct investment in technology and infrastructure. Other sectors with growth potential are depending in technology as tourism and transportation, through the multi-modal transport infrastructure including the Panama Canal, ports, highways, railroad and telecommunication. The telecommunication market was open since January 2003, and a legion of companies with and without experience, received a license from the Ente Regulador de los Servicios Publicos, the local FCC that has granted more than 1,422 licenses to 182 operators. The primary objective for most of the new players is international long distance and the use of services such as VOIP (voice over Internet) and VON (voice over the net). During 2003, the price of international call gets down to less US$0.10 a minute and will go down to 0.05 when new operators start operations, especially using VOIP. According to the largest local telephone company, the amount of traffic generated by VON or VOIP represents a market of approximately US$30 million. Cable & Wireless, the main telephone company of Panama, has in the market some additional 500 thousand cellular telephone numbers, a figure that is equal to one fourth of the users that exist in all the country. In 2005, Telefónica acquired the operation rights of BellSouth in Latin America in a transaction which surpassed $600 million. Today Telefonica Movistar has more than 1,000,000 cellular phone users. By the end of 2008, Digicel Caribbean from Jamaica began operations, positioning itself in the market of cellular communications by opening 300 stores throughout the country, offering their products and services and winning the bidding to acquire the concession to operate one of the two cell phone frequencies offered by the Panamanian Government throughout the country. The other companies that participating in 2007 at the bidding the consortiums Orange from France, Megafon from Russia, Milicom International Cellular (MIC) from Luxembourg, Mexico America Movil (AMX), as well as the Panamanian companies Telecarrier and Cable Onda. The concession is of type A, consisting of services that due to technical and economic considerations are given within a regime of temporary exclusivity or of competitiveness. If you are interested in more information to participate in this kind of bid, please be sure to contact the BusinessPanama Group. Regarding cellular telephones, Cable & Wireless, Telefonica Movistar and Digicel are currently the operators. Penetration of telephony service in Panama is of 13%, which is well below the average for Latin American countries, estimated at 17%, according to the U.S. telecommunications consultancy company Pyramid Research. In the Panama market there are 17 companies that have concessions for basic telephone service, provided by the National Authority of Public Services (ASEP), additionally investment for made expansion of the traditional telephone network to other parts of Panama is very small. This is due to little competition from operators in the fixed telephony market and the strong growth of mobile telephony. This is a trend in Latin America. Although there are still countries like Costa Rica that has a 22%, and El Salvador with 15% which are higher than Panama. This phenomenon is influenced by rates charged by operators and per capita income of the population. In Nicaragua, one of the poorest countries in the Region, the fixed telephony penetration is 4%, although the government plans to reach 5% by the year 2012. After the opening of the fixed telephony market in Panama, the number of service lines in the country has increased 70%. The service rates for services like telephony and international long distance calls has dropped 50% and prices are as competitive as in the U.S. and Europe. Now there are 10 companies providing local telephone service, 15 for long distance national calls and 16 for long distance international calls. Cable & Wireless Panama is the dominant operator with 90% of fixed lines in the country. Companies like Telecarrier, Clarocom and Advanced Communication represent a strong competition with cutting edge technology and products to provide fixed telephony services, internet, pay per view TV, or all together. Telecarrier, a 100% Panamanian owned company, currently has about 35 thousand customers. Fixed telephony service is currently offered in Panama by the traditional copper pair and fiber optics system. Concessionaries are investing have access to a more competitive wireless and internet infrastructure. The goal is to provide a full line of different products with a more efficient and strong platform. In recent years, Cable & Wireless has installed over 8581 public and 2720 semi-public telephones throughout the country. CALL CENTERS 21 licenses have been issued for Call Centers since the government of Panama agreed to eliminate a U.S. $ 1 tax on international calls in order to make call centers competitive with those in the rest of the world. The main participants are DELL, Health Link Networks, Language Line, Sitel, Spherion, creating already 5900 jobs. Fiscal advantages that eliminate taxation of international calls, among other tax laws, have allowed their development in the country. This industry employed approximately 14,000 people. Companies like Star Contact Dell and Panama have approximately 2 thousand workers. The activity of call centers is regulated by Law 54 of 2001. One of the greatest tax benefits is that there exists no tax over the calls abroad. Also, according to the law, call centers have the benefits and incentives of Law 25 of 1992 for call centers engaged in international calls only. The most important benefits are:
Law 25 of 1992 and Law 3 of 1997 also grant call centers enjoy certain special incentives in the employment field, making more flexible some of the provisions of the Labor Code:
Foreign companies that invest more than US$250,000 in the establishment of a call center may apply for the permanent resident visa as an investor. Expats hired as key employees, executives, and experts and/or technological of call centers have the right to request a temporary resident visa, which will be valid for the term of his contract. Foreigners that make investments in call centres established or in process of establishment, may request a visa under the condition as resident businessman, which is valid for one year. When obtaining this type of visas, it is included the permit for exit and re-entry, multiple, valid for the term of the visa. These will be extensive in the same conditions to the spouse and dependent children of the main petitioner. ONLINE GAMBLING Panama has passed its fully regulated Internet Gaming laws. This makes it the only regulated jurisdiction in the world issuing licenses now to those operators wishing to stay on the good side of US law. Panama’s laws are of the same high standards as the Isle of Man, large casino-resorts’ place of choice for iGaming. Until now a very few companies have applied for the license, mainly due to the huge paper work and the cost of the license. Costa Rica is still the success story with more 6,000 casinos online and gambling sites. The expectation is of a large exodus of companies from other Central American like countries Costa Rica and several Caribbean islands were the situation is unregulated, unclear and the price of bandwidth is astronomical compare to Panama. It has not been a success yet, Panama must review the business model and the cost of the license in order to actively particípate in this market. MOBILE COMMUNICATIONS Total cellular phone users reached $2,391,896 in 2007 with good chances for continued growth in the future, especially pre-paid services. Approximately 85% of the estimated total market for wireless services (U.S. $ 163 million) comes from Pre-Paid Services. The remaining 15% comes from Post Paid services, oriented primarily to corporate and personal high consumption users. Cable & Wireless, the largest cellular operator, accounts for 65% of the market. The other 35% is controlled by Telefonica Movistar. By 2009, Telefonica Movistar launched the operation of the new 3.5 G network that will facilitate internet browsing through greater speed. Cover the whole metropolitan area, the area of the beaches, Columbus, and David will continue to expand the interior of the Republic. The aim is that the cell phone becomes a virtual office. This type of network is an existing GSM evolution. The cellular market is not only based on usual and common services, but in provision of total innovation. BAC is the first banking institution that ventures into the mobile banking field, a new concept in the world of finance. It has been adapted for usage in coordination with the service offered by mobile companies such as Mas Movil (Cable & Wireless), Movistar and Digicel. The cellular phone has become an important tool for banks, due to its penetration into the population’s preference reaching a 68% in Latin America and 98% in Panama. Activation of this service, which is free, is done through a call in order to register the number. Afterwards the client receives a key to send a message containing the code of transaction to be conducted. It can be used abroad, through roaming. The issue of security is key element to this type of service. VOICE SERVICES Voice Services include local, domestic, international long distance and public pay phones. Since the privatization of the government-owned operator (INTEL), Cable & Wireless has been offering basic services on a five year exclusive concession. This market condition granted by law ended on January 2, 2003, when the market was opened to competition. With 380,224 lines installed (around 12.2 lines for each 100 inhabitants), and 365,000 customers on a digital platform installed by ALCATEL and Ericsson, Panama offers first class service compared to most of the Latin American countries. The total voice market in Panama is estimated at US$424 million. Local services, including domestic long distance, represent about 80% of the total. Clarocom, a co-owned (U.S. and Panamanian capital) company has focused on providing telephony services via VoIP, which the user can use by means of an Internet connection to make calls. This service enables greater convergence in the communications systems, -voice and data-, which are handled under the same environment, and communications between branch offices located in different provinces are not considered as domestic long distance calls. LOCAL SERVICES The Panamanian market has successfully combined services of fixed and mobile telephony. The telephone service-density reaches 90 out of 100 people. After the opening of the fixed telephony market in Panama, the number of service lines in the country has increased 70%. The service rates for services like telephony and international long distance calls has dropped 50% and prices are as competitive as in the U.S. and Europe. Now there are 10 companies providing local telephone service, 15 for long distance national calls and 16 for long distance international calls. Cable & Wireless Panama is the dominant operator with 90% of fixed lines in the country. Companies like Telecarrier, Clarocom and Advanced Communication represent a strong competition with cutting edge technology and products to provide fixed telephony services, internet, pay per view TV, or all together. Since June, 2004 over 21 new operators have applied for Basic Service Concession. Operators such as Cable & Wireless, Telefonica Movistar, Telecarrier, Cable Onda, ClaroCom, One World Communication, Advanced Communications and VOIP are already in operation and their continuous war on prices and rates helps the customers to get a choice by comparing services and costs. Most of those concessions are targeting the most populated areas of the country, mainly in Panama City and Colon, but plans include connecting the interior of the Republic. This situation outside the main cities is due to the fact that it requires a strong investment not only to provide service but also comply with standards set by the local telecommunications authority. The provider holding the best position to this moment is Cable Onda which is already offering cable TV and Internet and has begun offering local, long distance and International telecommunication services. DOMESTIC LONG DISTANCE SERVICES There are many areas of the country that are difficult to access, where none of the current operators are giving the long distance call service. As a result of that, there are business opportunities. The fixed wireless service enables access to remote areas without the need of wiring installations, as long as there is energy. Obviously, it has some limitations. Nevertheless, this kind of services could open the pace for the future, considering it as a high potential sector yet to be developed in the Republic of Panama given the growth of urban areas and new infrastructure projects in the coastal areas of the country. 29 licenses have been issued to operators that are going to provide Domestic Long Distance. Most of the operators currently own network infrastructure being used to transport data and to provide Internet services and last mille with Cable & Wireless, the price for a National long distance call was reduce from US$0.15 to 0,06 by Telecarrier, ClaroCom and Cable Onda. INTERNATIONAL LONG DISTANCE (ILD) After opening of the telecommunications market, long distance calls to the United States cost around 20 times less, among other offers flooding the market in Panama at this moment. Although the country has a population smaller in comparison to other countries in the region, it maintains a rapidly growing sector with a competitive diversification of products, services and prices for domestic and international calls. Executive Decree No. 17 of 20 February 2004, regulates Law 6 of 21 January 2004 that creates a burden ad valorem over the long distance international calls of public use, invoiced in Panama. 58 licenses have been issued to new operators of ILD. This use to be the most profitable market segment, requiring lower infrastructure investment. Most of the new players are relying on third party network infrastructure as Altec Carrier Hotel and Telco Virtual and local loop provider to transport voice traffic. Interconnection agreements, service level agreements and local loop availability are the most important issues being faced by new entrants in this segment, and the dominant operator is still trying very hard to block the entry of new carriers who will be waiting on line for the next two years. On June 16, the Regulatory Authority took a serious look of the situation and organize a public hearing session to find out more information regarding the difficulties to negotiate agreements with Cable & Wireless who was the center of the attack, almost all the companies complained for the delay and the unfair condition of the interconnection practice and a total monopoly of the network and pay phone. PAY PHONES 18 operators have obtained (licenses to offer services representing a $50 million market mostly in the largest cities, leaving the largest part of the country without telecommunication services due to the high cost of installation and operation, Cable & Wireless already asking a fair treatment from the Regulatory Authority for universal access. Fixed phone service operators at the moment are Cable & Wireless covering the entire territory and Telecarrier, especially in specific places like big shopping malls. Prepaid cards from other operators have already been approved, especially for international calls and long distance national calls to the provinces. PRIVATE VOICE CIRCUITS 13 operators have been granted licenses to offer private voice circuits since January 2003. DATA SERVICES At least 47 companies have licenses to offer data transmission services using dedicated access solutions the widespread use of wireless technologies such as Spread Spectrum and LMDS solutions, fiber optic and ADSL targeted to corporate and private users has been evolving since 2002. The main player is Cable & Wireless, Tele Carrier and another incumbent player is Optynex Telecom who uses existing fiber optic cable from UFINET, ACP and Global Crossing. Other smaller players are GBnet, Sky On Line( Diveo & Teleglobe) and Commnet. Data services, account for a market size of US$75 million, with approximately 9500 point-to-point private circuits in operation. INTERNET SERVICES 16 companies are competing to give service to more than 525,230 users, 82,137 in dialup mode, 19,382 in ADSL and 15,201in Cable Modem. Public posts have been installed around the country by a government sponsored institute known as SENACYT. The number of ADSL internet, WIFI and WIMAX connections kept growing with introduction of new prepaid services and connections charged per minute or seconds. Cable & Wireless launched an aggressive campaign to penetrate the Internet market with ADSL technology. The Kilobyte price for dedicated Internet access dropped significantly, as the main providers such as Cable & Wireless, Telecarrier and Cable Onda lowered their rates. The new pricing structure benefited both residential and corporate markets, reaching a level of menos de $39 per month. Internet access, hosting and first tier IP services represented approximated a US$27 million market, showing an increase of 18 % over the prior year. Digicel Panama is focusing on expanding its services to 4G Wimax technology (wireless broadband), which has already been installed in the markets such as the Cayman Islands, Jamaica obtaining a license to Honduras also. INTERNET DATA CENTER AND CARRIER HOTEL Panama is a point of convergence for the Americas Region Caribbean Ring System (ARCOS-1), the MAYA-1 and the PAN-AM submarine cable system, which all together provide connectivity to the United States and the Caribbean, Central and South American region. The isthmus is connected to satellite stations Intelsat (Atlantic Ocean) and the Central American microwave system. Data traffic, especially the Internet, has seen a significant increase for both companies operating the five fiber optic cables that pass through Panama. The country continues to serve as a bridge to Pan-American submarine cables, MAYA 1 and ARCOS-1 (operated by Cable & Wireless), PAC (Pan American Crossing) and SAC (South America Cables), which is operated by Global Crossing. Pan-American and MAYA-1, doubled their use through mid-November 2008, due to various internet projects. 80% of data traffic through the MAYA and the Pan-American come from Internet, while the remaining 20% is from telephony. Global Crossing recorded a significant increase in its use of PAC and SAC cables. Panama has already 3 world class internet data centers, the first one is Altec1, the only neutral organization and the other two are from Cable & Wireless and TeleCarrier; every one provide basically the same quality of services including redundant access to several submarine fiber optic network, security, fire detection and fire suppression system, access control, CCTV, Electrical generator and UPS. collocation space. rack, cabinet and private suite, scalability, reliability and convenience for companies looking to reduce their IT cost in a 24 x 7 secure facilities. Many foreign companies are already taking advantage of Panama completive advantage, including the US dollar economy, access to 5 submarines Fiber Optics Networks, availability of bilingual certified engineers, ecommerce and gaming laws, lower wages and lower operation costs. PANAMA MARKET SIZE BUSINESS OPPORTUNITIES
The telecommunications sector offers excellent growth opportunities for the immediate future with very low investment using the existing infrastructure. THE BEST OPPORTUNITIES ARE: IDC (Internet Data Center) and carrier Hotel, disaster recovery center, Collocation, Hosting, Data transmission and data switching, Internet access, intemet Kiosk, value added mobile services and HUB for International call. Desde hace muchos años, Panamá ha servido como país de tráfico y centro de hospedaje de información con todas las normas de seguridad requeridas. Otra de sus grandes ventajas es que está libre de grandes desastres naturales, como terremotos o huracanes por estar en una zona de convergencia intertropical. Más del 90% del tráfico de voz internacional, además del 90% de los enlaces de datos y el 100% del tráfico de internet de la región, recorren estos cables. The City of Knowledge TecnoPark is the first choice for companies interested in doing business in Panama; the large FT Clayton former US military base has a lot of advantages including a tax free environment. Today several companies are already processing credit card clearing centre, ecommerce, ASP and telecommunications activities. The most growth potential is Voice over IP (VOIP). Recently VOIP has been considered an (almost) legal activity by the telecommunications regulatory office, more than 40 company are doing the paperwork required to get a license paying the 12% value added tax, the market leader is NET2PHONE who have more than 6000 customers and 90% of the Colon Free zone customer who use to be the largest international long distance customer segment In Panama, it is very easy and inexpensive to apply for a license from the Regulatory Entity (Ente Regulador) at this date more than 1,474 licenses as been issued and is no limit of the quantity of new operators. However, the market tends to be highly concentrated, as 8 operators are active controlling 80% of the market and the red tape impose by cable & Wireless cause already several casualties within the new Carriers. The remainder are small companies operating long distance switch, trunking radio services, paging, Internet services, data transmission, fax store & forward, teletex, and many” paper company” without money or real intention to participate actively, are just trying to make money selling the licenses to new investors. Telecom Hub for:
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