Some big firms sit out cell telephone frequency auction

Only two companies presented proposals Tuesday when telecom officials opened a period to receive bids for cell telephone services.

The two were the Mexican firm Claro and the Spanish firm Telefónica. Expected international participants like Millicom, Digicel and Cable & Wireless.

Firms that participated were expected to put up $70 million and expect to invest perhaps as much as a billion dollars in building a cell telephone system.

There were no reports of why some of the big names did not participate, but the problems other foreign investors have had in the country may have been a reason.

Millicom International Cellular S.A. already has had its problems with unexpected barriers to doing business here.

The firm established the first Costa Rican cell telephone service in the mid 1980s. Soon thereafter, the Sala IV constitutional court and then the government decided it was a mistake to give the firm a license and kicked it out of the country while conveniently taking over the system in place.

The firms also may have been watching the travails of Industrias Infinito S.A. as it tries to develop an open pit gold mine in northern Costa Rica. The firm and predecessors have been trying to do that since 1996. Last month a lower court overturned the Sala IV constitutional court and decided that the company had been awarded a concession illegally. The case still is in litigation.

In addition, the country finished second to last among Central American states in an assessment of the ease of
doing business here. The rating was by the World Bank Group – International Finance Corp., which awarded Costa Rica 125th place among nations of the world.

The former government telecom monopoly, Instituto Costarricense de Electricidad, has jealously guarded its mobil service, and the company has been active in the courts to delay or derail the awarding of frequency franchises to private firms. In fact, the company withdrew one court action in order to permit the frequency auction to take place Tuesday.

Most observers figured there was just a matter of time before the Instituto Costarricense de Electricidad was back in court and even perhaps in the Tribunal Contencioso Administrativo that struck down the gold mine Nov. 25.

The Superintendencia de Telecomunicaciones was offering three sets of frequencies that would be suitable for cell telephone service. Under the rules established for the bidding process one firm can only obtain one set of frequencies. The Superintendencia estimated that the country could support four firms, including the Instituto Costarricense de Electricidad.

The Instituto de Electricidad will continue to run the fixed telephone service, and there have been continual issues of connectivity with the firm. Cell telephones, of course, have to be able to reach fixed telephones.

The next step for the Superintendencia is to determine if the two firms meet requirements of experience and financial depth. The firms appear to have easily met the requirements.

Just because the firms submitted a bid does not mean they will agree to install a system. The firms could back out before a concession actually is awarded.

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