BUSINESS OPPORTUNITIES WITHINTHE IT AND TELECOMMUNICATION

INDUSTRY

NICARAgUA

2

Business Opportunity Study

within the IT and

Telecommunication Industry

in Nicaragua

A sector study prepared for Danida

by Håndværksrådet (The Danish Federation of

Small and Medium-Sized Enterprises)

in collaboration with

Riccardo Castillo Arguello, Nicaragua

June 2009

3

© Ministry of Foreign Affairs of Denmark

Danida

June 2009

PublisherMinistry of Foreign Affairs of Denmark

Asiatisk Plads 2

DK-1448 Copenhagen K

Phone: +45 33 92 00 00

B2B service line: +45 33 92 00 55

Internet: www.b2bprogramme.com

www.b2bprogram.dk

ProductionThe Danish Federation of Small and Medium-Sized Enterprises (DFSME)

Islands Brygge 26

DK-2300 Copenhagen S

Phone: +45 33 93 20 00

Internet: www.hvr.dk

and

Riccardo Castillo Arguello

Title: MBA, journalist, strategic communications consultant

Email: rcastilloarguello@gmail.com

Phone: +505 8878 0220

CoverphotoKristian granquist

The report can be downloaded from:

www.b2bprogramme.com

ISBN 978-87-7087-195-2

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EXECUTIVE SUMMARY

IntroductionNicaragua’s telecommunications have evolved dramatically in the last two years from being one of the least developed in the Central

American and Caribbean region to one of the most modern in Latin America.

In December of 2008, the country’s former State telecom monopoly Empresa Nicaraguenses de Telelcomunicaciones (ENITEL), an

America Movil s subsidiary, completed, at an approximate cost of U$300 million, a three year-long upgrade of the national backbone

with nearly 4000 kilometers of fiber optics reaching remote and scarcely populated villages

New network capabilities have allowed a fast introduction of cutting edge applications such as collaborative computing for multination-

als, virtual production and design, and media convergence services like Triple Play, IPTV, and cloud computing.

Such a modern telecommunications system with plenty of redundant bandwidth and a competitive labour force costs are attracting

global enterprise organizations seeking to lower operational costs and optimize production performance by outsourcing and partnering

with companies in Nicaragua.

Labour forceNicaragua has ranked as one of the top countries in Central America with the greatest labour market stability. That position stems from

low levels of absenteeism and rotation reported by different companies surveyed locally by The Economist Intelligence Unit in its more

recent Labour Market Risk Index.

Recent studies suggest that there is an abundant pool of young, skilled underemployed professionals. Current market conditions and

the development level in Nicaragua make it impossible for either the public sector, or universities and private companies to absorb it.

However, this is also an opportunity for ICT companies. Interviews conducted with CEOs of various BPOs and Contact Centres and IT

and telecoms companies confirm that finding and hiring skilled labour is not an obstacle to their opening of operations in Nicaragua.

English is widely spoken in Nicaragua among its largely young labour force. Most of them have lived in the U.S. and are now returning.

government databases have registered about 10,000 English speaking Nicaraguans. Less than a fifth of them are currently employed

in call centres. Moreover, the experience of companies working via onsite/off-site collaboration show an almost flawless integration of

local labour force into international collaborative teams designing or developing specific products.

InfrastructureThe new network technology that makes up a nationwide IP network with an expansion capacity of over 300 gB service is based on

Cisco’s IP Centrex system integrating Internet Protocol/Multiprotocol Label Switching (IP/MPLS). By now ENITEL has deployed a 10 gB

long haul and metropolitan IP networks based on optical and Metro Ethernet technologies.

Also in 2008, the ICT sector companies introduced 3g wireless capabilities on a broadband multi-media mobile telecommunications

standard (UMTS/HSDPA) platform.

ENITEL will introduce before the end of 2009, its Next generation Network (NgN) platform to provide fixed line voice, data, and Internet

services to Small and Medium Enterprises (SMEs) over its NgN IP platform.

In 2005, Nicaragua connected its national network directly to an international fibre optics system, the ARCOS1, which lands at two

points in the Nicaraguan Caribbean Coast. From there, it interconnects with fibre networks from local and international service provid-

ers. Previously, Nicaragua connected only through the MAYA1 ring, in the Costa Rican Caribbean. ARCOS1, and the secondary MAYA1

ring provide Nicaragua with a highly reliable and robust connection.

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There are several backhauld providers, from the former monopoly ENITEL to Nicaragua s energy carrier. The bandwidth available for

most of these routes varies between SMT-1 and SMT-4. Nicaragua is also the only country in Central America to have a satellite gateway.

Provided by globalstar, the gateway allows foreign companies to build virtual private data networks using globalstar’s gateway brand.

The satellite gateway has users in all the subregion. The gateway provides not only voice, but also data, internet, and gPS.

Market opportunitiesThe business portfolio of ITC companies in Nicaragua is comprised by the private sector (60-80%) and (20-40%) the government. Last

year, the local IT firms serviced only 25% of government contracts while 75% remainder went to foreign companies. The ICT sector,

according to ProNicaragua estimates based on Central Bank yearly figures, has grown annually for four years at 17%. In 2005, sales

revenues totaled US$12.5 million, while in 2008 totaled US$33 million. Of that, $15 million came from BPOs and Contact Centers.

This report identified opportunities for companies interested in developing more specialized applications for Business Processing

Operations, BPOs, and Contact Centers. Many of the BPOs and contact centers seek Nicaragua as a near-shore option over India and

other locations to enter the US market, where corporate spending in offshore spending has not dwindled in spite of the economic crisis.

The possibilities for foreign companies –mostly but not exclusively from the US- to establish off-shore or outsourcing dependencies for

all types of ICT-related services in Nicaragua or to cooperate in these with local partner, are attracted by low operating costs and by the

privileged, high speed access to fiber-optics networks both on the Pacific- and Atlantic-coast.

For fixed and mobile operators in Nicaragua, broadband will be the main driver of revenue growth over the next few years. Nicaragua’s

wireless investment opportunities and growth have been particularly good in the areas of wireless LAN systems, mobile phones with

broadband services. WiMAX service providers are taking the first steps with pilots in remote rural areas. Moreover, WiFi is widespread

as residential and Small and Medium Enterprise LAN solutions.

Application providers will see new opportunities in partnering with Telecom providers to reach a broader set of users. Mobile data is

another important area of opportunity as the number of broadband accounts, including 3g mobile accounts, will more than double in a

two or three year span, and this will create an important target market for digital content, applications, and advertising dollars.

This means that non-voice mobile applications and broadband Internet access are expected to remain robust. Mobile music services,

including ringtones, continue to be the most popular mobile service beyond SMS and accessing emails while on the move.

While ringtones have been popular for some time, consumers are also beginning to use mobile for downloading full tracks and stream-

ing music. As the business models evolve and handsets continue to improve, this market is expected to continue its growth.

Mobile social networking is also a key area of interest at the moment with millions of mobile users around the world now using such services.

Even when the global financial crisis might rearrange business priorities, the ICT sector is optimistic because the government of Nica-

ragua believes telecommunications and IT will help diversify the economy, and will attract knowledge-based investments, improve

productivity, reduce poverty, and significantly reduce the economic and social isolation of rural areas at a lower cost than other infra-

structure projects.

As the government keeps spending on ICT projects with a proven impact on public education, public health services, municipalities,

rural development and SMEs (see government initiatives) there is a continuous demand for ICT specialists that are capable of handling

these projects.

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TABLE OF CONTENTS

ExECuTIvE SuMMary ......................................................................................................................................................................4

1. PrEfaCE................................................................................................................................................................................................7

2. INTrOduCTION TO ThE NICaraguaN ICT SECTOr .............................................................................................................................. 8

3. PrOfILE Of ICT COMPaNIES IN NICaragua .........................................................................................................................................93.1 ICT organizations ............................................................................................................................................................................. 9

4. ICT SECTOr OvErvIEw: kEy arEaS Of OPEraTION ........................................................................................................................... 104.1 IT sector ......................................................................................................................................................................................... 104.2 Call centres and business process outsourcing (BPO) ................................................................................................................... 104.3 Fixed Line Telephony providers .......................................................................................................................................................134.4 Mobile Telephony providers .......................................................................................................................................................... 144.5 Internet service providers .............................................................................................................................................................. 144.6 IP and voice over internet protocol (VoIP) .......................................................................................................................................15

5. ThE NEw NaTIONaL ICT INfraSTruCTurE ......................................................................................................................................... 165.1 High bandwidth infrastructure ....................................................................................................................................................... 165.2 Backhaul providers ....................................................................................................................................................................... 165.3 globalstar vsat ...............................................................................................................................................................................17

6. why NICaragua? ..............................................................................................................................................................................186.1 Key tax rules and regulations ......................................................................................................................................................... 186.2 Political risks .................................................................................................................................................................................196.3 Labour force and education ............................................................................................................................................................196.4 Number of employees and cost of labour .......................................................................................................................................196.5 ICT education ................................................................................................................................................................................ 206.6 English proficiency ........................................................................................................................................................................ 236.7 Electricity and stability of power supply ........................................................................................................................................ 236.8 Time zone, normal working hours and -weekdays ......................................................................................................................... 23

7. CONCLuSION: OPPOrTuNITIES fOr ICT BuSINESSES IN NICaragua ................................................................................................247.1 Outsourcing, BPOs, and contact centres ........................................................................................................................................ 247.2 IP centric-networks and broadband convergence services ............................................................................................................ 247.3 Chip sales, roaming and value added mobile services ................................................................................................................... 277.4 Other opportunities in the ICT sector ............................................................................................................................................. 277.5 Opportunities from government initiatives in the ICT sector .......................................................................................................... 27

8. SwOT aNaLySIS .................................................................................................................................................................................29

9. aPPENdICES .......................................................................................................................................................................................309.1 List of abbreviations ...................................................................................................................................................................... 309.2 Useful websites ..............................................................................................................................................................................319.3 Maps ..............................................................................................................................................................................................319.4 Tables ........................................................................................................................................................................................... 32

10. rEfErENCES .....................................................................................................................................................................................3710.1 Reports ........................................................................................................................................................................................ 3710.2 List of interviews ......................................................................................................................................................................... 3710.3 List of companies visited .............................................................................................................................................................. 38

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1. PREFACE

The Royal Danish Embassy and the Business-to-Business for Development Programme1 (B2B Programme) in Nicaragua have commis-

sioned this Information and Communication Technology Sector Study to contribute to the identification of business opportunities and

the challenges in Nicaragua.

Today, Nicaragua has one of the most modern and robust ICT infrastructures in Latin America. Also Nicaragua is ranked as one of the

top countries in Central America with the highest degree of labour market stability.

Some Danish-Nicaragua partnerships within the B2B Programme already established in Nicaragua are selling services and products to

specialized markets, in areas such as new generation wireless applications for mobile telephone systems, Business Process Outsourc-

ing (BPO), Software Development, ICT competence, e-learning and other specialized services.

The promotion of poverty alleviation through an international competitiveness approach, business-driven social responsibility, inclu-

sive businesses, quality employment and environmental sustainability is the main vision behind the B2B Programme.

We hope that local companies may benefit from this study, by understanding their comparative and competitive advantages and also

identifying their challenges and bottlenecks that can lay out a road map to success for present and future generations in Nicaragua.

Søren Vøhtz, Ambassador

1 www.b2bprogramme.com

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2. INTRODUCTION TO THE NICARAgUAN ICT SECTOR

In 2008, Nicaragua’s telecom system leaped into one of the most modern in Latin America. Its nation-wide network was upgraded last

year to a full fibre optic network, whose capillary reach extends to remote and scarcely populated villages in rural areas (See graphic

10.3.2). The network is fitted with IP/MPLS and NgN technology, which allows convergence of voice, data and video services. Also in

2008, the ICT sector saw the introduction of 3g wireless capabilities on top of a broadband multi-media mobile telecommunications

standard (UMTS/HSDPA) platform.

Such networking infrastructure for data, with plenty of redundant bandwidth, plus a modern telecommunications system and a com-

petitive labour force costs, is attracting global enterprise organizations seeking to lower operational costs and optimize production

performance by outsourcing and partnering with companies in developing countries.

Such advances spawned private and public investment in new services and infrastructure in the wireless and terrestrial backbones, as well

as in corporate networking and enterprise mobility. Internet usage and broadband availability grew significantly at a national level. Expand-

ed usage lifted the demand for more sophisticated services and network and personal equipment to support the latest applications.

The most promising sub-sectors for developing business opportunities in the Nicaraguan ICT market are digital, cellular and wireless

telephone systems and services, mobile data and data transmission equipment. Nicaragua is also seeing the advent of companies

developing more specialized applications for robust subsectors, such as BPOs and Contact Centres, bundled fixed-mobile services,

government ICT projects, web and content development, information and data hosting, among others.

While in some parts of Nicaragua mobile phones provide the only medium for Internet access; elsewhere, mainly in urban areas, de-

mand for accessing content at any time is growing.

Corporate users are seeking more managing network services, more mobility and access to their Intranets, increasing the demand for

network design consulting, implementation, managed network services and network product support services, as well as end-to-end

corporate class broadband connectivity. Therefore, ICT companies in Nicaragua are migrating to offer their expertise as services. But

also they need to tap on new opportunities in wireless and terrestrial data transmission, such as Mobile Entertainment, Mobile Busi-

ness, Mobile Commerce and Mobile Marketing.

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3. PROFILE OF ICT COMPANIES IN NICARAgUA

It is difficult to assess how many companies make up the ICT sector in Nicaragua, the main reason being a lack of updated statistics

from both the public and private ICT sector. However, while Nicaragua’s ICT sector is still young and not well structured, there is

evidence that the arrival of fixed wireless convergence and 3g is changing the playing field and expanding opportunities. Based on a

number of interviews with key ICT persons within the sector it is estimated that there are at least 88 companies in Managua related

directly to the ICT sector. The companies are distributed as shown in the diagram below.

In Nicaragua’s ICT sector, infrastructure players and application players, network vendors and device vendors, telecommunications pro-

viders and IT providers now seem to be making alliances. The latter have been moving away from their traditional focus of just develop-

ing commercial and administrative applications such as invoicing and tax management, to a more service oriented ICT, and to develop

other competencies that would allow them to be closer to a business process approach.

The business portfolio of ICT companies is comprised by the private sector (60-80%) and (20-40%) the government. Last year, the

local ICT firms serviced only 25% of government contracts while the remaining 75% went to foreign companies. The ICT sector, accord-

ing to ProNicaragua estimates based on Central Bank yearly figures, has grown annually for four years at 17%. In 2005, sales revenues

totalled US$12.5 million, while in 2008 totalled US$33 million. Of that, $15 million came from BPOs and Contact Centres.

3.1 ICT organizationsAlthough there is no organization to represent the broad interests of the ICT sector in Nicaragua it is worth mentioning that there have

been a number of initiatives to support the sector. The Nicaraguan Council of Science and Technology (CONICYT) and the Ministry of

Development, Industry and Trade, have in collaboration with the World Bank and the Swedish International Development Cooperation

Agency (SIDA), in the past, elaborated national ICT strategies to promote the development of the sector. Currently there is also an initia-

tive to organize an ICT Chamber through the High Council of Private Enterprises in Nicaragua (COSEP). Until now the companies operat-

ing in the ICT sector have been working through the Nicaraguan Chamber of Industries and Chamber of Commerce.

However, there is also the Nicaraguan Internet Association (AIN) which was established in 2002 as a non-profit association that would

bring together Internet Service Providers as well as educational institutions and other entities related to the development of the inter-

net in Nicaragua. Moreover, there is a local chapter of the International Association of Outsourcing Professionals (IAOP), which brings

together the world’s leading outsourcing customers, providers and advisors in a powerful, active and growing global association to ex-

change thought leadership, share best practices and network to maximize their effectiveness using outsourcing as a management tool.

ICT Sector Company Distribution

18

2

12

915

3

12

12

5

ISPs

Mobile TelephonyCarriers

Call Centres

Softw are DevelopmentCompanies

Hardw are Distributors

Computer Aid DesignCompanies

ICT Competence/TrainingCompanies

Universities w ith ICTCurriculum

Other Specialized Areas

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4. ICT SECTOR OVERVIEW: KEY AREAS OF OPERATION

4.1 IT sectorThe universe of companies that make up the Nicaraguan IT sector, whose applications are being used in both government and corporate

institutions, stems from a core group of 15 to 20 companies with the innovative and competitive levels expected of true international

ICT standards including: ongoing capacity training efforts of its labour force; implementation and use of the state-of-the art national

infrastructure; rising up to international standards in software development, producing applications for both government and corporate

markets, as well as exploration of new emerging service capabilities.

In the IT sector, according to interviews with a good number of key IT players, the activities representing more than 80% of total output

are specialized administrative software (i.e. electronic invoicing, inventory management, remote monitoring, and managing network

services). The service modalities comprise enterprise network consulting, implementation, managed network services and network

product support services.

In Nicaragua, only a handful of organizations are developing applications and solutions integrating enterprise applications such as ERP,

CRM, IT mobility applications and team collaboration tools, such as off portal applications and remote training. These scenarios have

been mostly fed by the rapid growth and positioning of Nicaragua as prime outsourcing and BPO destination and as outsourcing for

other non services businesses.

For IT companies, BPOs are a new market opportunity to which they are now offering mobile solutions, virtual production and design,

and remote training. Nicaraguan companies now offer capabilities to store, manage information remotely and the ability to control and

manage IP. Other areas where there is activity are:

• customerdevelopmentandemarketing

• customerserviceandsupport

• e-commerce

• financeandaccounting

• humanresources

• procurementandmaintenance,

• repairandoperation

• salesforceandautomatization

• supplychainmanagement

• enterpriseinformationportal

• EnterpriseResourcePlanning

4.2 Call centres and business process outsourcing (BPO) The progressive expansion of ICT-services will further push the convergence of the IT and Telecom worlds, rapidly increasing demand

for all types of ICT-specialists, from simple operation and maintenance of Systems and Networks or End-user assistance to the most

sophisticated tasks in software-development. One example has been the mainstream adoption of new technologies and solutions for

fast growing sectors like BPOs and outsourcing companies, textiles and pharmaceuticals.

Nicaragua’s BPO sector is just getting started and the call centre sector in Nicaragua has yet to grow like in other Central American

countries. However, an increasing number of companies from Europe, Asia and the U.S., and some from South America and Mexico, are

showing a new interest in Nicaragua’s BPO sector, as labour costs in neighbouring Costa Rica and El Salvador – until now the region’s

main outsourcing hubs – have risen amid a shortage of qualified English-speakers.

Many of the BPOs and contact centres seek Nicaragua as a near-shore option over India and other locations to enter the US market,

where corporate spending in offshore spending has not dwindled in spite of the economic crisis. The possibilities for foreign companies

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to establish off-shore or outsourcing dependencies for all types of ICT-related services in Nicaragua or to cooperate in these with a local

partner, are attracted by low operating costs and by the privileged, high speed access to fibre-optics networks both on the Pacific- and

Atlantic-coast.

Services and application development opportunities now exist for virtually all categories of products in this sector. Scalable applica-

tion-oriented architectures, new IP networks implementations in Nicaragua, along with new applications for virtualized environments,

and the necessary tools to manage infrastructure and applications are more common today than just a year ago.

BPO Key Opportunity Areas:

Source: ProNicaragua

Moreover, some of the advantages that Nicaraguan companies offer within BPO services include:

• AworkforcewithgoodEnglishskillsandagoodunderstandingofAmericanbusinessbecausemanygrewupintheUnitedStates

when their parents left the country in the 1980s.

• AlsotheEnglish-speakingcapabilitiesoftheCaribbeancoastareasofyetunexploredgreatpotential,accordingtoProNicaragua.

• ThecountryisaconvenientnearshorelocationforU.S.businessesbecauseit’sintheCentralTimeZoneandhasa100percenttax

exemptionformanufacturingsuppliersandmachineryunderitsFreeTradeZoneRegime.

• CompaniesneverhavetroublefillingjobsinNicaraguaandtheemployeeturnoverislow.

Insurance Banking/finance Telecom retail Pre-Media Publishing

Claims Processing Data Entry Correspondence/E-

Mail

Correspondence/E-

Mail

Content Management

Correspondence/E-Mail Correspondence/E-Mail Billing Data Entry Web Publishing

Data Entry Accounting Call Centre Operations Order Processing Language Translation

Accounting Research Accounting

Servicing Call Centre Operation

Contact Center for

instruments

Call Centre Operations

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Case Study #1 The Patentvest Case: Offshoring in NicaraguaChris Marlett, a half Nicaraguan and American discovered Nicaragua’s business potential almost by accident in 2007. Mar-

lett, the CEO of MDB Capital Investment group in Santa Monica, California, came to build a beach home in the Pacific Ocean.

“I knew outsourcing was about to explode in Nicaragua,” says Marlett, who saw the possibilities to cut costs by paying highly

qualified workers in Nicaragua a fraction of what they would pay U.S. employees.

Marlett had just founded in California a start-up called PatentVest, a business intelligence firm whose analysts do the

groundwork for companies seeking patent intelligence. But PatentVest began experiencing a high turnover rate.

“That’s when I decided to experiment with offshoring to see if I could improve my retention rate while receiving the high qual-

ity of research the work demanded,” Marlett said. He rented an office in Managua and personally hired 10 people. He says he

was astonished when he discovered “they got more data organized in their first three months on the job than our California

team did in 12 months.” Today he has 35 people working for PatentVest and for his MDB business.

Marlett discovered there were “a lot of professionals with U.S. college degrees who were out of work in Nicaragua.” He was

able to hire seven Nicaraguan researchers for $25,000 a year “all in” versus the $125,000 he had to pay for the same job in

California. They were also “high quality” researchers with a better work ethic than the associates he hired in the U.S. To date,

one left to take a great job with a major international bank and the rest are gaining valuable knowledge that is making them

more valuable to his business.

Today, Marlett’s main investment focuses on converting the old American Embassy in Managua into an ultra-secure offshore

call center for the financial services industry, a data center called the MDB Capital’s Outsourcing Complex. “There were no

facilities that were up to snuff by U.S. standards. When the embassy went up for sale, we saw an opportunity to open a world-

class facility.”

Marlett bought the property in June 2008. After months of renovation work, the site has now its first 500 operators from its

first client, Sitel, a Tennessee-based global business outsourcing provider.

“Nicaragua is a hidden gem in Central America,” says Marlett. “Most Americans think of Nicaragua as a country of camou-

flage and soldiers. But that was back in the 1980s.”

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Case Study #2

The almori Case: Offering BPO Services in Nicaragua The multinational eTelecare global Solutions Inc., one of the largest Business Process Operations companies in the world

recently invested $2.1 million for a 70 percent stake in Almori BPO Services Inc., a Texas-based company that provides out-

sourced services for U.S. health clinics from Nicaragua since 2003.

Almori’s call center in the glimmering Invercasa building in Managua has in fact been the poster child of the booming BPO

industry in Nicaragua, with first world class facilities and revenues which convinced eTelecare to jointly invest with Almori a

combined $12 million in Nicaragua over the next three years and create more than 2,000 jobs.

Its CEO and President John Harris said the same time zones and proximity to the United States have made Central America

“increasingly attractive” for outsourcing operations.

While the call-center sector in Nicaragua has yet to grow like in other Central American countries largely, investors who have

overcome a not so accurate perception of political instability in Nicaragua, have discovered the business potential of Nicara-

gua, says Maria Jose guerrero, an executive at investment promotions agency ProNicaragua.

“It’s a perception outside the country, but once companies come here they find a different reality,” she says. “Once they see

the government is committed to foreign investment, it’s a different story.”

The CEO of eTelecare agreed. “Its liberalized, high-growth economy, strong U.S. and Canadian cultural affinity, robust tel-

ecommunications infrastructure, and large pool of skilled multi-lingual workers are also strong selling points,” Harris said in

a statement. “Nicaragua in particular has a growing, largely untapped supply of skilled residents available at rates that are

competitive with those of other Central American countries, such as Costa Rica and Panama,” said Harris.

Almori has been operating in the country for more than five years and was the first contact center company to open opera-

tions in Nicaragua. e-Telecare global Solutions is the strongest company in the contact center industry in the world, having

more than 16 thousand positions in Asia and 2000 in the US. With its new partner, Almori, eTelecare will begin providing sup-

port services to its Fortune 500 client base for the first time from a location other than Philippines and the US.

4.3 fixed Line Telephony providers By 2003 there were only 224,000 installed fixed lines serving a population of 5.2 million, over a fixed-line system based on low-capac-

ity microwave radio relay and wire facilities. In 2007 that number had increased to almost 250,000 as shown in the table below. More-

over, based on interviews with key people from the ICT sector it was established that as of December 2008 there were approximately

260,000 conventional subscriber’s phone lines in Nicaragua. More importantly, Nicaragua’s telephony network system today has an

installed switching capacity to provide over 400,000 lines for 5.6 million people, easily surpassing the demand for fixed lines.

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Table – Telephone network statistics 20072

4.4 Mobile Telephony providersSince 2004, the country’s mobile market has been growing at an average annual rate of approximately 60%. And cellular phones have

by far surpassed land lines, up from 500,000 users in 2004 to 2,25 million in 2007 (See table 10.4.4), and about 3 million as of Decem-

ber 2008, according to ENITEL estimates.

Apple’s announcement in July 2008 that its highly anticipated iPhone 3g would be launched in Nicaragua almost in unison with most

of Latin America’s key markets, such as Mexico, Argentina, Brazil, Chile, and Colombia, underscored the phenomenal technological

leapfrogging the country is witnessing in its telecommunications.

Wireless equipment vendors from Nokia and Sony Ericsson are reporting a healthy growth in the market and even Motorola, the trou-

bled U.S. telecom vendor, is seeing a slight growth in Nicaragua and the rest of Central America. In 2008, ENITEL’s cell phone division

Claro introduced a third-generation (3g) all-digital network to support high-speed data transmission. Meanwhile, the Spanish company

Telefónica operates the competing Movistar cell phone network, and it has yet to fully deploy its 3g capabilities.

In the past, the lack of a proper telecommunication infrastructure in rural areas often meant eliminating the need for other services.

However, with the infrastructure in place and the type of services that are offered, the demand is increasing significantly in Nicaragua.

For example, the Calling Party Pays (CPP) option has attracted the lower end of the market and minutes of wireless use has increased

three to four times due to the CPP offering.

Moreover, prepaid wireless services have also proven popular, particularly in regions and for groups that find it difficult to get a credit

card. This option allows users to pre-buy minutes and airtime, and use the phone until the service runs out. In Nicaragua, approximately

20 percent of the subscriber base uses pre-paid services, and much of the increase in subscriber growth in the last five years can be at-

tributed to that service, and also there are more prepaying customers than regular subscribers.

4.5 Internet service providersA well developed networking infrastructure for data, with plenty of redundant bandwidth, plus a modern telecommunications system and a

competitive labour force costs have spawned private and public investment in new services and infrastructure in corporate networking and

enterprise mobility. Moreover, Internet usage and broadband availability have grown significantly at a national level. With expanded usage,

the demand for more sophisticated services and network and personal equipment to support the latest applications is growing fast.

Telephone Network Statistics

Fixed telephone lines in service 247,900

Fixed-line Tele density 4.8%

Public payphones (May 2007) 8,340

Major public telecom operators Empresa Nicaragüense de Telecomunicaciones (ENITEL)

2 Source: Asociación de Internet de Nicaragua (AIN). The data presented are the most recent statistics but are in fact obsolete as the number of fixed telephone lines in

service as of December 2008 were estimated to be approximately 260,000.

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4.6 IP and voice over internet protocol (voIP)Voice over Internet Protocol (VoIP) or Internet telephony is neither permitted nor prohibited in Nicaragua. As in most other Latin Ameri-

can countries, VoIP has gained huge popularity since it dramatically cuts the costs of long-distance calling.

Skype, Vonage, and iConnectHere work well. Internet cafés (or Tele centres) offer cheap international calls, using online VoIP systems;

this service is becoming more and more popular, since the standard overseas calling rates are extremely expensive. In fact, according

to the Association of Tele centres in Nicaragua (Asociación de Telecentros de Nicaragua), Tele centres rely on Internet telephony for

more than half of their revenue.

Moreover, ENITEL has been developing its own IP and VoIP services and plans to launch its own commercial offering sometime in 2009.

Case Study #3

The goIP Case: Offering ‘voIP in a Box solutions’ in Nicaragua.goIP International ApS is a Danish pure play Application Service Provider (ASP) that is currently involved in a partnership in

Nicaragua together with the local company Ideay.

“The background for goIP’s decision to expand its operations to Nicaragua has been the large business potential that

was perceived in the region based on the rapid increase in broadband deployments in Nicaragua and in Latin American in

general. All telecom carriers, ISPs, Internet portals, and call shops have a need to offer VoIP services to increase their ARPU

(Average Return per User) and increase market share with new innovative telecom services”, says COO Stig Skaugvoll of goIP.

“The main challenge in terms of achieving the goal of establishing the cooperation between the two companies has been

to maintain momentum in the process and not let the project dwindle away due to the long course of creating a solid busi-

ness plan. Contrary to what could be expected when working across different cultures, problems in communication and in

reaching a common understanding of the project scope have not been issues in the cooperation between the two companies.

Perhaps because both companies operate within the ICT sector, in which companies are often born global with a marked

international outlook”, says Stig.

With regards to the business perspectives of the cooperation the idea is that in the medium-long term the joint venture

company will support the sales initiatives towards the different type of Telecom operators to enable them to offer a variety of

competitive telecommunication services; including bundled VoIP services, international calling, fixed/mobile VoIP services

via dual-mode handsets, as well as new value added services. Moreover, the company is able to compete in other parts of the

region as well as in the rest of Latin America.

“goIP already has a very international company profile with a number of foreign employees at the company’s headquarters in

Copenhagen. In this way, the company’s decision to engage in the cooperation with Ideay has been a natural continuation of

its international orientation. And even though the real fruits of the joint efforts still remain to be harvested, the project itself

has been a valuable experience, which has helped stimulate the dynamic and innovative environment at goIP by bringing

new ideas and business opportunities to the attention of the management at goIP”, says Stig.

16

5. THE NEW NATIONAL ICT INFRASTRUCTURE

5.1 high bandwidth infrastructureThe country’s almost 4,000 kilometres of fibre optics backbone is an IP Centric network, which integrates Cisco Systems’ Internet

Protocol/Multiprotocol Label Switching (IP/MPLS) and state of the art Alcatel and Lucent Next generation Network IP capabilities. The

recurring data nodes all along its extension shows a robust and highly flexible architecture similar to those only found in more mature

and developed telecoms markets like those of Chile, Mexico or Brazil.

ENITEL began to convert its old microwave and copper network into a fully digital, IP centric network in 2006. By now it has deployed a

10 gB long haul and metropolitan IP network based on optical and Metro Ethernet technologies.

The network, supplied by Cisco Systems, has an expansion capacity of over 300 gB. It already offers a nationwide IP network service

based on Cisco’s IP Centrex system integrating Internet Protocol/Multiprotocol Label Switching (IP/MPLS). ENITEL will introduce before

the end of 2009, its Next generation Network (NgN) platform to provide fixed line voice, data, and Internet services to Small and Me-

dium Enterprises (SMEs) over its NgN IP platform.

As recent as of December 2007, Nicaragua’s telecoms infrastructure reflected the country’s poverty map, with good tele density in the

major urban centres, and poor or nonexistent telephony service in rural areas. The main business areas in Managua enjoyed first-world

telecoms system and services, while rural areas lacked even the most basic telephony services (See graphic 10.3.1).

But Nicaragua’s robust fibre optics infrastructure now reaches even remote and scarcely populated villages. It runs along the Pan-Amer-

ican highway, from north to south, and fibre optic branches reach all the main cities, and many municipalities.

In 2005, Nicaragua connected its national network directly to an international fibre optics system, the ARCOS1, which lands at two

points in the Nicaraguan Caribbean Coast. From there, it interconnects with fibre networks from local and international service provid-

ers. Previously, Nicaragua connected only through the MAYA1 ring, in the Costa Rican Caribbean. ARCOS1, and the secondary MAYA1

ring provide Nicaragua with a highly reliable and robust connection, of unmatched redundancy for Nicaraguan service providers and

private corporate networks (See graphic 10.3.2).

5.2 Backhaul providers

ENITEL The fibre network of ENITEL (Nicaraguan Telecommunications Company) uses five outbound links to increase redundancy, with ARCOS’

two landing points in Bluefields and Puerto Cabezas, in the Atlantic, and with the three customs border points to Honduras in the north,

Las Manos, guasaule and El Espino. From there, these link up with America Movil’s fibre operator networks’ properties in Honduras, El

Salvador, and guatemala, to continue on to the two MAYA landing points in the Yucatan Peninsula in Mexico. This sort of redundancy is

complemented with a digital satellite and nationwide trunk network using a microwave system with links to the NgN-IP platform.

ENTrESa In February 2006, Telcor (Nicaraguan Institute for Postal Services and Telecommunications) announced that the National Power

Company – Empresa Nacional de Transmisión Eléctrica (ENTRESA) – was in the process of building a fibre optic infrastructure over its

nationwide electrical network. Telcor granted a license that enables ENTRESA to sell capacity on its network on a wholesale basis to

other operators in competition with ENITEL. This should eventually allow ENTRESA to deliver converged telephony, video, and high-

speed Internet services.

ENTRESA has designed and developed its fibre optic network and sells exceeding capacity of the network as a telecommunications back-

bone that links Managua and other cities in Nicaragua with the Atlantic port of Bluefields and the ARCOS fibre optics cables to the USA.

17

The countrywide communication network includes a backbone of 622 Mbit/s (STM-4) as a core, and access multiplexers in all major

substations, power plants, and control centres for the connection of all user signals and services. The transport network, which is

divided into several rings with multiple interconnections, takes full advantage of the integrated protection mechanisms of the Synchro-

nous Digital Hierarchy (SDH) technology.

For the most part, the Pacific coast of Nicaragua is serviced by fibre for inter-city communications utilizing copper and microwave

network as secondary and/or backup routes. For long haul communications (i.e. international connectivity) Nicaragua has 3 routes

for worldwide communications serviced by multiple providers. The bandwidth available for most of these routes varies between SMT-1

and SMT-4.

There is also a bi-directional, fairly extensive fibre optic cable network for cable TV, which offers capacity to Internet Service Providers

(ISPs) and corporate Internet clients.

5.3 globalstar vSaTRolling out services in rural and outlying areas has proved a costly task, and one that ENITEL has been ill equipped to deal with. To

service remote rural areas, ENITEL has deployed its own SkyEdge broadband satellite hub station satellite infrastructure and Very Small

Aperture Terminals (VSATs) supplied by Israeli firm gilat Satellite Networks. The hub is with gilat’s SkyEdge multi-service system and

ENITEL has begun providing its most remote rural customers with a bundle of Internet service sand access, rural telephony, gSM trunk-

ing, fax, and prepaid telephony. Being satellite telecommunications among the most expensive, ENITEL’s platform allows the dynamic

use of its bandwidth, and allocate with what ENITEL calls high space-segment efficiency for its gSM backhaul.

Nicaragua is the only country in Central America to have a globalstar gateway, which means that, for example, any foreign company is

able to build virtual private data networks using globalstar’s gateway brand. The satellite gateway has users in all the subregion. The

gateway provides not only voice, but also data, internet, and gPS.

18

6. WHY NICARAgUA?

According to the fourth annual Latin globalization Index from Latin Business Chronicle, Nicaragua ranked in 2008 as the third most

globalized country in Latin America, with Panama and Costa Rica in first and second place, respectively.

The index of 18 countries, one of the most extensive of its kind, aims at measuring how the region overall and each country individually

fares when it comes to globalization. By measuring as a percent of gDP rather than by real numbers, the index reveals the impact of key

globalization benchmarks on a nation’s economy.

The six factors measured in the index are:

• ExportsofgoodsandservicesasapercentofGDP.

• ImportsofgoodsandservicesasapercentofGDP.

• ForeigndirectinvestmentasapercentofGDP.

• TourismreceiptsasapercentofGDP.

• RemittancesasapercentofGDP.

• Internetpenetration.

Nicaragua’s jump from its previous fifth rank is mainly due to a strong increase in exports and imports of goods and services as a per-

cent of gDP. While exports of goods and services accounted for 31.1 percent of gDP in 2006 they grew to 45.0 percent last year, accord-

ing to the World Bank. Meanwhile, imports of goods and services grew from 61.0 percent in 2006 to 74.5 percent last year, according to

an analysis by Latin Business Chronicle based on data from the World Bank and the International Monetary Fund (IMF).

6.1 key tax rules and regulations Nicaragua has various investment incentives for tourism and export-oriented operations. The country offers up to a 100 percent tax

exemptiononimportedsupplies,rawmaterials,andmachineryundertheFreeTradeZoneRegime.

Nicaragua is also part of the Central America Free Trade Agreement (CAFTA) with the US, which eliminates tariffs and other barriers to

goods and services between the two countries. The Central American Free Trade Agreement (CAFTA), offers foreign offshore or outsourcing

companiestoapplytooperateundertheFreeTradeZoneregime.TheFTAalsoseekstostimulatealltypesofICT-relatedservicesinNicara-

gua or to cooperate with a local partner. CAFTA also favours computer and peripheral equipment. Nicaragua’s import tariff policy considers

ICT’s hardware a core ingredient for the development of the ICT sector, and therefore they are not subject to import taxes.

Other regulatory developments include the deregulation of the telecommunications law also referred to as the general regulation of in-

terconnection and access. The purpose being to establish a regulatory framework of the technical, economic, legal and administrative

provisions governing interconnection and access between the various operators that provide services or provide telecommunications

networks, to ensure the development of a competitive market that guarantees interoperability of networks and services, regardless of

the technologies used and to contribute to the geographical expansion to the benefit of users. Meanwhile, liberalization of the fixed-

line market is still awaiting proper implementation, after delays in political and legal circles. ENITEL holds a virtual monopoly over the

country’s fixed lines. The mobile market, on the other hand, is a lively duopoly between Telefónica’s Movistar and ENITEL’s Claro, the

latter clearly in the lead with a 70% market share.

Additional rights for investors under the doing business in Nicaragua promotions policies:

• fullcurrencyconvertibility,

• freedomtoexpatriateallcapitalandprofits,

• fullinternationalownership,

• nodiscriminatorytreatmentforforeigninvestors

• fullprotectionofintellectualpropertyrights,patents,andbrands.

19

6.2 Political risksThe ICT sector is regarded by the government as a key area on the road to modernize the state and with the aim of improving govern-

ance and education, increasing decentralization, accountability, and transparency. Hence, the ICT sector does not appear to be vulner-

able to political risks but is rather seen as part of the solution to improve the situation of the country in terms of increasing productivity,

reducing poverty and diminishing the social and economic isolation of rural areas.

Also, the government will keep spending on ICT where it has a proven impact on Public Education, Public Health Services, Municipali-

ties, Rural Development and SMEs (See section 8.5).

6.3 Labour force and educationNicaragua has ranked as one of the top countries in Central America with the greatest labour market stability. That position stems from

low levels of absenteeism and rotation reported by different companies surveyed locally by The Economist Intelligence Unit in its more

recent Labour Market Risk Index.

Source: Viewswire Risk Briefing Services, September 2008

6.4 Number of employees and cost of labourBased on interviews with different people in the ICT sector there are more than 5,000 people currently employed in the ICT sector in

Nicaragua. In medium to small companies in Nicaragua, with up to 50 employees, a bilingual ICT professional in Nicaragua makes about

$400 a month (university graduates with no previous experience); $700 with more than a year of professional experience and with

supervising capabilities; and for those in a managerial position up to $1,500 to $2000. 3

Interest in Nicaragua has increased as labour costs in neighbouring Costa Rica and El Salvador – until now the region’s main outsourc-

ing hubs – have risen amid a shortage of qualified English-speakers. In Nicaragua the average cost of bilingual personnel is US$ 500

per month. The following graph depicts the salaries in the BPO industry in Central America.

3 All salary levels are not including obligatory social benefits.

0

10

20

30

40

50

60

70

80

90

Honduras Guatemala Mexico El Salvador Panama Nicaragua Costa Rica

Labour Market Stability

20

Source: ProNicaragua

6.5 ICT educationAccording to the 2006 census and the independent surveys by E-Nicaragua4 about 11,000 under-graduate and graduate students

enrolled that year in 43 ICT careers offered at 41 university campuses throughout Nicaragua. Similarly, there are already about 10,000

young professionals, who have finished their ICT-studies, yet at most 3,000 or so have found jobs in their fields.

According to data from the National University Council (CNU), there are 47 universities with total enrolment of over 115,000 students.

In 2006, student enrolment in state universities grew from 70,155 in 2005 to 75,945, in 2006. Approximately 30,000 students attend

private universities, whose numbers grew from 21 institutions in 2001 to 43 in 2006.

The high level of unemployment in the country, and a large informal sector5 suggest that there is an abundant pool of young, skilled underem-

ployed professionals. Current market conditions and the development level in Nicaragua make it impossible for either the public sector, or uni-

versities and private companies to absorb it. However, this is also an opportunity for ICT companies. Interviews recently conducted with CEOs of

various BPOs and Contact Centres confirm that finding and hiring skilled labour is not an obstacle to their opening of operations in Nicaragua.

Table – Student enrolment by major top ten universities

Source:ProNicaragua

4 E-Nicaragua is subdivision of the Nicaraguan Internet Association, which focuses on promoting the use of Information and Communication technologies in Nicaragua.

5 The informal sector is formed by those people who do not belong to the formal sector, who currently work or have worked in the past. It also includes unemployed individuals

with work experience.

25%

9%

37%

5%

10%

14%

IT & Engineering

Law

BusinessAdministration

Others

Agro

Sciences &Medicine

Panama Costa rica El Salvador guatemala Nicaragua honduras

Spanish agents

US$ 410 – US$

550

US$ 590 N/A US$ 360 – US$

430

US$ 290 – US$

365

N/A

Bilingual agents

US$ 750 – US$

890

US$ 750 US$ 700 US$ 575 US$ 500 US$ 525

Cost of T1 (NaP)

US$ 700 per

month

US$ 3,700 per

month

US$ 1,000 per

month

US$ 1,200 per

month

US$ 1,600 per

month

US$ 1,450 per

month

Office rental (m² per month)

Premium:

US$ 8 -16

Standard:

US$ 6-10

Premium:

US$ 17 -20 Stan-

dard:

US$ 13-16

Basic:

US$ 10-12

Premium:

US$ 13-15

Industrial space:

US$ 4

Premium:

US$ 6-9

Industrial space:

US$ 2-6

Premium:

US$ 13-16

Industrial space:

US$ 3-6

Premium:

US$ 10-15

Industrial space:

US$ 3.5-4

21

In addition, a number of the universities in Nicaragua are affiliated and recognized by prominent US universities. The Central American

Institute of Business Administration, (INCAE) is a Harvard-affiliated regional business school which has been repeatedly ranked as #1

in Latin America. Moreover, in a reverse brain-drain, Nicaragua has enjoyed the return of many experienced Nicaraguans within interna-

tional management from especially the United States.

Case Study #4

The xcompetence Case: Offering International IT Education in Nicaragua.Xcompetence A/S is a Danish IT company with 10 years of experience in IT system development and IT education. The com-

pany is internationally certified and recognized to issue IT certificates to students who pass the test. It is within IT education

that Xcompetence now has established a joint venture company with the Nicaraguan company güegüe Communication.

“The motivation for Xcompetence to establish a joint venture with a company in Nicaragua has been among other reasons

that the company has a lot of experience within IT education but limited possibilities for local business expansion. The com-

pany already has an international profile with a great deal of experience from working with global companies within the ICT

industry. Thus, the large business potential for internationally certified IT education in Nicaragua and a good local partner led

us to the decision of creating a joint venture company”, says CEO & Owner Kate Holmstrup of Xcompetence.

“One of the main challenges on the road to establishing the new joint venture has been to evaluate the visions and core

values of both companies and making sure that these were in concordance. Another challenge has been to establish the nec-

essary network and the dependence on importing training material from other countries has been time consuming and has

required careful planning in advance. Meanwhile, a lot of these challenges are solved when you have people in the organiza-

tion that already have a lot of experience from global projects”, says Kate.

“The business perspective for the long term cooperation of the joint venture company is to offer a great variety of competitive

products within IT education ranging from very basic to very advanced IT education, including internationally recognized IT

certificates, not only in Nicaragua but in the entire Latin American region ”says Ib Byder, Chairman of the Board.

“Clearly Xcompetence will benefit from the development of new IT courses and also from the fact that the joint venture

company can run courses for Xcompetence customers when it comes to training customers in the use of Xcompetence’s

products”, says Kate.

22

Case Study #5

The BellCom Case: E-education and E-learning products and servicesBellCom A/S was started in 1996 as one of the early Internet companies in Denmark, aiming at the kind of simple HTML web

development that was the standard at that time. Already in 1998 BellCom was appointed the first Oracle Internet Partner

in Denmark, and at this time BellCom was delivering complex database-driven solution to its customers. In 1999 BellCom

was sold to an American global company (iPares), but was returned on Danish hands after a few years. At that time BellCom

decided to focus on Open Source, which today is the core business.

“We decided to join a Danish IT delegation to Nicaragua in November 2007, in order to evaluate business opportunities and

to find a suitable partner” says Erik gravgaard, Managing Director of BellCom A/S. “We came to Nicaragua without much

knowledge about the country, but with a few business ideas in the suitcase; among others the idea of establishing a first

class e-learning centre in Managua, where we would focus on open source solutions.”

From the first trip Erik gravgaard recalls: “On the one hand we were surprised by the widespread poverty in Nicaragua and

on the other hand we were impressed with the companies we met and the professionalism of the people. With TI Consultores

S.A. we found an ideal partner to build our business case with.”

BellCom discovered a market in Nicaragua for affordable and effective training through E-learning solutions, but acknowl-

edges that the viability of the business also will depend on the ability to find customers in other Spanish speaking markets

(including Spain and the US). During studies BellCom and TI Consultores decided to expand the business concept to the

broader E-education and to build the business within a new jointly owned company.

“It’s a huge challenge to build up a new company, develop products and services and to attract customers. Hence it has been

very important for us that we can count on the support from the Danida B2B programme”, Erik points out. About other chal-

lenges Erik mentions language problems and communication. “We believe that it is possible to establish a good and healthy

business in Nicaragua, but we also know that it may take a few years to get there. We are two small companies who share a

common business idea. For Bellcom it will be a valuable experience in many ways and we hope to reach a profitable business

within 2-3 years. If we succeed we will be able to provide world class e-learning services to Nicaraguan companies, public

institutions and NgOs. I think that would be a remarkable achievement”, smiles Erik gravgaard.

23

6.6 English proficiency While Spanish is the official language of Nicaragua, English is widely spoken, chiefly among its largely young labour force. Moreover,

about 150,000 Nicaraguans who have lived in the U.S. have returned. ProNicaragua s database Nica.Search estimates some 10,000

English speaking Nicaraguans, less than a fifth of them are currently employed in call centres.

In addition, there are:

• 1U.S.accreditedEnglishlanguageuniversity

• 5bilingualuniversityprograms

• 5bilingualhighschools

• Morethan30EnglishLanguageInstitutes

6.7 Electricity and stability of power supplyEnergy blackouts are rare in Nicaragua and for energy redundancy, company executives, interviewed for this report, say that the best

option is to buy a power generator, which are readily available from companies like Caterpillar.

6.8 Time zone, normal working hours and weekdays

Working days Monday to Saturday

Weekend Sunday

Time zone UTC/gMT – 6 hours

Country IDD code 505

Managua city code 2

Working hours 9:00 am – 5:00 pm

24

7. CONCLUSION: OPPORTUNITIES FOR ICT BUSINESSES IN NICARAgUA

The Nicaraguan ICT sector is developing fast and the sector is increasingly becoming an attractive alternative to other outsourcing

destinations in the region. The country offers one of the most modern telecom systems in Latin America with a nation-wide full fibre

network that extends across the entire country. Moreover, in 2008 3g wireless service was introduced, giving way to a new array of op-

portunities within the sector and among others in the area of mobile solutions.

Combined with an abundant labour market with relevant ICT backgrounds and competitive salaries, compared to other countries in the

region, this has spurred both foreign and national investments in the areas of Call Centres and Business Process Outsourcing, in par-

ticular. The large pool of employees with good English capabilities and the favourable tax rules and regulations within the ICT industry,

have also contributed to the rapid development of the sector.

However, there are still a limited number of important ICT players in Nicaragua and the sector as such is still at its infancy with plenty of

room to grow. In this way, there is also an important first mover advantage still to be gained if companies decide to establish them-

selves in Nicaragua. In the following section, some of the different areas within the ICT sector in Nicaragua that offer opportunities of

particular competitive and comparative advantage are presented.

7.1 Outsourcing, BPOs, and contact centresSome companies already established in Nicaragua are selling services and products to some of these markets, especially in wireless

and terrestrial data transmission, and new generation wireless applications such as mobile entertainment, mobile business, mobile

commerce and mobile marketing.

More common each time is the advent of virtual ICT workers, who from Nicaragua have become part of international collaborative teams

designing or developing specific products.

In turn, such production models demand seamless and highly developed communication systems as well as real time tools. A case in

point are the BPOs scalable application-oriented architectures, their requirements for new IP networks implementations in Nicaragua,

along with new applications for virtualized environments, and the necessary tools to manage their infrastructure and applications.

7.2 IP centric-networks and broadband convergence services For fixed and mobile operators in Nicaragua, broadband will be the main driver of revenue growth over the next few years. Nicaragua’s

wireless investment opportunities and growth have been particularly good in the areas of wireless LAN systems, mobile phones with

broadband services. WiMAX service providers are taking the first steps with pilots in remote rural areas. Moreover, WiFi is widespread

as residential and Small and Medium Enterprise LAN solutions.

Application providers will see new opportunities in partnering with Telecom providers to reach a broader set of users. There is a big op-

portunity in IT-telecom bundled services in Nicaragua as the main operator ENITEL has taken the first steps to provide data, mobile and

video (including video on demand) services. These services are targeting both the business and residential markets.

According to ENITEL executives, the company is seeking applications that would complement their access, content and devices. As they

explained it, their customer service model is that owning the customer is not anymore a function of access or the line they subscribe to,

but of the applications and services the customer is using and paying for. The understanding that in this applications-centric environ-

ment, an operator cannot merely provide infrastructure to avoid ending marginalized, opens opportunities to third parties developing

the applications for their large operations.

25

Mobile dataMobile data is another important area of opportunity. “Mobile data will be the primary engine of growth, seeing revenue increase by

15% to US$223 billion,” notes Leslie Arathoon, Vice President of Research at Pyramid Research. “The number of broadband accounts,

including 3g mobile accounts, will more than double in a two or three year span, and this will create an important target market for

digital content, applications, and advertising dollars.”

This means that non-voice mobile applications and broadband Internet access are expected to remain robust. Add to this the rocket-

speed take-off of the market in Nicaragua for enterprise mobility devices such as smart phones (and now notebooks), and it is easy to

see how user’s access to the increasingly present 3g network is going to be expanded.

The new generation network IP (NgP IP) New network capabilities have allowed a fast introduction of cutting edge applications such as collaborative computing for multination-

als, virtual production and design, and media convergence services like Triple Play, IPTV, and cloud computing.

Moreover, according to Flemming Lund, CEO of Inmobia it is no longer just about integrating and expanding communication platforms,

but much more about bringing people to a new level of productivity enhancements via onsite/off-site collaboration, which is the way

Inmobia operates in several countries like Nicaragua. The case of Inmobia is an example of how the current economic environment is

forcing most organizations to rethink their budgets and ICT investments.

Meanwhile, analysts like Arathoon believe that, with infrastructure being one of the most affected areas by today’s budgetary con-

straints, the adoption of new technologies like virtualization and new application’s delivery models like SaaS, on-demand, online, will

be an opportunity during 2009

26

Case Study #6

The Inmobia Case: Providing Mobile Technology and Content in NicaraguaInmobia has more than 10 years experience and knowledge in providing mobile technology and content to operators and media

companies worldwide, with the core competence of providing a stable and secure backend system and precise delivery of

content and services.

Since 2003 Inmobia has focused heavily on emerging markets and the company has previously cooperated with Danida in a

project in Kenya, where a local Inmobia office has been established. Today this office is responsible for project management

and content agreements with customers and suppliers in 18 African countries. “It was therefore natural for us to continue this

strategy with a focus on countries experiencing strong growth and the choice of establishing a company in Nicaragua was

based on several reasons”, says Flemming Lund, CEO of Inmobia.

1. Nicaragua is located centrally in the Americas region, so we can travel north and south quite effectively.

2. Nicaraguan employees are responsible and well educated compared to the cost of setting up a local office or a company.

3. Danida recommended us to apply for a B2B project in Nicaragua, as our experience in Africa was and still is very positive.

However, as Flemming points out “it is always a challenge to start in a foreign country, especially in a developing country.

Nicaragua is no exception, since many things are slower and more bureaucratic than we are accustomed to from Denmark.

Inmobia sent 3 key staff members from Denmark to Nicaragua (with families) to ensure that our plans for the region were put

into practice with our own procedures and rules. To ensure momentum around 15 local employees were recruited and already

they have improved their professional capabilities and in this way also improved Inmobia’s capacity in the region”.

When asked about the future, Flemming is very positive with regards to the company’s office in Nicaragua, and thus the strat-

egy in the region. “Our local partner, Xolo, has proven to be better qualified and motivated than we could have expected. This

has resulted in that we were able to phase out more of our Danish partners within web-design, marketing and programming.

Moreover, our development projects have increased in both budget and geographical reach. This course is a great win and we

have allocated additional resources to ensure that our cooperation will be even stronger in 2009 onwards”.

In this way, Inmobia has achieved a strong position in developing countries in Africa and now in Central and Latin America.

However, as Flemming mentions, “it is not all due to hard work but also the right timing. Our employees are diligent with

regards to visiting our regional offices and ensure knowledge transfer, team work and good work ethics.

We must honestly admit that without our focus on developing countries, the company would not have been in the favorable

position that it is today. Inmobia has simply moved from being a small player in a consolidated European mobile market to

become a leading player in high growth markets.

27

7.3 Chip sales, roaming and value added mobile servicesSince the number of units expected to be sold should grow exponentially, hardware purchases will clearly be impacted. Furthermore,

the increasing rate at which phones are replaced (particularly if they are part of a fashion trend) means higher turnover of handsets.

Other opportunities lie in additional services that providers make available, which could necessitate further chipsets in phones.

“There are opportunities for semiconductor manufactures to team up with small providers, to embed chips for value-added services like

mobile payment and remote access to corporate networks,” says Jose Abelardo Sanchez from Xolo. “Remote access looks like it will be big.”

Also roaming will be important. Approximately 90 percent of calls (minutes of telecommunications traffic) originating in Central America

and the Caribbean, including Mexico, do not stay within Latin America, according to Telegeography. Already, in Nicaragua, around 15

percent of wireless phones are using roaming capabilities.

Looking ahead, as products converge and new technologies emerge, and the distinction between wireline and wireless blurs, the need

to provide diversified bundles will increase because recent surveys of wireless subscribers in Nicaragua indicate that they prefer “one-

stop” vendors and bundled services, in the areas of wireless voice, data and paging.

And in order to drive up revenues through demand for additional services such as e-mail, fax, data and paging, and access to intranets

and file transfers, along with the use of pre-paid cards and smart cards for the mass consumer market.

7.4 Other opportunities in the ICT sector Although still young and not well structured, the arrival of 3g and network convergence capabilities has changed the service environ-

ment while expanding opportunities for foreign companies and their know-how.

Meanwhile, there is a recent trend among ICT companies to move away from developing tailored commercial and administrative ap-

plications, such as invoicing and tax management, towards more ICT service-oriented activities, the demand for infrastructure and

application professionals remains high.

• AverysmallnumberofcompanieshavebeguntoexplorenewWEB2.0basedsolutionssuchasthoseappliedinsocialnetwork-

ing and group communications, or the pay-as you-go modalities, and to develop other competencies that would allow them to be

closer to a business process approach.

• TheprogressiveexpansionofbundledITandtelecommunicationsapplicationsandservicesincreasethedemandforICT-special-

ists that can handle from simple operation and maintenance of Systems and Networks or End-user assistance to the most sophis-

ticated tasks in software-development.

• Moreover,asthegovernmentkeepsspendingonICTprojectswithaprovenimpactonpubliceducation,publichealthservices,

municipalities, rural development and SMEs (see government initiatives) there is a continuous demand for ICT specialists that are

capable of handling these projects.

7.5 Opportunities from government initiatives in the ict sectorEven when the global financial crisis might rearrange business priorities, the ICT sector is optimistic because the government of Nica-

ragua believes telecommunications and IT will help diversify the economy, and will attract knowledge-based investments, improve

productivity, reduce poverty, and significantly reduce the economic and social isolation of rural areas at a lower cost than other infra-

structure projects.

28

fITELThe Rural Telecommunications Project has been considered high priority for the government of Nicaragua. The Telecommunications

Investment Fund – Fondo de Inversión de Telecomunicaciones (FITEL) – was established in April 2004 to develop public telephony and

Internet access in rural areas that have no private telecom providers.

All infrastructure built is used in finance, decentralization, education and public health initiatives. The first pilot project was awarded

in December 2005 to ENITEL and via FITEL mobile telephony was rolled out to 30 municipalities with no previous coverage. It installed

public phones in approximately 350 rural communities lacking public service. The project extended to all 30 municipalities, having

installed public phones in 365 rural communities, with a total population of nearly half a million people.

Moreover, private ICT companies have been interested in introducing technology and applications that facilitate communications and

services, such as remittances to rural populations from relatives in the U.S. and Costa Rica. The Internet POPs could reduce the costs

and increase the flow of remittances to rural destinations. Remittances to Nicaragua’s economy comprise nearly 30% of Nicaragua’s

annual gDP. Microfinance is another area where applications developers are beginning to make inroads in the rural telecommunications

market (See the Inmobia case).

Tele centresAnother government initiative to promote ICT usage has been the pilot Tele centre project, which aims at opening one in each second-

ary school of the 103 municipal heads that currently lack Internet access and in addition also provide 103 Internet points of presence

(Internet POP) in the same municipal heads.

The project is banking on increasing Internet services as there is significant demand (nearly 830,000 people or 16% of the Nicaraguan

population) for Internet and telephone services in rural areas by a wide range of stakeholders, including municipal governments and

students who walk long distances to use commercial Internet cafes to access online training programs.

A recent FITEL study and information provided by the Finance Ministry (MHCP) found that many government officials, individuals and

businesses in rural communities travel to other municipalities with commercial Internet cafes to communicate, or to access online train-

ing programs, or to carry out transactions. So far, the 3,000 or so Internet cafes in Nicaragua have been geographical links between

urban and rural centres, and are playing an important role in developing Internet use by SMEs.

The Tele centres are being installed in public secondary schools, and will run on top of ENITEL’s NgN IP network. The company that wins

the right to provide the Internet connection will be required to furnish each pilot Tele centre with 10 computers, a local area network

(LAN) as well as one year of free connectivity. After the first year, the Education Ministry and the schools will be responsible for paying

connectivity costs at regulated rates much lower than the current monthly market rate of $725.

Meanwhile, these entities will also receive training and guidance through this project to identify ways of raising funds to finance their

Internet and equipment costs.

29

8. SWOT ANALYSIS

Strengths weaknesses

The labour force is one of the main strengths and selling •points of the Nicaraguan ICT industry. Labour is abundant,

well educated, young, and keen on learning

Salary levels are highly competitive•The national ICT infrastructure is one of the most modern in •Latin America, which awaits full exploitation

The government regards the ICT sector as an integral part of •the state modernization efforts aimed at improving govern-

ance and education, increasing decentralization, account-

ability, and transparency

The geographical position of Nicaragua is an advantage due •to its proximity to the United States as well as its central posi-

tion in the Latin American region

Taxation is favourable to foreign investments•

The lack of an industry organization that monitors the activi-•ties of the sector and is able to represent its interests and

lobby these with government agencies

Although the pool of ICT graduates is large, training in spe-•cific technologies is necessary on behalf of the companies to

be able to make use of new employees

Nicaragua is a relatively small market compared to other •markets in Latin America

Though many employees have some English knowledge, •Spanish is the primary language and therefore a language

barrier

The ICT sector in Nicaragua is still at its infancy and not very •developed

Opportunities Threats

The Nicaraguan ICT market is vibrant and developing fast with •demanding customers

The country is a natural entry point to the rest of Central •America and the region as a whole

Local competition is limited and the need for ICT solutions in •the state is a high priority

There is a potential first mover advantage for new companies •in Nicaragua as the ICT sector is still developing and has few

important players

Democracy in Nicaragua is debilitated and government rela-•tions with the international community is strained

Monopoly behaviour and market protection by some local •players

Bureaucracy in the public ICT market•

30

9. APPENDICES

9.1 List of abbreviations

ADSL Asymmetric Digital Subscriber Line

AIN Nicaraguan Internet Association

BPO Business Process Outsourcing

B2B Business To Business

CAD Computer-Aided Design

CAFTA Central American Free Trade Agreement

CAM Computer-Aided Manufacturing

CPP Calling Party Pays

CRM Customer Relationship Management

DANIDA Danish International Development Agency

ENITEL Empresa Nicaragüense de Telecommunicaciones

ERP Enterprise Resource Planning

gDP gross Domestic Product

gPS global Positioning System

gSM global System for Mobile Communications

HSDPA High-Speed Downlink Packet Access

IAOP International Association of Outsourcing Professionals

ICT Information and Communication Technology

IMF International Monetary Fund

INCAE Central American Institute of Business Administration

IP Internet Protocol

ISP Internet Service Provider

IT Information Technology

ITU International Telecommunications Union

IXP Internet Exchange Providers

MPLS Multiprotocol Label Switching

NgN Next generation Networking

POP Post Office Protocol

SDH Synchronous Digital Hierarchy

SME Small to medium-sized enterprises

UMTS Universal Mobile Telecommunications System

VAS Value Added Services

VoIP Voice over Internet Protocol

VSAT Very Small Aperture Terminal

WTO World Trade Organization

31

9.2 useful websites

9.3 Maps

Nicaragua’s Tele Infrastructure, 2007

Source: ProNicaragua6

ENicaragua www.enicaragua.org.ni

CAPTIC www.captic.net.ni

Emunicipios www.emunicipios.net.ni

gOBeNIC www.gobenic.gob.ni

CACTE www.escuelenic.org.ni

Formación TIC www.formacionentic.edu.ni

CONIPROSIT www.coniprosit.org.ni

Country.Net http://countrynet.enicaragua.org.ni/home.php

iEconomi@ http://ieconomia.enicaragua.org.ni

6 Map depicts Nicaragua s connection to the world, as of December 2007

32

Nicaragua’s Tele Infrastructure, 2008

Source: ENITEL7

9.4 Tables

Internet user Statistics

Internet users (e) 175,000

Internet penetration (e) 3,3%

Table 9.4.1

Internet user statistics – 2006

Source: BuddeComm

7 Map of fibre optics reach (in blue). Network was completed in December 2008.

33

Broadband Statistics

Total broadband subscribers 19,800

ADSL subscribers 7,064

Cable modem subscribers 9,048

Broadband penetration 0.4%

Broadband household penetration 1.8%

year Subscribers annual change

2000 15,600 n/a

2001 16,500 +6%

2002 14,500 -12%

2003 16,200 +12%

2004 15,900 -2%

2005 18,500 +16%

2006 23,600 +28%

Mobile Statistics

Mobile subscribers 2.25 million

Annual growth 42%

Mobile penetration 40.2%

Major mobile operators Claro (América Móvil)

Movistar (Telefónica)

Table 9.4.2

Broadband statistics – 2006

Source: BuddeComm

Source: BuddeComm

Source: AIN

Table 9.4.4

Mobile statistics – September 20078

Table 9.4.3

Internet subscribers and annual change – 2000 – 2006

8 The data presented are the most recent statistics but are in fact obsolete, as the number of mobile subscribers as of December 2008, were estimated

by ENITEL to be approximately 3 million.

34

Table 9.4.5

Telecommunication Costs in USD:

Source: ProNicaragua. Approximate figures.

Table 9.4.6

List of selected ICT companies in Nicaragua:

Carrier IPLC (Fibre) E1 Cost Installation Charges Initial Cost Monthly Cost

NAVEgA CZF-NAPMiami 4,100,00 1,500,00 5,600,00 4,100,00

AMNET CZF-NAPMiami 3,200,00 1,200,00 4,400,00 3,200,00

gBNET CZF-NAPMiami 2,700,00 3,500,00 6,200,00 2,700,00

gBNET Bluefields-NAP Miami 2,550,00 2,500,00 5,050,00 2,550,00

ENITEL CZF-NAP

ENTRESA CZF-Bluefields 2,270,00 700,00 1,970,00 1,270,00

Company name area of activity Contact person Email

Amnet Internet Service Provider Ing. Nestor Martinez infoni@amnetcorp.com

Asesores Informaticos Software Juan Mayoral ventas@asiasesores.com

Business Soft Software Ing. Emilio gutiérrez egutierrezl@businesssoft.com.ni

Comercial San Pablo, S.A. Hardware Lic. Jorge Carlos Icaza jicaza@tmx.com.ni

Compulab ICT Competence/Training Lic. Rafael Acevedo Meza compulab@compulab.edu.ni

Compusac Hardware Andres gregory y Everte

gamboa

compusac@cablenet.com.ni

Computecsa Hardware Lic. Noel Hernández computecsa@cablenet.com.ni

Comtech Hardware Ing. Ernesto Varela comtech@comtech.com.ni

Condor Comunicac. Internet Service Provider Lic. Daniel Fajardo Bodden gerencia@condorcomunicaciones.com

Conico Hardware Lic. Iván Fonseca jpalacios@grupo3c.com

Controles Y Sistemas Software Ing. Carlos Cerda webmaster@controlesysistemas.com

Datasystem, S.A Hardware Ing. Adolfo Miranda Palma amiranda@datasystem.com.ni

Datatex Hardware Ing. Pavel Ruiz pruiz@datatex.com.ni

Diseños Digitales Software Ing. Oscar Flores Pentzske oflores@disenosdigitales.com

Electronica Digital Hardware Lic. germán Benavidez edigital@turbonett.com.ni

Es Consultores Software Hardy Jiménez hjimenez@esconsultores.com.ni

Expertise Consultores Software Sr. Pablo Valle expertise@ideay.net.ni

g.B.M Hardware Sra. Sandra Torres López storres@gbm.net

gbnet, S.A. Hardware Lic. Blanca gonzález

(Admitivo Financiera)

bgonzale@gbnet.cc

35

geosat gPS Ing. Mario Cuadra geosat@ibw.com.ni

global De Comercio Software Ing. Octavio Macias macias@amnet.com.ni

global Tech Hardware Lic. Fernanda guzman globaltech@cablenet.com.ni

grupo Ipesa Hardware Oscar Martinez ipesaexpressclientes@cablenet.com.ni

gue gue ICT Competence/Training Lic. Alfredo Wilson info@guegue.com

Inktec Hardware Lic. Mauricio Pineda pinedapayan@yahoo.com

Ipc Solutions Hardware Ing. Javier Flores javierf@ipcsolutions.com.ni

Mastertec Hardware Ing. guillermo Vargas ventas@mastertec.com.ni

Microdata Hardware Lic. Julio José Vallejos jvallejo@microdata.com.ni

Microsa Hardware Lic. Lilliam Rowhuani microsa@ibw.com.ni

Microtec Hardware Ing. Ricardo Vargas rvargas@casapellas.com

Microtechnologys Hardware Ing. Juan Carlos Novoa

Martínez

jcnm25@hotmail.com

Pc group S.A. Software Lic. Roberto Flores Lacayo roflac_58@yahoo.com

Servicom Hardware Ing. Arturo Lara radiocom@ibw.com.ni

Simtesis Software Luis E. Barreto Novoa luis.barreto@almori.com

Sistemas Ac Hardware Lic. Carlo de la Jara Haler acuadra@aplitel.com

Sistemas Cross Software Ing. Alfredo Cuadra sales@sistemascross.com

Soft Solutions Software Lic. Neville Cross softsol@ibw.com.ni

Soluciones Informaticas Software Ing. Mario Urtecho ccastillo@turbonett.com.ni ccasna@

yahoo.com

Ssa-Sistemas Hardware César Castillo Navas jdruiz@ssasis.com

Sumin Hardware Ing. José Dolores Ruiz ventas@sumin-nic.com

Syditek Hardware Lic. Francisco Quiñónez y/o

Sra. Carolina Sánchez

mojicajuni@hotmail.com

Telssa Hardware Lic. Jonathan Abarca jraulg@telssa.com.ni

Ti Consultores, S.A. Software Ing. José Raúl gómez esilva@ticonsultores.biz.ni

Walker Nicaragua Hardware Ing. Enrique Silva walalta@ibw.com.ni, walalta@enitel.net.ni

Infornet Internet Service Provider Ing. Emma Raquel Diaz

gutièrrez

diazemma80@hotmail.com

Compu-Sistemas, S.A. Hardware Lic. Claudia Cuarezma

gutiérrez

ventas@compusistemas.net

Systemax Hardware Lic. Claudia garcia sysgerencia@cablenet.com.ni

Agente Autorizado Movistar Telecommunications Lic. Danilo Abud Vivas infasa@cablenet.com.ni

Alliance, S.A. Telecommunications Lic. William Aldana J. xsoza@estesa.com.ni

Celltech Telecommunications Lic. Douglas A. Obando dobancerd@hotmail.com

E. Business Distribution De

Nicaragua, S.A.

Telecommunications Lic. María Atha Salinas ma@aplitel.com

Ecami, S.A. Telecommunications Lic. Luis gonzalo Lacayo

Lacayo

ecami@ibw.com.ni

36

Mobile Factory, S.A. De

Capital Variable

Telecommunications Ing. Hazel Blanco hblanco@mobile-factory.com

Newcom Nicaragua Telecommunications Ing. Nestor Martinez nmartinez@amnetus.com

Redcom, S.A. Telecommunications Lic. gustavo Ferrea dreyes@cablenet.com.ni

Comunica, S.A. Hardware Lic. Pedro Cervera comunic@turbonett.com.ni

Syscom Hardware Lic. Manuel J. Riguero syscom@syscom.com.ni

Cable Net, S.A. Internet Service Provider Lic. Bernardo Chamorro

Arguello

bernardo@cablenet.com.ni

Joseph Servicios Y Cia Ltda. Internet Service Provider Ing. Nestor Martinez nmartinez@amnetus.com

Redes De Centroamerica,

S.A.

Internet Service Provider Lic. Haroldo Juàrez Morales lauditor@intelnett.com

37

10. REFERENCES

10.1 reports• PropuestadeplanestratégicoparalaComisióndelsectorTIC-MIPYME,YvesChaix,Enero2007.

• PresentaciónCarrerasenTecnologíadelaInformaciónyelretodedefinirlas,CornelioHoppman,2006.

• PlandeTrabajo,CONIPROSIT,2006-2007.

• GlobalTelecomServicesRevenueForecast2008-2013:EmergingMarketOpportunities,PyramidResearch,2009.

• MobileandHandsetTrendsinLatinAmericafromreport“HandsetsgetaLatinbeat:MobileusersinLatinAmericaturntoMusic,

Camera and 3g”, Omar Salvador, Senior Analyst, Pyramid Research, 2008.

• BuddeComm’sAnnualPublicationontheCentralAmericancountries–2008Telecoms,MobileandBroadbandinLatinAmerica–

the Central American Countries.

• OpportunitiesinTelecommunicationsEquipment/ServicesCentralAmerica,RodrigoRojas,RegionalIndustrySpecialist,COMTEL-

CA, 2006.

• RuralTelecommunicationsinNicaragua,ProjectAppraisal,Feb2006,WorldBank.

• TopTenIDCpredictions2009forLatinAmerica,http://www.idclatin.com/campaign/predictions/predictions_09_press_confer-

ence.html

• NationalDevelopmentStrategyofICT,2005,TheICTCommission/Asdi

10.2 List of interviewsMr. Jose Abelardo Sanchez, CEO, Xolo Sistemas y Servicios de Información, S.A.

Mr. Javier Wilson, Administrative Manager, güegüe Comunicaciones.

Mr. Enrique Silva, Presidente, TIConsultores.

Victor garcia, gerente de Regulaciones, ENITEL/America Movil.

Flemming Lund, CEO, Inmobia.

gustavo Mercado, general Manager, PatentVest.

Christopher Marlett, CEO, PatentVest.

Luis Barreto, Almori

Claudia Salieron, Corporate Communications, Almori

David Ibarra, Former CEO, ENITEL

Fermin Pineda, Director, Scientific Initiatives, Conicyt

Maria Jose guerrero, ProNicaragua

Esther Vega, ProNicaragua

Eugenio Icaza, Former Telcor executive, the Regulatory Entity of Nic.

Luis Lopez, Director of Private Sector program, DANIDA

Yves Chaix, CEO, Char(i)

Luciano Sensidoni, Presidente, ASIS

Fernando Solis, Presidente, IDEAY

Tania Castro, Director, Asociación de Internet de Nicaragua (AIN),

Juan Martinez Toribio, Director, UNI (Universidad de Ingenieria) Online.

Alberto Santos, ENATREL

Moises Reyes, Director de Diseño de Sistemas, DATASYSTEM

Leslie Arathoon, Directora de Investigación de Mercado, Latinoamérica, Pyramid Research,

Lucia Bibolini, Consultora de Mercado, Budde Communications.

38

10.3 List of companies visitedXolo Sistemas y Servicios de Información. www.xolo.com.ni

güegüe Comunicaciones. www.guegue.com

TIConsultores. www.ticonsultores.biz.ni

ENITEL/America Movil. www.enitel.com.ni

Inmobia. www.inmobia.com

PatentVest. www.patentvest.com

Ideay. www.ideay.net.ni

Datasystem. www.datasystemsa.com

Almori.

Char(i).

ASIS.