Enterprising operators switch on to telecoms opportunities
MAJOR INTERNATIONAL TELECOMS COMPANIES SUCH AS FRANCE TELECOM AND TRICOM HAVE MADE THEIR PRESENCE FELT IN THE DOMINICAN REPUBLIC

RAOUL FONTANEZ President and CEO of Orange/ France Telecom Dominicana

Late but not least might be a good way of summing up the position of France Telecom in the Dominican telecom market. In the little over a year since the French operator’s international brand, Orange, became the fourth competitor in an already fiercely contested arena, the company has managed to carve out a 20% share of the market in its first major venture outside the Francophone part of the Caribbean.
According to the president and CEO, Raoul Fontanez, luck alone had little to do with these spectacular results. “We could see the opportunity in the country. At the end of 2000, the penetration rate for mobile phones was about 8% and we thought that was underdeveloped in terms of the stability and growth potential of the local economy.” The company made the wise choice of looking for a local partner and found the ideal one, in Carnvale, which holds 14% of the equity.

The other ingredients in Orange’s recipe for success? “We based our marketing strategy in making mobile phones not just available but affordable,” says Mr. Fontanez. Knowing one’s customers and having the product that meshed with their demographic characteristics was also decisive. “The Caribbean is certainly a market that is interesting. The population is young, so it is easy to make an impact with new products and services. And every Dominican citizen has this deep-felt desire to modernize and keep in step with the rest of the world. As long as we can offer them something that is easy to use and financially within reach, I think they’ll go for it.”

Being the last seated at the table is not necessarily a disadvantage in the telecom sector, where you can often trump the other players by leading with the technology card. As far as Orange is concerned, that card has GSM written in all over it in capital letters. “It may not be the standard now, I’ll grant you, but it will be,” assures Mr. Fontanez. “It is an open technology in the sense that you can buy it from different suppliers, it offers more, it gives better value, comes with lots of add-on services and our group has considerable experience using it.” That standard is a key part of Orange’s strategy, both globally and even in a constricted environment like the Dominican Republic where, as Mr. Fontanez admits, “there’s only room for the top two to be successful. We intend on being in the top two and we already on our way there.”

CARL H. CARLSON Executive Vice President of Tricom

But while Orange has opted for the narrow focus, rival Tricom has become one of the Dominican companies with the highest international profile (and the only one to have its U.S. affiliate listed on the NYSE) by taking precisely the opposite approach and going all out for diversification. The result, says executive vice-president Carl H. Carlson, is that they are ranked second in the telephony sector and were named one of the world’s top 20 small companies by Forbes magazine.
“We got started in 1987, providing point-to-point data transfer for clients of the free zone industrial park,” recalls Mr. Carlson. (The park was owned by Tricom’s corporate parent, Grupo Financiero Nacional, which controls various banking and insurance interests.) “It took us until 1994 to get the interconnection rights nailed down. By that time, Motorola had come in as our partner, with the know-how that allowed us to offer cellular, local and long distance service.”

In the high-margin cell phone segment, Tricom is the only Dominican operator that can offer full national penetration. With a wireless network covering about 85% percent of the population - in a country where penetration rate is still flat lined at about 3%. Getting to control 44% percent of the existing mobile market was largely due to the company’s pioneering use of pre-paid calling cards, the right product match for customers in an developing country. The number of customers tripled in a year.

The majority of the revenues, says Mr. Carlson, comes from data exchange and their fixed-line local phone network, the latter being 100% digitalized. Old-style telephones have not yet had their day in a country where 85% of the people are living in cities and only one in ten has phone access. “Still, 50% of all new lines over the last five years were installed by us,” notes Mr. Carlson. Its US affiliate carries over half of the phone calls made from he United States to the Dominican republic, mostly by means of prepaid smart cards, and Tricom owns its owns switching facilities in New York. Miami and Puerto Rico. Last year, Tricom acquired Telecable Nacional, the country’s largest cable TV firm, which is expected to give a turbo boost to next year’s revenues.

Having identifying itself right from its start-up as an integrated communications provider, Tricom now wants to add the word regional to its descriptive handle. Tricom had taken its first cross-border stride into Panama, where it acquired control of Cellcom, an advanced mobile service provider, and has also purchased frequencies for El Salvador and Guatemala. Says Mr. Carlson: “In a few more years you will see us in Honduras, Nicaragua, Costa Rica and Venezuela. I think there will be many opportunities for growth yet to come.”