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Boston, MA -- (SBWire) -- 05/19/2014 --Executive summary

El Salvador's broadband market sees steady growth

The smallest country in Central America, though with the third largest population, El Salvador is burdened with considerable income inequality, poor infrastructure and inadequate social capital.

Despite these difficulties, the telecoms sector has been one of the more successful in the nation's economy. This is particularly true of mobile services, which are emerging as the country's preferred avenue of communication given the poor state of fixed-line infrastructure in many areas. The use of text messaging and multimedia has gained traction as an alternative for voice services, and there is a clear trend towards services supported by 3G networks as these are expanded by network operators.

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El Salvador's fixed-line teledensity is substantially lower than the Latin American and Caribbean average. However, there has been a significant drop in the number of fixed lines since 2010, largely due to the substitution for mobile-only alternatives.

Mobile penetration is remarkably high considering El Salvador's economic indicators, being about 35% higher than average for Latin America and the Caribbean. Of the estimated total number of telephones in the country, 11% are fixed and 91% are mobile.

El Salvador's telecom legislation is one of the more liberal in Latin America, encouraging competition in most aspects of the telecoms sector and permitting foreign investment in all areas. However, there are no regulations as yet which promote wholesale broadband, and thus the ADSL market remains a virtual monopoly for Claro. The only effective cross-platform competition in the broadband market comes from the few cable operators.

Although many companies launched services when the telecom sector was liberalised, the market has been undergoing a gradual process of consolidation, leaving a few dominant multinational operators (notably Millicom's Tigo, America Movil's Claro, and Telefonica's Movistar), which have managed to expand into almost all sectors through a process of convergence.

The mobile market is served by five operators: Tigo, Movistar, Claro, Digicel, and Intelfon.

The fastest growing sectors in coming years will continue to be pay TV and broadband (both fixed and mobile). The outlook is especially promising for mobile broadband, which could help to bolster the slipping mobile ARPU figures in the medium term. The longer-term prospect is also promising, particularly in the mobile sector where competition between Claro, Tigo, and Telefonica will oblige the operators to diversify services and reduce prices.

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