VZCZCXYZ0000
RR RUEHWEB

DE RUEHMU #1034/01 2931904
ZNY CCCCC ZZH
R 201904Z OCT 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 4672
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 0202
RHEFDIA/DIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUMIAAA/CDR USSOUTHCOM MIAMI FL
RHEHNSC/NSC WASHINGTON DC

C O N F I D E N T I A L MANAGUA 001034 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC AND EEB 
STATE PASS USTR 
EEB FOR CIP/BA 
TREASURY FOR SARA SENICH 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
E.O. 12958: DECL: 10/20/2019 
TAGS: ECON ECPS ETRD PGOV TINT RS NU
SUBJECT: NICARAGUA: TELECOM LICENSE SENDS BAD SIGNAL 
 
REF: A. MANAGUA 562 
     ¶B. MANAGUA 947 
     ¶C. MANAGUA 959 
 
Classified By: Ambassador Robert J. Callahan for reasons 1.4 b & d. 
 
SUMMARY 
------- 
 
¶1. (C) On September 30, the Nicaraguan Telecommunications and 
Postal Services Institute (TELCOR) awarded a license allowing 
a Russian-Nicaraguan joint venture, Yota de Nicaragua (Yota), 
to offer telephone and internet services via wireless 
technology.  Local reaction to the licensing agreement has 
been highly critical and well-publicized in the Nicaraguan 
media, amid claims of favoritism and a lack of transparency. 
The local partners have close ties to the ruling Sandinista 
National Liberation Front (FSLN) party.  The involvement of a 
Russian firm reflects Ortega's desire to strengthen bilateral 
ties and presumably obtain further Russian assistance.  The 
non-transparent nature of the Yota award only serves to 
further damage Nicaragua's already poor investment climate. 
 
Russian Telecom Firm Awarded License 
------------------------------------ 
 
¶2. (U) On September 30, TELCOR (the GON,s telecommunications 
regulator) awarded a license to provide telephone and 
internet services via wireless technology.  A request for 
proposals appeared on TELCOR's website on July 24 with an 
abbreviated bidding window of July 27 to 30.  In addition to 
Yota, three other companies -- Movistar, Claro and Amnet -- 
competed for the license despite the tight deadline. 
 
¶3. (C) The winner, Yota, is a Russian-Nicaraguan joint 
venture that partners Russian state-owned Rostekhnologii with 
Nicaraguans Jose Mojica Mejia and Jose Maria Enriquez 
Moncada.  According to press reports, Mejia is an associate 
of President Daniel Ortega and First Lady Rosario Murillo, 
while Moncada maintains close ties to Ortega,s chief 
economic advisor, Bayardo Arce.  Moreover, Mejia's ex-wife is 
on staff at TELCOR as an advisor to President Orlando 
Castillo. 
 
¶4.  (U) Yota claims it will offer the Nicaraguan market 
fourth generation (4G) wireless technology, which allows 
faster rates of data transmission compared to existing 3G 
technologies.  On October 5, Petteri Saarinen of 
telecommunications company Ericsson AB told econoff that 4G 
technology would require repeater station equipment to be 
installed on existing or new telecommunication towers to 
transmit wireless signals to Yota modems, making it 
essentially a fixed line.  Petteri suggested that the 
licensed frequency (2500-2690 MHZ) would be practical only 
for service in Managua where fixed line density is already 
high.  At present, Nicaragua's wireless sector is dominated 
by a duopoly )- Claro, part of the Mexican tycoon Carlos 
Slim's America Movil, and Telefonica de Espana's Movistar, 
both of which have grown quickly in recent years with the 
expansion of rural wireless service. 
 
Local Reaction Critical 
----------------------- 
 
¶5. (C) Industry experts characterized the three-day bidding 
period as highly unusual.  Mario Gonzalez, a former TELCOR 
Director, told econoff on October 5 that the process by which 
TELCOR selected Yota for the new license lacked transparency. 
 Gonzalez cited Nicaraguan procurement and licensing norms, 
which dictate that bidders' technical and cost proposals 
publicly be compared.  In reality, according to Gonzalez, 
Yota's proposal was the only bid opened, and subsequently 
selected, without review.  Roger Arteaga, President of the 
American Chamber of Commerce of Nicaragua, lodged similar 
complaints.  In addition, Gonzalez opined that given the lack 
of transparency in the selection of Yota, it was likely that 
the GON would continue to offer preferential treatment to the 
company within the telecommunications market.  He suggested 
that the GON could compel competing companies to allow Yota 
to place its repeater station equipment on existing towers 
throughout the country. 
 
¶6. (U) Both major daily newspapers have run front-page, 
above-the-fold articles on the Yota licensing issue over the 
last three weeks.  La Prensa, the leading center-right daily, 
published an article on October 6 citing an anonymous GON 
source who stated that the Yota license opens the door for 
the company to provide other telecommunications services as 
well.  The source suggested that TELCOR will grant Yota 
additional lower frequencies without competition.  With 
additional frequencies Yota will then be able to tap into the 
lucrative cellular, internet, and television markets. 
 
Comment 
------- 
 
¶7. (C) Unfortunately, Nicaragua's telecom sector lacks a 
regulatory environment that would truly foster a free and 
competitive market (Ref A).  The recent cancellation of the 
Amayo wind generation permit without a clear explanation (Ref 
B) and now the nontransparent awarding of a 
telecommunications license to Yota demonstrate that doing 
business in Nicaragua is increasingly contingent upon close 
ties to President Ortega and First Lady Rosario Murillo.  The 
fact that Yota is a Russian company also serves Ortega's 
geopolitical aspirations to recultivate close ties with 
Moscow.  However, Yota appears to be a legitimate provider of 
4G wireless technology, and its presence in Nicaragua could 
conceivably lead to increased consumer choice apart from the 
existing telecommunications duopoly of Claro and Movistar. 
CALLAHAN