BUSINESS OPPORTUNITIES WITHIN

THE IT AND TELECOMMUNICATION

INDUSTRY

nicaragua
 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

2
© Ministry of Foreign Affairs of Denmark
Danida

June 2009

Publisher
Ministry 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

Production
The 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

Coverphoto
Kristian Granquist

The report can be downloaded from:

www.b2bprogramme.com

ISBN 978-87-7087-195-2

3
EXECUTIVE SUMMARY

Introduction
Nicaragua’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 force
Nicaragua 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.

Infrastructure
The 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 opportunities
The 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..........................................................................................................................................9

3.1 Ict organizations.............................................................................................................................................................................. 9

4. Ict sector overview: key areas of operation............................................................................................................................ 10

4.1 It sector.......................................................................................................................................................................................... 10
4.2 Call centres and business process outsourcing (bpo).................................................................................................................... 10
4.3 Fixed Line Telephony providers........................................................................................................................................................13
4.4 Mobile Telephony providers........................................................................................................................................................... 14
4.5 Internet service providers............................................................................................................................................................... 14
4.6 Ip and voice over internet protocol (voip)........................................................................................................................................15

5. The new national ict infrastructure.......................................................................................................................................... 16

5.1 High bandwidth infrastructure........................................................................................................................................................ 16
5.2 Backhaul providers........................................................................................................................................................................ 16
5.3 Globalstar vsat................................................................................................................................................................................17

6. Why nicaragua?...............................................................................................................................................................................18
6.1 Key tax rules and regulations.......................................................................................................................................................... 18
6.2 Political risks..................................................................................................................................................................................19
6.3 Labour force and education.............................................................................................................................................................19
6.4 Number of employees and cost of labour........................................................................................................................................19
6.5 Ict education................................................................................................................................................................................. 20
6.6 English proficiency......................................................................................................................................................................... 23
6.7 Electricity and stability of power supply......................................................................................................................................... 23
6.8 Time zone, normal working hours and -weekdays.......................................................................................................................... 23

7. Conclusion: opportunities for ict businesses in nicaragua.................................................................................................24

7.1 Outsourcing, bpos, and contact centres......................................................................................................................................... 24
7.2 Ip centric-networks and broadband convergence services............................................................................................................. 24
7.3 Chip sales, roaming and value added mobile services.................................................................................................................... 27
7.4 Other opportunities in the ict sector.............................................................................................................................................. 27
7.5 Opportunities from government initiatives in the ict sector........................................................................................................... 27

8. Swot analysis..................................................................................................................................................................................29

9. Appendices........................................................................................................................................................................................30
9.1 List of abbreviations....................................................................................................................................................................... 30
9.2 Useful websites...............................................................................................................................................................................31
9.3 Maps...............................................................................................................................................................................................31
9.4 Tables............................................................................................................................................................................................ 32

10. References......................................................................................................................................................................................37
10.1 Reports......................................................................................................................................................................................... 37
10.2 List of interviews.......................................................................................................................................................................... 37
10.3 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.

ICT Sector Company Distribution

ISPs

Mobile Telephony
5 Carriers
18 Call Centres
12
Softw are Developm ent
Com panies
2 Hardw are Distributors

12
Com puter Aid Design
12 Com panies
ICT Com petence/Training
3 Com panies

9 Universities w ith ICT

15 Curriculum
Other Specialized Areas

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 organizations

Although 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.

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4. Ict sector overview: key areas of operation

4.1 It sector
The 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:

• customer development and emarketing

• customer service and support
• e-commerce
• finance and accounting
• human resources
• procurement and maintenance,
• repair and operation
• sales force and automatization
• supply chain management
• enterprise information portal
• Enterprise Resource Planning

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

10
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:

Insurance Banking/Finance Telecom Retail Pre-Media Publishing

Claims Processing Data Entry Correspondence/E- Correspondence/E- Content Management

Mail Mail

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

Source: ProNicaragua

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

• A workforce with good English skills and a good understanding of American business because many grew up in the United States
when their parents left the country in the 1980s.
• Also the English-speaking capabilities of the Caribbean coast are as of yet unexplored great potential, according to ProNicaragua.
• The country is a convenient nearshore location for U.S. businesses because it’s in the Central Time Zone and has a 100 percent tax
exemption for manufacturing suppliers and machinery under its Free Trade Zone Regime.
• Companies never have trouble filling jobs in Nicaragua and the employee turnover is low.

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Case Study #1

The PatentVest Case: Offshoring in Nicaragua

Chris 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

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)

4.4 Mobile Telephony providers

Since 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 providers

A 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.

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.

14
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.

15
5. The new national ict infrastructure

5.1 High bandwidth infrastructure

The 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.

16
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 vsat

Rolling 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.

17
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:

• Exports of goods and services as a percent of GDP.

• Imports of goods and services as a percent of GDP.
• Foreign direct investment as a percent of GDP.
• Tourism receipts as a percent of GDP.
• Remittances as a percent of GDP.
• Internet penetration.

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
exemption on imported supplies, raw materials, and machinery under the Free Trade Zone Regime.

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
companies to apply to operate under the Free Trade Zone regime. The FTA also seeks to stimulate all types of ICT-related services in Nicara-
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:
• full currency convertibility,
• freedom to expatriate all capital and profits,
• full international ownership,
• no discriminatory treatment for foreign investors
• full protection of intellectual property rights, patents, and brands.

18
6.2 Political risks
The 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 education

Nicaragua 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.

90

80

70

60

50

40

30

20

10

0
Honduras Guatemala Mexico El Salvador Panama Nicaragua Costa Rica

Labour Market Stability

Source: Viewswire Risk Briefing Services, September 2008

6.4 Number of employees and cost of labour

Based 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.

19
 Panama Costa Rica El Salvador Guatemala Nicaragua Honduras

Spanish US$ 410 – US$ US$ 590 N/A US$ 360 – US$ US$ 290 – US$ N/A
agents 550 430 365

Bilingual US$ 750 – US$ US$ 750 US$ 700 US$ 575 US$ 500 US$ 525
agents 890

Cost of T1 US$ 700 per US$ 3,700 per US$ 1,000 per US$ 1,200 per US$ 1,600 per US$ 1,450 per
(NAP) month month month month month month

Office rental Premium: Premium: Premium: Premium: Premium: Premium:

(m² per month) US$ 8 -16 US$ 17 -20 Stan- US$ 13-15 US$ 6-9 US$ 13-16 US$ 10-15
Standard: dard: Industrial space: Industrial space: Industrial space: Industrial space:
US$ 6-10 US$ 13-16 US$ 4 US$ 2-6 US$ 3-6 US$ 3.5-4
Basic:
US$ 10-12

Source: ProNicaragua

6.5 Ict education

According 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

IT & Engineering

14%
Law
25%

10% Business
Administration
5% Others
9%
Agro

37%
Sciences &
Medicine
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.

20
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.

21
Case Study #5

The BellCom Case: E-education and E-learning products and services

BellCom 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.

22
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:

• 1 U.S. accredited English language university
• 5 bilingual university programs
• 5 bilingual high schools
• More than 30 English Language Institutes

6.7 Electricity and stability of power supply

Energy 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

23
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 centres

Some 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.

24
Mobile data
Mobile 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

25
Case Study #6

The Inmobia Case: Providing Mobile Technology and Content in Nicaragua

Inmobia 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.

26
7.3 Chip sales, roaming and value added mobile services
Since 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.

• A very small number of companies have begun to explore new WEB 2.0 based solutions such as those applied in social network-
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.

• The progressive expansion of bundled IT and telecommunications applications and services increase the demand for ICT-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, 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.

7.5 Opportunities from government initiatives in the ict sector

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.

27
FITEL
The 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 centres
Another 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.

28
8. Swot analysis
Strengths
• 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
Opportunities
• 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
29
Weaknesses
• 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
Threats
• 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
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

30
9.2 Useful websites

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

9.3 Maps

Nicaragua’s Tele Infrastructure, 2007

Source: ProNicaragua6

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

31
Nicaragua’s Tele Infrastructure, 2008

Source: ENITEL7

9.4 Tables

Table 9.4.1
Internet user statistics – 2006

Internet User Statistics

Internet users (e) 175,000

Internet penetration (e) 3,3%

Source: BuddeComm

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

32
Table 9.4.2
Broadband statistics – 2006

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%

Source: BuddeComm

Table 9.4.3
Internet subscribers and annual change – 2000 – 2006

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%
Source: BuddeComm

Table 9.4.4
Mobile statistics – September 20078

Mobile Statistics

Mobile subscribers 2.25 million

Annual growth 42%

Mobile penetration 40.2%

Major mobile operators Claro (América Móvil)

Movistar (Telefónica)

Source: AIN

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.

33
Table 9.4.5
Telecommunication Costs in USD:

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

NAVEGA CZF-NAP Miami 4,100,00 1,500,00 5,600,00 4,100,00

AMNET CZF-NAP Miami 3,200,00 1,200,00 4,400,00 3,200,00

GBNET CZF-NAP Miami 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

Source: ProNicaragua. Approximate figures.

Table 9.4.6
List of selected ICT companies in Nicaragua:

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 compusac@cablenet.com.ni
Gamboa
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 bgonzale@gbnet.cc
(Admitivo Financiera)

34
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 jcnm25@hotmail.com
Martínez
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 mojicajuni@hotmail.com
Sra. Carolina Sánchez
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 diazemma80@hotmail.com
Gutièrrez
Compu-Sistemas, S.A. Hardware Lic. Claudia Cuarezma ventas@compusistemas.net
Gutiérrez
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 Telecommunications Lic. María Atha Salinas ma@aplitel.com
Nicaragua, S.A.
Ecami, S.A. Telecommunications Lic. Luis Gonzalo Lacayo ecami@ibw.com.ni
Lacayo

35
Mobile Factory, S.A. De
Capital Variable
Newcom Nicaragua
Redcom, S.A.
Comunica, S.A.
Syscom
Cable Net, S.A.
Joseph Servicios Y Cia Ltda.
Redes De Centroamerica,
S.A.
Telecommunications Ing. Hazel Blanco
Telecommunications Ing. Nestor Martinez
Telecommunications Lic. Gustavo Ferrea
Hardware Lic. Pedro Cervera
Hardware Lic. Manuel J. Riguero
Internet Service Provider Lic. Bernardo Chamorro
Arguello
Internet Service Provider Ing. Nestor Martinez
Internet Service Provider Lic. Haroldo Juàrez Morales
36
hblanco@mobile-factory.com
nmartinez@amnetus.com
dreyes@cablenet.com.ni
comunic@turbonett.com.ni
syscom@syscom.com.ni
bernardo@cablenet.com.ni
nmartinez@amnetus.com
lauditor@intelnett.com
10. References

10.1 Reports
• Propuesta de plan estratégico para la Comisión del sector TIC-MIPYME, Yves Chaix, Enero 2007.
• Presentación Carreras en Tecnología de la Información y el reto de definirlas, Cornelio Hoppman, 2006.
• Plan de Trabajo, CONIPROSIT, 2006-2007.
• Global Telecom Services Revenue Forecast 2008-2013: Emerging Market Opportunities, Pyramid Research, 2009.
• Mobile and Handset Trends in Latin America from report “Handsets get a Latin beat: Mobile users in Latin America turn to Music,
Camera and 3G”, Omar Salvador, Senior Analyst, Pyramid Research, 2008.
• BuddeComm’s Annual Publication on the Central American countries – 2008 Telecoms, Mobile and Broadband in Latin America –
the Central American Countries.
• Opportunities in Telecommunications Equipment/Services Central America, Rodrigo Rojas, Regional Industry Specialist, COMTEL-
CA, 2006.
• Rural Telecommunications in Nicaragua, Project Appraisal, Feb 2006, World Bank.
• Top Ten IDC predictions 2009 for Latin America, http://www.idclatin.com/campaign/predictions/predictions_09_press_confer-
ence.html
• National Development Strategy of ICT, 2005, The ICT Commission / Asdi

10.2 List of interviews

Mr. 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.

37
10.3 List of companies visited
Xolo 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.

38