A number of telecoms operators have expressed an interest in investing in Cuba, following the US’ recent move to lift certain restrictions against the Caribbean island, a senior US official was reported as saying.
Roberta Jacobson, assistant secretary…
A number of telecoms operators have expressed an interest in investing in Cuba, following the US’ recent move to lift certain restrictions against the Caribbean island, a senior US official was reported as saying.
Roberta Jacobson, assistant secretary of state for Western Hemisphere affairs, reportedly said during a US Senate hearing yesterday, that “quite a few” telcos had contacted the US government to discuss the possibility of doing business in the country.
Last December, US president Barack Obama and his Cuban counterpart Raul Castro announced they would begin a process of normalising relations between the two countries, after more than 50 years of sanctions imposed by the US.
In his speech, Obama pointed out that as part of the US new Cuban policy, he would ease business restrictions on US telcos doing business with Cuba.
Many commentators welcomed the move, hoping that it would bring about a number of political, regulatory and economic changes for the Communist-ruled island.
However, some analysts are sceptical that this will translate in significant benefits for telecoms operators overnight.
According to US-based Zacks Investment Research, telecom operators may not reap any near-term gain from Cuban investments as the country still reels under highly restrictive government regulations.
“However, in the long term, Cuba may become a boon for telecom service providers. An opportunity to sell products to 11 million customers is something to reckon with,” the research firm recently wrote in its analysts’ blog.
Additionally, Cuba’s geographical proximity with the US could allow companies looking to establish a presence on the island to reduce operational costs.
“Telecommunications is a necessary utility. The need for telecom in both rural and urban areas, and its role in the infrastructure of both developed and developing markets, continues to grow and Cuba is no exception,” the company added.
Colombia-based Wally Swain, senior VP at 451 Research, argued that the Helms-Burton Act, which makes it illegal for US companies to do business in Cuba, could still pose a major hurdle to American telcos establishing operations on the island.
“There may be a blind eye (under a Democratic president) turned to low-level contacts like interconnection and roaming agreements. But I think it will be a while before there is a branded presence by the major US carriers on the island by which they earn revenues from Cuban customers,” Swain said.
In his view, it is more likely that European operators will increase their activities in Cuba, assuming that the US will not be as strict with the extra-territorial provisions of the law, “while there seems to be a thawing of the last remnant of the Cold War.”
For Ari Lopes, principal analyst for Latin America at Ovum Research, the Cuban government will object to US companies investing in such sensitive infrastructure as the telecoms sector. “I believe they will only go as far as roaming agreements, but nothing else,” he said.
During a conference in Costa Rica last week, Castro was reported by Reuters as saying he was committed to the talks despite his concern that the US might try to encourage internal opposition within Cuba as a result of improved telecommunications.
Cuba has the lowest mobile phone and internet penetration rates across Latin America. Fixed-line services are provided by government-controlled Empresa de Telecomunicaciones de Cuba (ETECSA), while its fully-owned subsidiary Cubacel offers mobile services.
Italian incumbent Telecom Italia owned a 27% stake in ETECSA until 2011, when it sold its interest to Rafin, a finance company owned by the Cuban government, for US$706m.
The government still imposes a number of restrictions on internet usage. However, according to a report by Australia-based research firm BuddeComm, since mid-2014 it allows internet services to be extended to non-agricultural cooperatives, although these must comply with the same strict conditions which apply to other authorised outlets.
A submarine fibre-optic cable between Cuba and Venezuela with the potential to provide 640 Gb/s bandwidth, ALBA-1, was scheduled to be operational by 2011 but it has faced a number of delays. In May 2013, the Jamaican branch of the cable was reportedly opened for traffic, following the route through to Venezuela in January 2013.
