Dominican telecoms regulator Indotel approved last week a resolution to auction off spectrum in 941-960MHz and 1710-1755MHz/2110-2155MHz in a move to attract new competitors.
The resolution creates a special committee in charge of drawing up auction rules, dates and the minimum bidding price.
In a blog posting, Signals Telecom Consulting outlined why it thinks the Dominican market is unattractive for a new entrant.
The market already has 93% penetration and looks like it could reach 100% and 9mn mobile lines by the end of the year - "in other words, an unattractive scenario for a new entrant given the high cost of acquiring customers that the player would have to face."
Of the four existing players, three already have 3G networks, making it more difficult for a new operator to differentiate itself with mobile data. Further, Claro and Tricom also have fixed-line networks, which enable them to offer service bundles.
All of them are also backed by financially strong owners.
"An operator that decides to enter the market would have to consider not only the cost of acquiring the spectrum and deploying the network, but also of positioning the brand against established and experienced competitors," Signals said.
However, Signals identifies three potential candidates that could be interested in rising to the challenge - Cable & Wireless Communications (C&WC), Digicel and Movistar, the brand of Spanish giant Telefónica (NYSE: TEF).
C&WC and Digicel are the main competitors in the Caribbean. In the case of C&WC, this year it landed its East-West cable on the Dominican Republic and was granted a 20-year contract to provide services to ISPs.
That said, C&WC shied away from bidding for a license in Costa Rica earlier this year, preferring to concentrate on consolidating its recent acquisition of a 51% stake in Bahamas incumbent BTC.
Digicel also passed on bidding in Costa Rica and decided this year to sell its El Salvador and Honduran operations to América Móvil. Besides being Spanish speaking, the Dominican Republic is in many ways socially and culturally more similar to Central America, where Digicel appears to be in retreat from (it still has an operation in Panama), according to Signals.
Movistar would be better positioned financially to set up a Greenfield operation, and the operator's interest in entering the market was alluded to by former Indotel head Rafael Vargas.
"The four existing mobile operators are likely to show most interest in the spectrum or, in a more unlikely scenario, one of the small WiMax operators that is interested in migrating to LTE in bands that would theoretically have greater economies of scale," Signals said.
The consultancy proposed that the two most viable options for a new entrant would be acquiring one of the existing operators or via the mobile virtual network operator (MVNO) model.