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					             REPUBLIC OF PANAMA




      INFORMATION MEMORANDUM

UPCOMING PUBLIC BID FOR AWARDING TWO (2) CONCESSIONS
    FOR PROVIDING THE PERSONAL COMMUNICATIONS
                 SERVICE (PCS) No. 106




PANAMA, MAY 25, 2007
                             REPÚBLICA DE PANAMÁ
                             AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS


                                               TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................1
INTRODUCTION ..................................................................................................................2
1. EXECUTIVE SUMMARY                                                                                                          3
    1.1 The Concessions ......................................................................................................3
    1.2 Definition of the Personal Communications Service (PCS) No. 106 in
        accordance with Resolution JD-025 of December 12, 1996: ............................3
    1.3 The Radio-electric Spectrum ................................................................................4
2    THE PUBLIC BID                                                                                                                   4
     2.1. Information of Interest ..........................................................................................4
     2.2 Schedule ....................................................................................................................5
3. THE CONCESSIONS
   3.1. Number of Concessions ..........................................................................................7
   3.2. Summary of the terms of the concession .............................................................7
   3.3 Duration of the concession.....................................................................................8
   3.4 Termination of the concession contract ..............................................................9
   3.5 Requirements for the network layout ..................................................................9
   3.6 Availability of the Radio-electric Spectrum .......................................................9
   3.7 Additional use of the assigned Radio-electric Spectrum ..................................9
   3.8 Additional use of the Radio-electric Spectrum for operation of the
        infrastructure of the Personal Communications Service ...............................10
   3.9 Use of Technology .................................................................................................10
   3.10 Transfer of the concession ...................................................................................10
4. IMPORTANT POLICY AND REGULATION ISSUES IN THE
   TELECOMMUNICATIONS SECTOR                                                                                              10
   4.1 Panamanian State policies in the matter of telecommunications ..................10
   4.2 Numbering issues ..................................................................................................11
   4.3 Issues related to the Public Health .....................................................................12
5. LEGAL FRAMEWORK                                                                                                                 12
6. TECHNICAL DESCRIPTION OF THE PERSONAL COMMUNICATIONS
   SERVICE                                                                                  14
   6.1 Channeling the Personal Communications Service (PCS) .............................14
   6.2 Range of the Personal Communications Service (PCS) ..................................14
7. THE PANAMA MARKET                                                                                    15
   7.1 Economic and Demographic Indicators ...........................................................15
   7.2 Mobile Telephony Market in Panama ...............................................................19

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                      REPÚBLICA DE PANAMÁ
                      AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS




INTRODUCTION
This Information Memorandum has been prepared by the Autoridad Nacional de los
Servicios Públicos de Panamá [National Authority of the Public Services] (from here on:
ASEP), with the purpose of informing the interested parties on the dispositions of the next
Public Bid for awarding two (2) concessions that enable the Republic of Panama, the
provision of the “Personal Communications Service known as PCS” defined in the
Panamanian legislation as telecommunications service Nº 106.


This document shall not be considered as an invitation to participate in the Public Bid. The
ASEP, at the appropriate time will publish the date when the Public Act will take place.


It is advised that the information contained in this Memorandum is subject to changes until
the publication date of the convocation to the Public Bid; additionally it is fitting to point
out that this memorandum will not constitute the basis of a contractual agreement.


The interested parties are invited to submit their comments by writing, in the Spanish
language, listing the general data such as, company, name, address, electronic mail, fax
and telephone number, referring to the precise sections of the Information Memorandum.


Additionally,   the    interested   parties   may    obtain    more    information,    in   the
telecommunications section of ASEP’s Internet site: http://www.asep.gob.pa/telecom/default.asp


The comments to this document may be expressed and submitted by August 20, 2007.
The interested parties shall designate a contact person. The comments must be sent to the
following address:


For the ASEP-PCS Information Memorandum
(Engineer Manuel Troitiño)
Autoridad Nacional de los Servicios Públicos
Edificio Office Park, Vía España y Fernández de Córdoba
Apartado Postal 0816-01235 Panama, Rep. of Panama
E-Mail: pcs@asep.gob.pa




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                    AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS


1. EXECUTIVE SUMMARY


1.1   The Concessions
Two (2) concessions will be submitted to the bidding process for providing, the operators’
own account and risk, the Personal Communications Service (PCS) Nº 106 throughout the
entire National territory. The operators of the aforementioned concessions will compete
with the current concessionaires of the Cellular Mobile Telephony Service, Bands “A” and
“B”.


Each concession will have a duration of twenty (20) years, and can be renewed by paying
the right to the use of the frequency, for an equal period, provided that the concessionaire
complies with the requirements and obligations set forth included in the concession
contract, the Law and its Regulations, and the Resolutions that are issued by the ASEP, in
agreement with the procedure established by the Law and its Regulations.


The system that the concessionaire develops shall be based on the digital access
technology, that he considers most convenient in his network, complies with the
recommendations that are dictated for this type of service by the International
Telecommunications Union (ITU); be commercially available, duly proven, and that it
allows the interconnectivity with the existing networks of the other operators of the
telecommunications services.


1.2    Definition of the Personal Communications Service (PCS) Nº 106, in
      accordance to Resolution JD-025 of December 12, 1996:
The mobile public telephony that consists on the transmission or transportation of the low
power radio emissions generated and received by the terminal equipment or radio-
telephones in the hands of the clients or users of the service with the purpose that these
persons can originate and receive telephone calls or equivalent transmissions, utilizing for
this end a system based on a radio-base network connected to a control and switching
exchange, that by means of the reutilization of frequencies or the “frequency hopping”
technology” or other means that automatically enables the continuity of the
communication between the user and the mobile exchange control to which it is connected
(“hands off”) between cells and from there to the public telecommunications network,
using, for this purpose, any band of frequencies assigned by the Regulating Authority ,
excluding the frequencies assigned to the “A” Band and “B” Band of the cellular mobile


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telephony, defined in the Article 5 of Law 17 of 1991 and the services that use satellites.


This personal communications service includes the origin and the reception of
communications from and to the radio-telephone, directed to or coming from other clients
of the same communications system or any other telecommunications service with which
it interconnects, including other Personal Communications Systems of the Cellular Mobile
Telephony Systems and the Basic Telecommunications Network.


1.3    The Radio-Electric Spectrum
For the provision of the Personal Communications Service (PCS) No. 106 there exist the
following availability for the radio-electric spectrum:


                Segment 1: Bandwidth total, 30 MHz
        Mobile Frequency in MHz               Radio Base Frequency in MHz
                  (Uplink)                                (Downlink)
               1850 – 1865                                1930 – 1945


              Segment 2: Bandwidth total, 30 MHz
       Mobile Frequency in MHz               Radio Base Frequency in MHz
                 (Uplink)                                 (Downlink)
               1870 – 1885                                1950 – 1965


Each concession will have the option of expanding the frequency of the bands assigned for
such purpose, under the conditions and terms that will be provided in the respective
concession contract, by way of a previous payment for the assigned radio-electric
spectrum.


2      THE PUBLIC BID


2.1. Information of Interest
ASEP, by means of a Public Bid process, and with grounds on the provisions of the First
Section of Chapter 3 of Decreto Ejecutivo No. 73 de 9 de abril de 1997, will award two (2)
separate concessions of the Personal Communication Service (PCS) No. 106. Each bidder
is eligible for obtaining only one (1) of the concessions.



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Any national or foreign corporate person, with experience in the operation of the Personal
Communications Service, or Cellular Mobile Telephony and that are registered in the
Public Registry, such as it is provided by Law 32 of February 26, 1927 on Limited
Companies.


2.2    Schedule


ASEP reserves the right to decide on the schedule of the Public Bid. ASEP, with the
objective of assisting the interested parties in participating in the Public bid, has included
in this Information Memorandum the following indicative schedule, with the
corresponding stages:

                     Activity                                      Deadline
Publication of the Information Memorandum for                   May 31, 2007
receiving indications of interest in participating
Meeting with representatives of companies                      August 21, 2007
interested in bidding
Approval of the Pre-qualification Document                     October 25, 2007
Emission of invitation to participate                          October 29, 2007
Submittal of Pre-qualification Request                         January 28, 2008
Evaluation, Pre-qualification and Announcement               January 29, 2008 to
of the Pre-qualified Bidders
                                                              February 27, 2008
Homologation Process (List of Charges and                      March 13, 2008
Concession Contract)
Approval of List of Charges and Concession                      April 18, 2008
Contract
Submittal    of     economical offers  and                      May 21, 2008
announcement of the winners
Signature of the Concession Contract and                        May 21, 2008
payment of the rights




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                     AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS


2.2.1   Publication of the Information Memorandum for Receiving Indications of Interest
        in Participating.


        This document has the object of providing the interested investors a series of
        information related with macro-economy aspects of the telecommunications
        industry in the Republic of Panama and of the bidding process itself.


        On the other hand, ASEP seeks to receive feedback from the companies interested
        in participating in the Public Bid.


2.2.2   Emission of the Invitation to Participate


        By means of announcement published during three (3) consecutive days in two (2)
        daily newspapers of national circulation, invitation will be extended for acquiring
        the pre-qualification documents. This announcement will formally initiate the
        Public Bid process.


2.2.3   Pre-qualification Conditions


        The Pre-qualification Conditions document has the object of assuring that the
        companies that wish to participate in the public bid provide the ASEP the legal,
        technical and financial nature information, with the purpose of determining that the
        companies can participate in the Public Bid. The aforementioned document will
        have a cost that will be announced by ASEP at the time of its publication.


2.2.4   Homologation Process


        At this stage ASEP, jointly with the pre-qualified companies, will homologate the
        Concession Contract thus defining the terms and conditions by which the State will
        award the respective concessions, this stage must be concluded previous to the
        opening of the offers.


        This stage also considers the homologation of the List of Charges that explains the
        way on how the submittal of the offer will be presented, the payment document and
        the bond for assuring the maintenance of the offer, among others.


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3.      THE CONCESSIONS


3.1.    Number of Concessions


Two (2) concessions for providing the Personal Communications service will be submitted
to bid. The provision of service includes the use of frequencies in a bandwidth of thirty
(30) MHz per concession, in accordance with the following table:


                 Segment 1: Bandwidth total, 30 MHz
         Mobile Frequencies in MHz          Radio Bases Frequencies in MHz
                   (Uplink)                            (Downlink)
                 1850 – 1865                           1930 – 1945


                   Segment 2: Bandwidth total, 30 MHz
         Mobile Frequencies in MHz          Radio Bases Frequencies in MHz
                   (Uplink)                            (Downlink)
                 1870 – 1885                           1950 – 1965



3.2.    Summary of the concession terms


3.2.1   The winners of the Public Bid will be granted individual concessions for the
        provision of the Personal Communications Service (PCS) No. 106. The concession
        will grant the right to the exclusive use of the indicated frequencies for the
        Personal Communications Service, including the supplementary services and the
        rest of the services inherent to the Personal Communications Service, among
        which the following are included, without being limitative: calls on hold , call
        transfers, conference, voice transmission, calls restriction, data transmission, video
        transmission, national and international roaming, voice mail, speed dialing and
        added value services.


3.2.2   The concessionaires shall comply with all the legislation in effect.


3.2.3   The concessions will be granted at the time of the signature of the contract between
        the State and the winners of the Public Bid for each concession.

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3.2.4   The concession contracts will include terms with respect to:


        a.     The general description of the networks that the concession authorizes to
               lay out, the requirements for development and expansion, and the
               requirements related to the provision of services.
        b.     Issues related to interconnection, access, co-location and sharing of
               facilities and infrastructure.
        c.     Numbering and number portability.
        d.     Issues on the right of use of frequencies.
        e.     Regulations referring to the provision of emergency services such as
               firemen, police, civil protection, among others.
        f.     The fees to be paid for the concession and the performance bond for
               guaranteeing compliance of the obligations derived from the concession
               contract.
        g.     Capacities of ASEP for supervising and controlling the concessions
               granted.
        h.     The transfer of the concession, or the change of control over the
               concessionaire, or the commercial exploitation of the frequencies granted or
               their numbers.
        i.     The conditions in which the concession can be amended, suspended or
               revoked.


3.2.5   The award of an individual concession will not exonerate the concessionaire from
        the following obligations:


        a.     Request all the necessary administrative permits for laying out the network.
        b.     Separately    request    the     concessions   necessary   for   the   additional
               telecommunications services that are intended to have presently or in the
               future, and for any operation other than telecommunications.


3.3     Duration of the concession


Each concession will have a duration of twenty (20) years, and may be renewed by paying
the right to the use of the frequency, up to an equal period, provided that the


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concessionaire is at the time complying with the requirements and obligations that the
concession contract, the Law, the Regulations and the Resolutions establish and the
Resolutions that are issued by ASEP, in accordance with the procedure established in the
Law and its bylaws.


3.4    Termination of the concession contract


Chapter V of Ley 31 de 8 de febrero de 1996, provides the cases that may give way to the
termination of the concession contract as well as it describes the procedure and rules that
the State must apply in the event of administrative resolution.


3.5    Requirements for laying out the network


The bidder to which the concession is awarded, will have the obligation to install, use and
maintain the equipment necessary to provide the services following the terms and
conditions corresponding to the minimum development plan included in the concession
contract (see Annex-A of the Cellular Mobile Telephony Concessions for the Bands “A”
and “B”).


3.6    Availability of the Radio-electric Spectrum

In the National Frequency Attribution Plan (PNAF, for initials in Spanish), adopted in the
year 1997, the frequencies segment for the Personal Communications Service (PCS) No.
106 were reserved, so therefore, at this time, the band frequencies of the radio-electric
spectrum corresponding to the concessions to be bid, are not being used by any service or
user and are actually free of interferences.


3.7    Additional use of the assigned Radio-electric Spectrum.


The radio-electric spectrum that is assigned to the concessionaires can be used for the
provision of the Local Basic Communications Service (No. 101) and the Public and Semi-
public Terminal Service (No. 104), as long as it is complying with the technical and legal
parameters and prior to the concession awarded by ASEP. Nevertheless, the frequencies of
the radio-electric spectrum awarded to the concessionaire, can not be transferred and/or
reassigned and/or reassigned by the concessionaire to third parties.


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3.8    Additional Radio-electric Spectrum for the operation of the infrastructure of
       the Personal Communications Service.


The frequencies for the point to point microwave links required for the Personal
Communications Service (PCS) No. 106 will be awarded by the State at no additional cost
to the payment of the concession rights, by means of the frequency assignment procedure
provided by the Law. The concessionaire may develop his own infrastructure for directly
providing the support to the Personal Communications Service.


3.9    Use of Technology


The system to be developed by the concessionaire shall be based on the digital access
technology that he considers most convenient in his network; comply with the
recommendations that for this type of service are dictated by the International
Telecommunications Union (ITU); be commercially available and duly proved, and be
compatible in a way such that assures the interconnectivity with the rest of the
telecommunications services.


3.10   Transfer of the concession


The concession transfer or the change of control of the concessionaire shall be previously
authorized by ASEP, that must assure that the service is provided continuously and
without interruptions.
The concessionaire shall have the same technical and economic conditions as the
corporate person to whom the original concession was originally awarded.


The partial assignment of segments of the radio-electric spectrum, or the numbers assigned
to the concessionaire is not permitted.


4.     IMPORTANT           POLICY         AND   REGULATION         ISSUES     IN    THE
       TELECOMMUNICATIONS SECTOR


4.1    Policies of the Panamanian State in the matter of telecommunications:


In Article 5 of Ley 31 de 8 de febrero de 1996, the policy of the Panamanian State on the


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matter of telecommunications is described in detail.


4.1.1   Freedom of Prices


The prices of the telecommunication services offered in competence plan shall be
established freely by the concessionaires.
There are only three (3) assumptions in which ASEP can establish tariffs plans for the
telecommunications services, and these are detailed in Article 38 of the Ley 31 de 8 de
febrero de 1996


4.1.2   Interconnection and access


4.1.2.1 Chapter IV of the Decreto Ejecutivo 21 de 12 de enero de 1996 provides the
        obligation of access and interconnection, the mechanism of settling conflicts, and
        the parameter for pricing the access charges and interconnection costs.


4.1.2.2 The Regulation in the matter of Telecommunications points out that the
        telecommunications companies that operate, manage and operate the Cellular
        Mobile Telephony Service and the Personal Communications Service, are in the
        obligation to provide umbumdle access of their infrastructure under the same terms
        that they provide themselves when they use the radio-electric spectrum for offering
        a different service to the Cellular Mobile Telephony or Personal Communications
        Service.


4.1.2.3 ASEP and the Autoridad de Protección al Consumidor y Defensa (Authority of
        Protection to the Consumer and Defense of the Defense of the Competition), by
        operation of law or by formal complaint, will investigate the practices that limit the
        competition. ASEP will supervise and will penalize the violations to the
        Telecommunications Law. The Autoridad de Protección al Consumidor y Defensa
        (Authority for the Protection to the Consumer) will supervise and file suit before
        the Court of Justice the violations to the Competition Law.


4.2    Numbering issues
The telephone numbers are assigned by ASEP. Annex “A” of Resolución JD-179 de 12 de
febrero de 1998 y la Resolución JD 5011 de 1 de noviembre de 2004, provide the


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National Numbering Plan.


4.3        Issues related to public health


In the subject of non-ionizing signal emissions that affect the human health, the
recommendations of the International Telecommunications Union (ITU) expressed in
recommendation K-52, are followed.


5.         LEGAL FRAMEWORK


The following list details the dispositions applicable to the telecommunications sector and
that may be consulted by the interested parties:


      a.      Constitución Política de la República de Panamá.
      b.      Ley 26 de 29 de enero de 1996 “Whereby the Public Services Regulating
              Entity is created” and its modification by means of the Decreto Ley 10 de 22
              de febrero de 2006.
      c.      Ley 31 de 8 febrero de 1996, “Whereby Rules for the Regulation of the
              Telecommunications in Panama are dictated”.
      d.      Ley 24 de 30 junio de 1999, “Whereby the Radio and Television Public
              Services is Regulated and other dispositions are dictated”.
      e.      Ley 22 de 27 de junio de 2006, “That regulates the Public Contracting and
              dictates other disposition”.
      f.      Decreto Ejecutivo 21 de 12 de enero de 1996, “Whereby the Cellular Mobile
              Telephony Service Operation Regulation is dictated”.
      g.      Decreto Ejecutivo 73 de 9 de abril de 1997, “Whereby Law No. 31 of
              February 8, 1996 is regulated, whereby rules for the Regulation of the
              Telecommunications in Panama are dictated”.
      h.      Decreto Ejecutivo 138 de 15 de junio de 1998, “Rules are dictated for the Use
              of Installations dedicated to the Provision of Telecommunications, Radio and
              Television Services”.
      i.      Decreto Ejecutivo 189 de 13 de agosto de 1999, “ Whereby Law 24 of June
              30, 1999 is regulated”
      j.      Decreto Ejecutivo 143 de 29 de septiembre de 2006, “Whereby the Only
              Text of Law 26 of January 29, 1996, added and modified by Decree Law10 of


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     February 22, 2006 is adopted”.
k.   Decreto Ejecutivo 4 de 8 de febrero de 2007, “Whereby the Only Text of of
     Law 29 of February 1, 1996, is adopted with the amendments and
     modifications introduced by Decree Law 9 of February 20, 2006”.
l.   Resolución JD-025 de 12 de dieciembre de 1996, “Whereby the
     Classification of the Telecommunications Service is adopted”.
m.   Resolución JD-080 de 10 de abril de 1997, “Whereby the conditions for the
     Personal Communications Service Bidding 106 are established”.
n.   Resolución JD-107 de 30 de septiembre de 1997, “Whereby the Plan for the
     Use of the Radio-electric Spectrum and the National Plan of Frequency
     Attributions is adopted”.
o.   Resolución JD-179 de 12 de febrero de 1998, “Whereby the National
     Numbering Plan which is a part of the National Technical Plan for
     Telecommunications is adopted”.
p.   Resolución JD-1334 de 12 de abril de 1999, “Whereby parameters are
     dictated   for   Establishing    Dominant   Position   for   the   Provision   of
     Telecommunications Public Services with Commercial Purposes, are dictated”
q.   Resolución JD-1844 ´15 de febrero de 2000, “Whereby Resolution JD-025 of
     December 12, 1996 are modified”.
r.   Resolución JD-3518 25 de septiembre de 2002, “Whereby the National
     Numbering Plan is modified, in accordance with the Public Hearing carried out
     on March 7, 2002”
s.   Resolución AN 535-TELCO de 8 de enero de 2007, “Whereby Resolution
     No. 025 of December 12, 1996 that adopted the Classification of the
     Telecommunications Service which provision is permitted in the Republic of
     Panama, is modified”.
t.   Resolución JD-4408 de 18 de diciembre de 2003, “Whereby rules are adopted
     so that the companies that provide the Cellular Mobile Telephony Service Band
     “A” and “B” offer the facilities for the Automatic Routing (Pre-subscription)
     and Access Code for National and International Long Distance Calls”.
u.   Resolución JD-5011 de 1 de noviembre de 2004, “Whereby is modified, the
     National Numbering Plan for Providing more numerical resources to the
     Cellular Mobile Telephony Service (107) in accordance to the Public
     Consultation, carried out by the Public Services Regulating Entity of
     September 13 to 24, 2004”.


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6.          TECHNICAL DESCRIPTION OF THE PERSONAL COMMUNICATIONS
            SERVICE


6.1             Channeling of the Personal Communications Service (PCS)


For the Provision of the Personal Communications Service there will be the following
options for the use of the frequency bands:



                  CHANNELING OF THE PERSONAL COMMUNICATION SERVICE (PCS)

     Segment 1               Segment 2                                                Segment 1'               Segment 2'




                                                                      Assigned for
      A     B    C      D    E     F      G     H    I   J   K    L   101 and 104 A'         B'   C'     D'    E'    F'   G'     H'   I'   J'   K'    L'
                                                                        Services




     1850       1865        1870         1885                                         1930        1945        1950        1965




                       SEGMENT 1 - 1' de 30 MHz                                                               SEGMENT 2 - 2' of 30 MHz
                       Channels          BANDWIDTH                                                            CHANNELS           BANDWIDTH
                 A     1850 - 1855 MHz          5 MHz                                                    E    1870 - 1875 MHz         5 MHz
                 B     1855 - 1860 MHz          5 MHz            15 MHz of Uplink                        F    1875 - 1880 MHz         5 MHz
                 C     1860 - 1865 MHz          5 MHz                                                    G    1880 - 1885 MHz         5 MHz
                 A'    1930 - 1935 MHz          5 MHz                                                    E'   1950 - 1955 MHz         5 MHz
                 B'    1935 - 1940 MHz          5 MHz            15 MHz of Downlink                      F'   1955 - 1960 MHz         5 MHz
                 C'    1940 - 1945 MHz          5 MHz                                                    G'   1960 - 1965 MHz         5 MHz


                Uplink: Assigned to the radiocommunication from Base Radio to Mobile
                Downlink: Assigned to the radio communication from Base Radio to Mobile.




6.2             Range of the Personal Communications Service
6.2.1 The Personal Communications Service, as a minimum, in the nature of contract,
pre-paid and public telephones, including the supplementary services and other services
inherent to the PCS Systems, among which, are included, without being limitative, call on
hold, transfer and conference calls, voice transmission, data and/or video, call restriction,
national and international roaming, voice mail, speed dialing and added value added.

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7.     THE PANAMA MARKET


The Republic of Panama, has a population of 3.3 million people, according to estimate of
the Directorate of Statistics and Census of the Republic of Panama by June 7, 2007. It has
a territorial extension of 75,517 Km2 , and the metropolitan region has an extension of
16,775 Km2 , and the rest of the country has 58,739.5 Km2. The length of its coasts is
2,988.3 kilometers of which 1,700.6 kilometers correspond to the Pacific coast line and
1,287.7 to the Atlantic coastline.


The Panamanian State is located in Central America and borders North with the Caribbean
Sea, East with the Republic of Colombia, South with the Pacific Ocean, and West with the
Republic of Costa Rica. Its Political–Administrative Division comprises nine (9) provinces
and three (3) indigenous jurisdictions.


The Panamanian Nation is a Sovereign and Independent State, its government is unitary,
republican, democratic and representative. Spanish is the official language and the
currency is Balboa (B/.), it is sub-divided in 100 cents and it is equivalent to the Dollar
(US$), which is a legal tender.


The free market policy is exercised in the country, on the other hand the existence of
foreign investors it is promoted.


7.1    Demographic and Economic Indicators

The Republic of Panama holds the best economic indicators in Latin America. During the
year 2006, the production of goods and services in the Panamanian economy, measured
through the Gross Domestic Product (GDP), evidenced a growth of 8.1% with respect to
the previous year. The GDP valued at constant prices of 1996 recorded, according to
official calculations of the Directorate of Statistics and Census, an amount of $15,141.9
million in 2006, which corresponds to an annual increment of $1,137.1 millions.




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This dynamic that the economy has been showing is reflected in the increment of all the
categories of the economic activity.

The activities related to the external sector followed with its dynamism throughout the past
years, emphasizing the export of non-traditional fruits, the ports, the hotels, the air
transportation, the Panama Canal and the Colon Free Zone.

In the internal sector evidenced good growth the construction, the banking activities, the
retail trade, mines, quarries and the communications.

The transportation activities, the storage and communication, closed the year with a
growth of 13.0%, driven mainly with the port activities, the Panama Canal, the
telecommunications and the air transportation.

It is fitting to emphasize that the Telecommunications Sector presented a growth of 16.0%,
due mainly to the growth of the Cellular Mobile Telecommunications service and the
Internet services, among others.




[Note: (P) Preliminary figures.      (E) Estimated figures         PIB = GDP]

The Graph No. 1 (above) shows that the Gross Domestic Product (GDP) at 1996 prices
and the variation percentage of the years 2002-2006, maintain a sustained growth
throughout the recent past years, and this tendency it is expected to be maintained.


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                    REPÚBLICA DE PANAMÁ
                    AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS




7.1.1. Main Economic Indicators

The evolution of the economic and social growth of the country is reflected through the
results recorded in the following economic and social indicators:

             Social and Economic Indicators in the Republic of Panama
                                Years 2004 - 2006
                        Indicator                   2004         2005           2006
          Estimated Population June 1                   3,172,370 3,228,186   3,283,959
          GDP Market price at 1996, millions $.          13,099.2  14,004.8    15,141.9
          GDP Per Capita (B/. = US$)                      4,129.0   4,338.0      4,611.0
          Imports (millions of $)                         3,592.2   4,152.8   4,568.1(e)
          Exports (millions of $)                           891.1     963.2   1,011.4(e)
          Occupied Population                             955,974 1,002,890   1,210,699
          Public Debt (millions of $)                     8,672.5   9,969.7    10,485.5
          Variation of the GDP (%)                            7.5       6.9          8.1
          Unemployment rate                                  12.7       9.8          8.6
          Public Debt as % of the GDP                        71.7      73.0         69.0
          Balance in Current                    Account
                                                           -408.0    -781.6      -378.2
          (millions of $)
         Source: Directorate of Statistics and Census and Ministry of         Economy and
         Finance.

It is fitting to point out growth of the National economy has been in an important part a
product of the appropriate atmosphere and the confidence for the public and private
investment. One of the positive repercussions is reflected by way f the reduction of the
interest rates, favoring therewith the country-risk index.


7.1.2 Companies by sector and province.

According to the Census of the year 2000, most of the businesses have at least five (5)
employees.

The managerial activity has most of its concentration in the business sector and in the
province of Panama.




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                           REPÚBLICA DE PANAMÁ
                           AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS




               Number of companies by sector, according to province. V National Economic Census-2001

                   Manufacturing Industries             Commerce             Rest of the services
                                                                                                     Transportation
                                                            Retail, with
    Province       5 or more     5 or less        Whole-                    5 or more    5 or less     storage and         Total
                                                            less than 5
                  employees     employees         sale 1/                   employees    employees   communications
                                                            employees

 Total                   965          1,959        4,177           14,792       2,371        8,836               892       33,992

Bocas del Toro            12                 67        61            767           31          338                   20     1,296

Cocle                     48                 97       142           1,065          57          351                   20     1,780

Colon                     25                 57       894            819          159          560               189        2,703

Chiriqui                 106            466           421           3,038         192        1,548                   74     5,845

Darien                                       14        12            218           ...          93                   ...     337

Herrera                   45            167           126            982           45          434                   39     1,838

Los Santos                30            193            84            882           21          458                   17     1,685

Panama                   644            768        2,315            5,730       1,819        4,471               509       16,256

Veraguas                  55            130           122           1,291          47          583                   24     2,252

1/ Includes retail business with 5 or more employees



7.1.3 Distribution of the Population


The Population and Housing Census performed on May 14, 2000, records that the
population in the Republic of Panama is 2,839,177 and reveals that more than 50% of the
population is concentrated in the provinces of Panama and Chiriqui. This high
concentration of the population is product of the perception of better opportunities and
improvement of the quality of life. Less than 6% of the population lives in indigenous
zones, identified as Kuna Yala, Emberá and Ngöbe Buglé jurisdictions.


Sixty (60) % of the population lives in urban residences, and more than 70% of these are
located in the province of Panama.




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                       REPÚBLICA DE PANAMÁ
                       AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS



                    Private residences occupied within the urban locations,
                             According to province: Year 2000 Census
                                     Number of       Composition     Without Res.
                     Province
                                     residences          %             Telephone
                  Total                    442,768        100.00          193,590
                  Bocas del Toro             7,631            1.72          4,615
                  Cocle                     14,229            3.21          7,549
                  Colon                     34,694            7.84         16,993
                  Chiriqui                  39,762            8.98         20,296
                  Darien                      346             0.08           259
                  Herrera                   12,887            2.91          5,895
                  Los Santos                 5,310            1.20          2,408
                  Panama                   314,292           70.98        128,354
                  Veraguas                  13,617            3.08          7,221
                  Source: General Comptrollers Office, Republic of Panama.


7.2    Mobile Telephony Market in Panama


The average annual income of the telecommunications sector during the period 2002-2007
has been $28.8 Millions, approximately.

        GROSS INCOME GENERATED BY THE TELECOMMUNICATIONS SECTOR
                      YEAR 2002 - 2005, ESTIMATED 2007
                               In Balboas (=US$)
 TYPE OF SERVICE       2002         2003        2004       2005       2007e
Sub Total Services
Basics              283,583,308 266,785,048 237,428,522 222,943,382 226,312,701

Other Services                63,475,318    84,929,971   38,146,616 195,346,550     102,437,876

Cellular Mobile
Service                      143,361,020 193,500,886 216,480,100 262,343,169        287,392,150

Grand Total                  490,419,646 545,215,905 492,055,237 680,633,101        616,142,727

Mobile Cellular
Service/ Grand Total              29.2%         35.5%          44.0%        38.5%        46.6%
Cellular Mobile
Service/Basic Total               50.6%         72.5%          91.2%       117.7%       127.0%
Source: National Authority of the Public Services



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                     REPÚBLICA DE PANAMÁ
                     AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS




From the above table it is concluded that the incomes generated by the Cellular mobile
Telephony Service is taking in a larger participation to a point that for the year 2007 it is
estimated that will represent 46.6% of the total gross income generated under the concept
of basic telecommunications service.


Throughout the years, the growth tendency in the demand for this service under the
Contract (post-pay) Plan has tended to decrease while the pre-pay plan continues with a
tendency of larger growth, such as can be demonstrated by means of the following Graph.

                                                      Plans used by Clients     Density
              Users of the Cellular    Variation
    Year       Mobile Telephony                                               Cellular per
                    Service               %           Post-pay     Pre- pay    each 100
                                                                              inhabitants
    1998               86,389                           54,759       31,630        3.10
    1999             223,193             158.36         45,444      177,749        7.90
    2000             410,401              83.88         55,767      354,634      14.50
    2001             475,141              15.77         60,529      414,612      15.80
    2002             525,845              10.67         69,799      456,046      17.20
    2003             692,404              31.67         95,977      596,427      27.12
    2004           1,259,948              81.97        111,808    1,148,140      39.70
    2005           1,748,740              38.79        137,931    1,610,809      54.20
  2006 (e)         1,890,388                8.10       149,103    1,741,285      57.60
  Source: National Authority of the Public Services




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                  REPÚBLICA DE PANAMÁ
                  AUTORIDAD NACIONAL DE LOS SERVICIOS PÚBLICOS



                              Telefonía Móvil Celular
                            Cellular Mobile Telephony
                                     Densidad
             60
                                                                        53.6
             50
                                                               41.9
Porcentaje

             40
                                                        39
             30
                                               22.2
             20     14.5     15.8     17.2
             10

              0
                  2000     2001     2002     2003     2004   2005     2006

                                             Year
                                             Año
                                             Year




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DOCUMENT INFO
Description: Mobile Cellular Communications document sample