Govt Proposes Subsidy for Hondutel Mobile Launch

The government of Honduras is considering subsidies to allow state telecom operator Hondutel to launch mobile services, local daily Hondudiario reported.

The subsidy proposal appears in a draft bill of measures to prepare Hondutel for competition, particularly to enable the company to compete on equal terms with private mobile operators, the daily said.

Orlando Mejía, president of the Hondutel workers' union Sitratel, was skeptical of the proposal as the government has a history of not honoring Hondutel's budget and siphoning off the company's profits for other purposes.

Hondutel's budget was 400mn lempiras in 2005 and 700mn lempiras this year, Mejía said, and according to Hondudiario the company will need an injection of 950mn lempiras (US$50mn) to enter the mobile market.

Even if such a budget is approved, the company will still need greater flexibility in purchasing equipment and infrastructure, Mejía said.

Broader reforms of the country's telecommunications law are set to allow all operators to compete in the mobile market. However, Hondutel initially received approval to expand into the mobile sector in January 2004, and was expected to begin operations in December 2005. The company is now expected to enter the PCS market by mid-2007, according to Hector Iván Núñez, CEO of startup operator Tele+.

Hondutel will face greater competition in the long distance market due to the telecom reforms, which will open the market to competition from Tigo, América Móvil and 20 operators already affiliated with Hondutel.

Due to declining long distance rates the state operator is expected to cut its annual contributions to the state by 50%, from US$75mn to US$50mn.

The government nonetheless expects to see an overall gain in revenues from a 1.25-2% tax on net earnings from new companies entering the telecom market, Núñez told BNamericas in an email.

BNAmericas.com"

Posted to the site on 10th November 2006