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UDPATE: Ecuador Government: America Movil Unit May Lose License

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(Updates with comments from government official)

QUITO -(Dow Jones)- Mexican telecommunications company America Movil has 30 days to fix problems with the network of its local operator in Ecuador, or the Ecuadorean government will cancel its operating license, the country's telecommunications regulator said Monday.

"We have started the process of termination of contract; according to the law the company has 30 days to fix the problems or if it doesn't the contract will be terminated," said Paul Rojas, Ecuador's telecommunications superintendent, during a press conference.

"If it fixes (the problems) we will all have won with an improved quality of service, Rojas said.

America Movil's local unit, Porta Celular, had service problems on Sept. 25 which left some customers without service for around six hours, while the total outages were for more than 19 hours across the country, the superintendency said.

According to Rojas, it was the fourth time that Porta Celular had problems. The main group of customers affected use pre-paid plans, which account for about 90% of the firm's customers.

These recurring problems "mean that the prepaid platform has a level of performance that is below what is recommended," Rojas said, adding that there was no evidence of a plan to correct these problems.

Rojas said that, if the firm's license is indeed canceled, there would be a process for "the transfer of assets," but declined to provide details.

Ecuador's government has stepped up the pressure on Ecuador's two privately owned mobile telephone operators in recent months, as it prepares to discuss renewing concessions that expire next year. The government wants to increase the taxes and royalties it receives from the operators in exchange for the operating license.

Ecuador President Rafael Correa previously has said the two companies must accept changes to their concession contracts by the end of this year, or else the government will hold a tender to award new concessions in 2008. Conecel has a concession that expires Aug. 28, 2008. The second privately owned operator is Otecel, a unit of Spain's Telefonica that operates under the Movistar brand, whose concession is up on Nov. 29, 2008. Porta has around 6.3 million customers, while Movistar has 2.6 million customers.

Talks between the government and the operators haven't yet started, according to people at the superintendency that are familiar with the situation.

A spokesman for Porta Celular said the firm is analyzing the decision and may provide its position by the end of the day.

The firm previously has said the problems on Sept. 25 were due to excessive text-message traffic and has suggested crediting customers with an extra day of service in their accounts.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@dowjones.com

(END) Dow Jones Newswires

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Tags: america movil  movistar  rafael correa  taxes  termination  porta  Ecuador