QUITO -(Dow Jones)- Spain's Telefonica is preparing for negotiations with Ecuador's government to renew the concession of its local operator, and said it has invested a total of $1.1 billion in the country to date.
"Telefonica trusts that the negotiation process will be carried out within a framework of mutual benefit for the community, the state and the company," the firm said in a statement to Dow Jones Newswires.
Telefonica said past investments have been "highly beneficial" to the country, and said there may be more investments in the future.
The operating concession for Telefonica's local unit, Otecel, expires in November 2008, and both sides are gearing up for a negotiating process which is expected to begin later this year, after the country's regulatory agencies prepare a report on Otecel's performance under the current contract.
In recent days, President Rafael Correa has taken a hard line with the operators, saying there will be a "tough negotiation" to renew the contracts.
The president said Ecuador has the "worst and most expensive mobile telephone service in the world." He accused the two private-sector operators in Ecuador of colluding on prices, and said he plans to introduce an antitrust law to prevent that from happening in the future.
"In 2008, we will re-negotiate with transparency and patriotism those contracts. We will oblige both companies to provide better service and at a much lower cost," the president said.
The Spanish firm declined to respond to Correa's comments directly.
The company said its revenues in Ecuador in 2006 were $445 million, while its profit was $17.8 million. Otecel paid $8 million for use of radio spectrum, $7.1 million in income tax, and a further $6.4 million as profit-sharing for its employees, it said. The firm said it is a source of income, directly and indirectly, for 30,000 families.
The other private sector operator in Ecuador, Conecel, is owned by Mexico's America Movil. Its concession expires in August 2008 and will also be subject to re-negotiation.
Conecel and Otecel were awarded 15-year mobile telephone concessions in 1993, and each paid a one-off fee of $51.5 million. The contracts have an option to be extended for a further 15 years if a deal can be struck with the government.
Telefonica's subsidiary, which operates under the Movistar brand, is the second-largest operator with 2.6 million customers, while Conecel's Porta brand has 6.1 million customers. The third operator, state-owned Alegro, has just over 500,000 customers.
-By Maria Elena Verdezoto, Dow Jones Newswires; 5939-6331-768; mercedes.alvaro@dowjones.com
(END) Dow Jones Newswires
Posted to the site on 28th August 2007
Posted to: www.cellular-news.com/story/25691.php