Saturday, July 21, 2012

Can Hondutel Be Saved?

Hondutel, the Honduran national telephone company, is in trouble. Big trouble.

As wired telephones become less important in residences and businesses in Honduras, Hondutel's income has fallen significantly; its income in 2011 was 2489.7 million lempiras (about $131.3 million dollars).  At the same time its costs rose to 2583.2 million lempiras (about $136.3 million dollars).  Since January, 2010, Hondutel has added over 1200 new employees, an increase of 33%, and those employees have received salary increases over the last two years.

It is unclear whether this poor economic performance will have any impact on the presidential aspirations of Romeo Vasquez Velasquez, the candidate for the newly formed right-wing political party, the Patriotic Alliance of Honduras.

Vasquez Velasquez, notorious for his role in the kidnapping of former president José Manuel Zelaya during the 2009 coup, was rewarded on retiring with the directorship of Hondutel, a role for which his military service manifestly has not prepared him.

President Porfirio Lobo Sosa has appointed a commission to suggest ways in which Hondutel, the state telecommunications company, can be made solvent. The commission can collect information and make suggestions. Vasquez Velasquez, however, remains in charge.

Losses at Hondutel are not new.  They've been going on for years.

They have become important now because as part of a new agreement with the IMF for stand-by funds, the Honduran government must present a balanced budget plan and show that it can and is sticking to it.

The new commission, headed by Hector Guillen, the Finance Minister, has 30 days to make recommendations.  Guillen made it clear that Hondutel is looking for strategic investors.  Over the last several years, several international telecommunications companies have expressed interest in a strategic partnership or outright purchase of the state-owned company. This never worked out, due to the lack of a mechanism to allow private investment in state-owned companies.

Guillen said it will be up to the commission to find a structure that makes such investment possible. Whether they find interested investors or not, Honduras continues to be not just open for business, but up for sale.

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