PRE-QUALIFICATION FOR 25-YEAR HONDURAN CELLULAR

UNCLAS TEGUCIGALPA 002563

SIPDIS

SENSITIVE BUT UNCLASSIFIED

STATE FOR EB/CIP
GUATEMALA FOR COMMATT:DTHOMPSON

E.O. 12958: N/A
TAGS: ECPS EINV KPRV HO
SUBJECT: PRE-QUALIFICATION FOR 25-YEAR HONDURAN CELLULAR
SERVICES CONTRACT

REF: TEGUCIGALPA 02043


1. (SBU) Summary. Two American cellular companies were
among six who applied for pre-qualification to bid on the
GOH's 25-year cellular service contract. The winner of the
bid will be the only competition for Honduras' current
cellular provider, Celtel (majority owned by Motorola).
Conatel plans to announce the qualifying companies on or
about October 8, 2002 and the official bid opening is
scheduled for January 2003. The GOH has, unfortunately,
limited the evaluation criteria to the size of the
concession fee paid to the government. End Summary.


2. (SBU) On September 9, 2002, Contatel, Honduras'
Telecommunications Regulatory Commission, held an open pre-
qualification process for companies who are planning to bid
on the Honduran cellular service contract. Two American
companies, Bell South Honduras (comprised of Bell South
Honduras, BS Chile, BS U.S., BS Nicaragua and BS Guatemala)
and Digicel Honduras (U.S. partners with Salvadoran and
Italian investment) applied. The other potential contenders
include Radio Movil Dipsa, S.A. de C.V. (TeleMex of Mexico),
Telecomunicaciones de Guatemala (TelGuat of Guatemala),
Empresa Nacional de Telecomunicaciones, S.A. (Entel Chile -
an Italian backed Chilean company) and Megatel - Emce
(ENITEL, a Honduran company owned by Freddy Nasser). This
cellular service contract would be for one of Honduras'
three Personal Communication Systems (PCS) bands, not the
highly politicized cellular band B (reftel).


3. (U) Conatel will officially announce by October 8, 2002,
which companies qualify and will go on to the second phase
of the bidding. During the pre-qualification process,
Conatel will check that the firms meet certain business
criteria, including having annual sales upwards of USD 150
million and a company user market of minimum 500,000 mobile
users. Conatel is looking for large companies only for the
bid. The winner of the 25-year contract would be in
competition with Honduras' only other cellular services
provider, Celtel (majority owned by the U.S. firm,
Motorola).


4. (U) Celtel has expanded lines rapidly, and now accounts
for approximately half of total phone lines in the country.
However, cell phone rates are very high by Central American
standards and service coverage is generally limited to
Honduras' largest cities. Celtel's contract with Conatel is
currently under dispute. Originally, Celtel held a ten-year
contract that is set to expire in 2006. However, on
principles of fairness, Conatel extended Celtel's contract
an additional 15 years to equal Hondutel's (Honduras state-
owned telephone company) current 25-year contract. Two
deputies in the Honduran National Congress did not agree
with Conatel's decision. The Public Ministry is currently
suing Conatel over the Celtel extension.


5. (SBU) The final bid opening is forecast for sometime in
January of 2003. The winner of the bid will be based solely
on the highest bid presented. Comment: The GOH's decision
to not include other criteria in this concession, such as
expanded coverage and other customer service issues, appears
shortsighted. However, it appears that a simple price-based
concession is considered more likely to obtain congressional
support. End Comment.


PIERCE