ACTION REQUEST: LUCENT SEEKS USG CONCURRENCE TO

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002312

SIPDIS

SENSITIVE

STATE FOR WHA/CEN, WHA/EPSC, EB/CIP, EB/CBA, L/EB
STATE FOR L/EB (LSVAT)
STATE PASS AID (LAC/CAM)
COMMERCE FOR MSIEGELMAN

E.O. 12958: N/A
TAGS: ECPS EINV ECON HO
SUBJECT: ACTION REQUEST: LUCENT SEEKS USG CONCURRENCE TO
DONATE TELECOMMS EQUIPMENT


This cable contains proprietary business information and
should be protected accordingly ) not for internet
distribution.


1. (U) This is an action cable. Please see para 5.


2. (SBU) On October 7, EconChief met with Carlos Aviles,
Senior Manager for Lucent in Latin America, and Juan Carlos
Galan, New Business Manager for Lucent, to discuss a pending
Lucent proposal to donate CDMA-based switching technology to
Honduran state telephone monopoly Hondutel. As Aviles and
Galan explained, Lucent established a presence in Honduras in
1993 with a contract to install 110,000 lines between the
capital Tegucigalpa and the business center San Pedro Sula.
That equipment used now-outdated AMPS technology. Following
several years of poor relations with the GOH in which Lucent
failed to secure additional contracts, Lucent in 2003 won a
nine-month contract for upgrade and expansion of 11,000
lines. Their new management team, on-time delivery, and
strong customer service on that contract have allowed them to
repair relations with the GOH and Hondutel, which Lucent now
hopes to leverage into a re-entry into the Honduran market.
However, Lucent fears that its future bids could be judged in
light of their currently deployed (AMPS based) technology,
rather than on their latest, third-generation compatible CDMA
technologies.


3. (SBU) To remedy this, Lucent proposes to donate USD five
million worth of switching equipment to Hondutel, to be used
to upgrade the Tegucigalpa-San Pedro corridor. This gesture
would earn good will, while also showcasing Lucent,s latest
technology. For its part, Aviles told us, the GOH would have
to purchase approximately USD 2 million of additional system
equipment (base stations, etc). Similar offers have been
made and accepted by Ericsson and Siemens, each of which has
already launched GSM-based demonstration projects in more
remote regions along the borders with Guatemala, El Salvador,
and Nicaragua. Lucent wishes to compete on an equal
footing, defend its existing market share, and prevent de
facto lockout of CDMA technologies in the Honduran market.
Lucent is also positioning itself for December 2005, when
Hondutel loses its fixed-line telephone service monopoly.


4. (SBU) Lucent officials are requesting that the USG
publicly endorse the donation as transparent and entirely
above-board. Lucent emphasizes that there is no quid-pro-quo
expressed or implied in the donation (though obviously they
hope to position themselves for future sales opportunities).
In the interest of full disclosure, Lucent officials told us
that they have also submitted a bid for an unrelated October
28 microwave contract worth approximately USD seven million.
However, that is a public, competitive bid being managed by
UNDP, and therefore its outcome should not be influenced by
Lucent,s proposed donation to Hondutel.


5. (SBU) Action request: To initiate the donation process,
Lucent has prepared a letter to Hondutel (an informal
translation of which appears in para 6) offering the
equipment and specifying the terms of the donation. Lucent
requests that the U.S. Embassy provide a cover letter
endorsing the donation, thereby protecting them somewhat from
any potential future allegations of improper behavior.
(Note: Lucent is well aware of FCPA constraints and insists
its lawyers have fully vetted both the proposal and the draft
letter and found them fully compliant. End Note.) Post
requests L/EB concurrence that the proposed donation does not
violate FCPA, and suggested wording on a brief cover letter
to Hondutel endorsing the donation.


6. (SBU) Informal translation of text of Lucent draft:

Dear Mr. Valenzuela:

Understanding Hondutel,s current situation and its need to
increase tele-density to support governmental objectives,
Lucent Technologies, with the support of the USG and the U.S.
Embassy in Honduras, is pleased to announce its desire to
donate to Hondutel communications equipment sufficient to
provide CDMA-based fixed wireless telephone service to
approximately 11,000 subscribers. This equipment is valued
at an estimated USD five million.

The equipment includes:

-- Central switching hardware and software for fixed wireless
telephony (5ESS, Access Manager, OMP/FX, FMS)

-- Replacement parts for Flexent Modcell 4.0 Compact OD 3S/1C
switches and base stations.
We bring to your attention the professional services,
necessary for the proper functioning of the abovementioned
equipment being offered, as well as related additional
equipment that are required for optimal system function, and
to indicate the cost of each.

We consider it our duty to tell you that to reach the zones
of social interest that Hondutel considers it necessary to
cover, and for obvious reasons the equipment offered above
will not be sufficient, whether it be for reasons of
technology, economics, or any other reason. If you would
like to expand the system under discussion, that expansion
can only be accomplished using equipment manufactured
exclusively by Lucent Technologies.

Most respectfully, allow us to suggest that one efficient use
of the products and services being offered would be to use
them to provide telephone service in the Tegucigalpa-San
Pedro Sula corridor, where there is already a Lucent
Technologies WSS system in place.

If this offer is accepted, we sincerely hope that the use of
the donated products, however Hondutel chooses to use them,
promote the interests of Honduras, and support reaching the
economic, financial, and social goals that undoubtedly will
translate into direct benefits for the people of Honduras.

We respectfully request confirmation of your acceptance of
this offer, so that we might proceed with the legal
formalization of the donation.

(Complimentary close). End text.

PIERCE
Pierce