Identifier
Created
Classification
Origin
07TEGUCIGALPA838
2007-05-16 00:18:00
CONFIDENTIAL
Embassy Tegucigalpa
Cable title:  

HONDUTEL UNDER FIRE AS NEGOTATIONS OVER NEW LAW

Tags:  ECON ECPS ELAB KJUS KPRV PGOV PINR 
pdf how-to read a cable
VZCZCXRO6262
PP RUEHLMC
DE RUEHTG #0838/01 1360018
ZNY CCCCC ZZH
P 160018Z MAY 07
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC PRIORITY 5801
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC PRIORITY 0649
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEAFCC/FCC WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000838 

SIPDIS

SIPDIS

STATE FOR EB/IFD, WHA/EPSC, INR/IAA, DRL/IL, AND WHA/CEN
STATE FOR L/LEI, EB/OMA
STATE PASS USTR
JUSTICE FOR CRIMINAL DIVISION/FRAUD SECTION/MARK MENDELSOHN
AND WILLIAM JACOBSON

E.O. 12958: DECL: 05/15/2017
TAGS: ECON ECPS ELAB KJUS KPRV PGOV PINR
SUBJECT: HONDUTEL UNDER FIRE AS NEGOTATIONS OVER NEW LAW
CONTINUE

REF: A. TEGUCIGALPA 715 06


B. TEGUCIGALPA 579 07

C. TEGUCIGALPA 736 07

Classified By: Ambassador Charles Ford for reasons 1.4 (B,D)

C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000838

SIPDIS

SIPDIS

STATE FOR EB/IFD, WHA/EPSC, INR/IAA, DRL/IL, AND WHA/CEN
STATE FOR L/LEI, EB/OMA
STATE PASS USTR
JUSTICE FOR CRIMINAL DIVISION/FRAUD SECTION/MARK MENDELSOHN
AND WILLIAM JACOBSON

E.O. 12958: DECL: 05/15/2017
TAGS: ECON ECPS ELAB KJUS KPRV PGOV PINR
SUBJECT: HONDUTEL UNDER FIRE AS NEGOTATIONS OVER NEW LAW
CONTINUE

REF: A. TEGUCIGALPA 715 06


B. TEGUCIGALPA 579 07

C. TEGUCIGALPA 736 07

Classified By: Ambassador Charles Ford for reasons 1.4 (B,D)


1. (C) SUMMARY: The major actors in on-going effort to pass
a new telecommunications law met May 11, and agreed to
reconcile four key issues: license authorizations, naming of
commissioners, taxes, and mobile licenses. While the group
plans to meet again May 18, a related effort by Congress to
pass the law without Executive branch support may begin May
15, around a donor nation meeting on telecom. Meanwhile,
more information regarding shady activities at state telecoms
company Hondutel may force the departure of the allegedly
corrupt interim chief. END SUMMARY.


2. (C) Post hosted an informal discussion May 11 involving
key representatives from groups involved in the on-going
effort to pass a new telecommunications law "Ley Marco." The
new law would introduce more competition in many services
while helping to meet commitments outlined in CAFTA. While a
strong Ley Marco was introduced with other CAFTA-related
legislation late in 2005, it was never passed (ref A),and
the Executive branch recently proposed a version that would
support Hondutel's exclusivity in key services indefinitely.


3. (C) The group distilled the main points of contention down
to four key issues: 1) who would approve licenses to compete
in domestic and international services; 2) what branch of
government will name the commissioners for telecom regulator
CONATEL; 3) what is the percentage tax that each company
needs to contribute for international calls and social
development funds; and 4) the procedure for awarding mobile
licenses. ASETEL, the Honduran association of private

telecommunications companies, promised to provide their view
on each of the issues, with justification, to the Presidents
office in time for the next meeting, planned for Friday, May

18.

THE PRESIDENT'S SIDE: LIMITED COMPETITION


4. (C) The meeting included some of the key architects of the
President's recently submitted revised law. Hector
Rodriguez, the former head of Central American
telecommunications association COMTELCA (www.comtelca.com),
spoke at length on the changes he made in the latest
revision. The principles behind his revisions were summed up
recently in a letter his office wrote to private industry
group COHEP: competition should be in local services only,
and long distance, international and mobile licenses should
be limited for "technical, economic and constitutional
reasons." (Comment: Rodriguez was reportedly asked to leave
COMTELCA, an organization supported by private businesses,
because of his protectionist position. Rumors that he is in
line to be the next head of Hondutel was supported when he
appeared in the meeting with two senior Hondutel legal
advisors. Rodriguez is also the uncle and confidant of
Hondutel interim head Marcelo Chimirri (ref B). End Comment).


5. (C) Rasel Tome, the head of state telecom regulator
CONATEL, also supported the President's position. He
expanded on the argument that licenses need to be regulated
by the Congress because of constitutional requirements.
Specifically, he indicated that each company that wanted to
compete in international calling required an access code,
which needed to be auctioned because "the best codes
contained numbers like 1-2-3." (Comment: Customers who
pre-subscribe their service from home do not need to use
access codes, and the Honduran market is several years from
competing in U.S. type access code marketing. End Comment).
Tome also maintained that he supported President Zelaya's
position that only the executive branch appoint CONATEL
commissioners. (Comment: Appointment of commissioners is a
powerful and lucrative tool for Honduran presidents. Tome's
appointment was President Zelaya's payback to Honduran
businessman Jaime Rosenthal, who many believe is benefiting
from illegal international "grey line" traffic terminated
over his son Cesar Rosenthal's local telephone and cable
company CableColor. End Comment.)

TEGUCIGALP 00000838 002 OF 002




6. (C) Maurcio Sierra, the head of the Modernization
Committee under Minster of the President Yani Rosenthal,
also commented on the President's desire for an "ordered
maret opening." He played more of a facilitator rolein the
discussion, trying to moderate Rodriguez'rhetoric while
helping to distill the controversal points that needed to be
worked. (Comment: Sierra is generally well thought of in
private indutry, but has had limited involvement in telecomsdue to Yani Rosenthal's desire to stay far away frm
potential problems with his brother's CableColr. In an
interesting move, Sierra's top deputy for telecoms, Rafael
Madriaga, recently left the Cmmission to take Rodriguez' old
job at COMTELCA,and immediately contacted the embassy with a
desre to improve relations. End Comment).

PRO-COMETITION FACTION READY TO MOVE


7. (C) The other faction at the meeting stood behind the
original Ly Marco and maintained the law would create
comptition, lower prices, provide more revenue to stat
coffers and comply with commitments made under nternational
trade agreements. The faction was headed by World Bank
representatives Adrian Fozzar and Dante Mossi and ASETEL
president Jose Luis ivera.


8. (C) Both major parties of the Nationa Congress were
represented, by Nationalist, and x-President of CONATEL,
David Matamoros and Liberal telecommunications committee
member Marcia Vileda. Matamoros made some of the meeting's
most nsightful comments, stating flatly that the Presidnt's
version was simply a delay tactic and that pecial interests
that were benefiting daily from the current regulatory
structure were behind the hanges. (Comment: Post has heard
credible evidece that corruption at Hondutel is bleeding
betwen USD 2.5 million to USD 13 million a month throug
pirated "grey line" traffic and other schemes. End Comment.)


9. (C) Villeda, though of PresidentZelaya's Liberal party,
is part of rival Presidet of Congress Roberto Micheletti's
faction and ws firm in her request that any law presented to
ongress should first be agreed upon by all stakeholders.
(Comment: The latest version from PresidentZelaya was
presented without having any other paty first review it.
End Comment). Unofficially,Villeda has also been asked by
Micheletti to preare a version of the law based on the
original Ley Marco to be presented in Congress without the
Pesident's approval. (Comment: Introducing a bill or
consideration without the President's input aparently has
not been done in the last 25 years,thanks to a historically
rubber-stamp Congress. End Comment).

HONDUTEL UNDER FIRE


10. (C) As or Hondutel, a popular radio program, HRN,
startd on May 14 a series on corruption and mismanagemet at
the state telecoms company. Called "Hondutl, Victim" the
program went on to describe the suspicious contracts that
were negotiated with 16 international carriers, some of which
may not actually exist (ref C). Post has also learned that
leading daily newspaper El Heraldo will be running an
investigative piece on Hondutel, probably on May 16.
Finally, with popular suspicion arising regarding activities
at Hondutel, Post has learned that the Public Ministry is set
to run a series of operations against key Hondutel executives
as early as May 15.


11. (C) SUMMARY: While Post supports continued dialogue
between the opposing factions, the observations of
Nationalist Congressman David Matamoros were right on the
mark: with up to USD 13 million a month at stake, even a
small delay means big money. So, despite constructive
dialogue, Post has little faith in Hector Rodriguez and his
team's commitment to timely reconciliation. A bold move by
Congress to present the law may make President Zelaya accept
broader changes, and the attack on Hondutel could force him
to finally fire Chimirri. The link between Zelaya and
Chimirri has proven too strong to break before, however, and
may yet weather the storm. END SUMMARY.
FORD