ECUADOR PLANS TO REORGANIZE TELECOM SECTOR

C O N F I D E N T I A L QUITO 000427 SIPDIS E.O. 12958: DECL: 05/14/2018 TAGS: ECPS ECON EINV EC SUBJECT: ECUADOR PLANS TO REORGANIZE TELECOM SECTOR REF: QUITO 415 Classified By: DCM Jefferson Brown. Reason: 1.4 B and D. ¶1. (SBU) Summary: Fresh from the successful renegotiation of its two private mobile phone concessions, the government of Ecuador is planning the possible reorganization of its telecom sector, including the eventual creation of a telecommunications ministry and consolidation of Ecuador's three state telecom companies. End Summary. ¶2. (SBU) The coming year should be interesting in Ecuador's communications sector, as the GOE plans to separate its telecommunications administrative and technical bodies (Conatel, Senatel, Suptel and parts of Conartel) from their radio and television counterparts, and fold them into a new Ministry of Telecommunications. Observers had predicted the move for 2008, but the head of Ecuador's telecom Secretariat (Senatel),Jaime Guerrero ) who led the mobile concessions negotiations (reftel) * told post in March that these changes will not happen until at least 2009. A National Telecommunications Council -------------- ¶3. (SBU) Jorge Glas, head of the government Solidarity Fund, announced in March that when Ecuador's new constitution takes effect and dissolves the Fund (which currently owns a number of parastatal companies, including state telecom companies Andinatel, mobile subsidiary Allegro, and Pacifictel),the GOE will create a National Telecommunications Council that will work in concert with existing telecommunications administrative bodies. The Council reportedly will serve as a precursor to the Telecommunications Ministry and will unify the three state telecom companies under one executive director. Working-level contacts at Andinatel and Alegro say that the government's eventual goal is to integrate the three into one company. (In the 1990s the state telecom monopoly was broken into two regional companies -- Andinatel and Pacifictel -- before attempting to privatize them, but there were no offers for either company. They continued to be operated as state companies, and Pacifictel in particular was known for its inefficiency and corruption, although its performance has improved some under the Correa administration.) ¶4. (SBU) Glas said the Council's "Strategic Plan" will be defined with assistance from the national telecommunications corporation of Uruguay, Antel, and its budget will be approximately $950 million. He added that the Council may seek financial agreements with public corporations from other countries, such as China, which has reportedly informed Ecuador in writing of its state telecom company's intention to participate in development projects in the sector. Representatives from Senatel commented to econoff that they were surprised to see this announcement in the press, since discussion of the Council is still in nascent stages. ¶5. (C) Comment: The Solidarity Fund's control over a number of state companies, including telecoms and electricity distributors, has resulted in loose, opaque, and ineffective control over the companies, which has fostered inefficiency and/or corruption in many of them. Hopefully a new ownership structure would increase control and accountability, which, at least in Ecuador would be an improvement over the existing system. Perhaps consolidating Ecuador's three inefficient state-owned telecom companies under central management would help the telecommunications administration to summon the political power it has lacked to expand services (currently Ecuador has just a 13% penetration rate of fixed-line services, due to a lack of government interest and investment). ¶6. (C) Jorge Glas and Jaime Guerrero are both rumored to be candidates for the position of Telecommunications Minister, but most observers say that Glas, a GOE insider, will be the contender. Others dispel criticisms of Guerrero as being inexperienced by pointing to his role in negotiating new mobile concessions with the two private operators, Porta and Movistar. This rumored reorganization may help consolidate the overlapping layers of regulations, but it does not appear that it will result in less regulation or state intervention, which is what all private telecom companies agree the industry needs most. End comment. Jewell