Movistar ups rate of 3G site expansion; aims to migrate CDMA users; hopes to repatriate profits

22 May 2013

Telefonica Venezuela (Movistar) has disclosed that in the first quarter of 2013 it installed 55 new 3G W-CDMA/HSPA cell sites, a 45% increase on the number of new sites deployed in Q1 2012, while it spent over VEF133 million (USD21 million) on improving the W-CDMA/HSPA network during the three-month period. Telesemana reports that the base stations were activated in high traffic sites such as Simon Bolivar International Airport (Vargas), Santo Domingo Airport (Tachira), the Caracas metro, and malls Gallery los Naranjos (Caracas), CCCT (Caracas) and Climar (Guarico), while the Spanish-backed company also invested in increasing its voice traffic capacity. Movistar also announced another project earlier this month to invest around VEF500 million in central Venezuela to deploy 37 3G cell sites and make other 3G network improvements in the region.

Movistar Venezuela predicts 2013 EBITDA of VEF9.54 billion, an increase of 22% from 2012, while sales are expected to climb 37% to VEF23.6 billion. In Q1 2013 the operator’s revenues jumped 30%. Telefonica reportedly plans to increase spending in Venezuela in 2013 by 78% to VEF3.9 billion (USD619 million), excluding VEF600 million earmarked for mobile broadband spectrum licence fees, partly to hedge against a further decline in the value of cash which it cannot repatriate to Spain. As reported by Bloomberg, Movistar Venezuela’s head Pedro Cortez told journalists earlier this month that Venezuela may allow foreign companies operating in the country to repatriate some of their profits in exchange for increased investment, following a ‘positive’ meeting with Finance Minister Nelson Merentes, who declined to give further details, but announced to a news conference that: ‘Once we come to an agreement, we’ll draw up a timetable for payment.’ Tight currency controls to address foreign currency shortages have left foreign-owned companies holding an estimated USD12 billion in dividends (including around USD3 billion accumulated by Telefonica over seven years) that they cannot repatriate, which lose value every time the government devalues the local currency, which happened most recently in February 2013. Mr Cortez added that Movistar Venezuela has an eight- to ten-month delay in paying providers because of the foreign currency shortage, although Mr Merentes announced this month that the government currently has ‘enough dollars to meet demand’. Bloomberg notes that Venezuela introduced a new currency system this year, known as Sicad, that auctioned USD200 million on 27 March, although it has not auctioned any foreign currency since.

Meanwhile, alongside its W-CDMA/HSPA network expansion, Movistar Venezuela is actively promoting the migration of its CDMA2000 user base to its favoured GSM/W-CDMA/HSPA technology platform. A voluntary technology migration plan has begun, including a scheme to replace CDMA-based mobile and fixed-wireless end-user equipment/devices to GSM/UMTS equivalents, including swapping EV-DO-based mobile broadband modems to HSPA models. Reportedly, Movistar has not made any substantial investment in new CDMA-based equipment in the last year.

Elsewhere this week, Spanish parent group Telefonica has reportedly put on hold plans to publicly list its Latin America unit, including Venezuela.

Venezuela, Movistar Venezuela, Telefonica