I guess I can’t pass up the comments today by President Chavez that he would cut both fixed line and cellular prices by 20%. He also announced that he would cut taxes on phone service for those living in “poor” areas, as well as cutting interconnection fees by 30%. Thus, in one swipe, the Government has set the course to ruin CANTV much faster that I ever believed possible.
When I first heard that the Government was taking CANTV over, I thought that given the company’s financial health, it would take sometime for the inefficiency, politicking and indecision to start affecting the company. But given that in the December quarter the company’s margins were 27%, the 20% cut in these three very significant revenue streams will be a large hit.
Some people think that these price cuts will drive customers towards CANTV, but in fixed line, CANTV is essentially the only game in town and in wireless it has come back from a distant second place thanks to good service and smart marketing, neither of which are guaranteed now. In fact, I understand that the company’s advertising agency has already been fired in favor PDVSA’s company, so we will see red colors a lot in CANTV’s advertising going forward.
But even worse were Chavez’ comments about wireless (can’t find the quote I heard), saying that wireless communications was an invention of capitalism. This comment shows the President’s ignorance and superficial understanding of communications. In saying that the “new” CANTV will emphasize fixed line, he ignores or seems to be ignorant about the impact and importance of wireless for Venezuela’s poor. The cost of wiring homes which will generate low ARPU’s was the problem of most underdeveloped countries for years. With wireless communications, penetration of communications soared as the home by home investment was replaced by the building of cells which were shared by all users in the area. In 1991, when CANTV was privatized, Venezuela had 1.7 million telephone lines under a mismanaged Government telecom company. Today, CANTV has 3 million fixed lines, but between the three wireless operators, there are some 15 million cellphones in the country, a staggering number that nobody, either from the Government or from the telecom industry ever thought could even happen and so fast. That is real results for everyone, particularly the poor. It would simply be very expensive for anyone, Government or private to undertake the wiring of 5-6 milion homes to achieve a similar penetration with fixed line.
To compound matters, the people named to run the company have little telecom experience or in running large organizations. People are already resigning en masse, as they have been asked to do, if they are not with the “process”. The President of CANTV comes from PDVSA, a former SAP specialist who had a fairly gray career until she pledged allegiance to Chavez. The new President of the wireless company Movilnet, is the former Minister of the Environment, who did not precisely leave a great track record there. I am surprised by the absence of anyone from the military telecom area, one of the few areas in which the military is strong relative to the rest of the country. Even more, I can’t help but mention the presence in the Board of the academic “expert” who advised the CNE so “impartially” on random number generators when the recall vote took place. The revolution certainly rewards those that claiming to be impartial, participate without ethical values in biased processes to favor the Autocrat/Dictator.
Those are the values of the revolution.
The Devil's Excrement 
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