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Ecuador: No Dial Tone, No Contract
Via NY Transfer News Collective * All the News that Doesn't Fit
IPS - Nov 21, 2007
http://www.ipsnews.net/news.asp?idnews=40160
ECUADOR: No Dial Tone, No Contract
By Kintto Lucas
QUITO, Nov 21 (IPS) - The possible cancellation of the mobile telephone
operating licence granted by Ecuador to ****ta Celular, a company
indirectly owned by Mexican multi-millionaire Carlos Slim, could set a
precedent in Latin America.
Ecuadorean President Rafael Correa warned earlier this year that when
****ta Celulars contract expires in 2008, its cell phone operations
might be repossessed by the state. ****ta, a subsidiary of Am(c)rica
Mvil, runs a lucrative private business but has not benefited the
country, he said.
"The partys over," said Correa in one of his regular Saturday radio
programmes, adding that re-negotiation of the conditions for cellular
telephone operations in the country will continue until December.
The president also claimed that ****ta Celular pays less taxes than its
competitor Movistar, which belongs to the Spanish company Telefnica,
although ****ta has three times as many customers as Movistar.
"Were going to put an end to the abuses by certain telephone
companies," he said.
A few days later, when Spains deputy prime minister Mara Teresa
Fern!ndez de la Vega visited Ecuador, Correa indicated that ****ta and
Movistar must get ready to renegotiate their concessions, because the
government of Ecuador will "act vigorously" to defend the national
interest.
This position was reaffirmed when the Internal Revenue Service (SRI)
re****ted irregularities in ****tas tax payments, and the
Superintendence of Telecommunications (SUPTEL) accused ****ta of
negligence towards customers and sub-standard service.
The SRI started tax audits in September, on discovering that ****ta had
paid only four million dollars in income tax over the last four years,
although its recorded sales were worth over two billion dollars.
The suspicion aroused by the dispro****tionately low tax payments came
on top of nine other investigations of ****ta for alleged non-payment of
Value Added Tax (IVA) and Special Consumption Tax (ICE), and illegal
withholding of taxes.
The head of the SRI, Carlos Marx Carrasco, said such a low level of tax
payment by ****ta Celular leads one to presume that "something untoward
is going on," as preliminary investigations calculated the company owes
large amounts to the state.
****ta issued a communiqu(c) arguing that the *****sment of its tax
liabilities should take into account the large debts it inherited and
the severe economic crisis in Ecuador when it took over the concession.
During the period 1999 to 2002, "the balance of our operations was
negative. The losses were basically due to the situation left by the
former company and the need for profound restructuring and investment,"
the statement says. "Therefore, during that period no taxable income
was generated and no taxes were payable to the state."
The allegations of tax evasion come on top of repeated problems with
the telephone service.
SUPTEL detected a serious deterioration in call quality and constant
interruptions in ****tas service on Sept. 25, which affected more than
5.5 million users for over 15 hours.
The problem, which had occurred to a lesser degree twice before,
prompted SUPTEL to open administrative proceedings against the firm for
negligence, because in SUPTELs view, "all necessary measures to ensure
continuity of service," as stipulated in the constitution, had not been
taken.
Furthermore, SUPTEL claims that certain clauses in the contract by
which the state granted ****tas concession have not been fulfilled,
like the one binding the company to "install, operate, and maintain in
good working order" the mobile cellphone system "until Aug. 26, 2008,"
when the contract expires.
The telecoms regulator also takes the view that ****ta has not met its
obligation to "provide sufficient capacity to satisfy the requirements
of phone traffic generated by customers throughout the period of the
concession."
The contract stipulates that in case of negligence or breach of quality
standards, the company shall be granted 30 days to justify and remedy
the problem. Failure to do so will result in initiation of legal action
to cancel the concession.
****ta Celular denied the allegations and launched an advertising
campaign in the national media to improve its image and justify its
presence in Ecuador.
The head of the companys legal department, Daniel Bernal, argued that
the request to improve its services within 30 days is superfluous,
because ****tas equipment is at the cutting edge of technology and it
is continually updating its software. In 2007 alone it has invested
over 200 million dollars in equipment and infrastructure, he said.
He also said that SUPTEL had reached "hasty conclusions" in blaming
****ta, which is the largest cell phone company in the country, with
nearly 6.6 million customers, equivalent to about 70 percent of the
market.
The remaining 30 percent is shared between Movistar and the state firm
Alegro, which received its operating permit many years later than the
two private firms.
In response to Bernals statements, SUPTEL official Darwin Muoz
Serrano said neither Bernal nor ****ta are above the laws of the
Ecuadorean state.
"****ta argued that the interruption of service on Sept. 25 was caused
fortuitously, by causes that could neither be predicted nor prevented,
in an attempt to excuse itself from legal sanctions and compensation
payments to customers, but it was unable to prove its case objectively,
technically or legally," Muoz said.
"The resolution that ****ta was guilty of negligence, handed down by
SUPTEL in the administrative procedure against the company, protects
the right of six million users to continuity of service, as guaranteed
by the constitution, which may not be interrupted due to negligence on
the part of an operator," he stressed.
The SRI tax audit of ****ta, and the time allowed the company by SUPTEL
to remedy its service failures, both end in December.
(END/2007)
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