Venezuela to Lower Phone Rates 20% Following Nationalization

Wednesday, May 23, 2007
By: Venezuelanalysis.com

Caracas, May 23, 2007 (venezuelanalysis.com)— With the swearing in of the new board of directors for Venezuela’s main telecommunications company CANTV, which was recently nationalized, President Hugo Chavez declared that phone rates would be lowered by as much as 20%, among a number of other changes.

“We have nationalized [CANTV] after so many years [after privatization], but it will not become what it was prior to privatization, when it was a company of a capitalist state. Now we have to make a leap from a private capitalist company to a socialist state-owned company, which is not seeking profit, even when with a good management there will not be economic losses,” declared Chavez during yesterday’s ceremony, which was broadcast on all TV channels.

“More important than economic gain is the social gain – social service for the integral development of all inhabitants of Venezuela,” added Chavez.

The lowering of the phone rates will affect the company’s cell phone network, whose rates will be lowered in two phases, by 10% as of June 15 and another 10% as of August 15. Also, phone rates from land lines to cell phones will be lowered by 20% and rates between CANTV’s cell phones and the cell phone networks of other company’s will be lowered by 30%.

Chavez explained that this means that the current rates of $0.16 per minute for calls from land lines to cell phones would thus be lowered to $0.13 per minute. Local and long distance phone rates of land lines will also be lowered by 10% and 15% respectively.

According to Andreas Faust, an analyst with Banco Mercantil in Caracas, “In a way, the government, instead of paying a dividend to shareholders, will pay a dividend to customers,'' Faust said, according to Bloomberg. “It's a very populist move and will likely slow inflation a bit.”

As of January 2008 the newly nationalized company will expand its service into currently underserved and low-income areas with lower “solidarity” pricing for these areas. Currently Venezuela’s land line network reaches only 45% of the country’s households, whereby there is a large class divide, so that 80% of upper and middle class households (so-called sectors A,B, and C) have phone service and only 20% of working class and poor households (sectors D and E).

“Rest assured that since this government is socialist, we will include the maximum number of families possible [in the phone network],” said Chavez. Households with land line phone service are thus to be increased by 50%, from currently 2.7 million households to 4 million in the next year and a half. In the next few years 93% of Venezuelans would have access to land line phone service.

“CANTV will be present in all population centers with more than 500 inhabitants,” said Chavez. This expansion will be related to the rail system that Venezuela is constructing throughout the country, he added.

Cell phone service, though, will also continue to expand, so that in the next 18 months another two million cell phone customers will be added, for a total of 10.5 million by the end of 2008.

Chavez explained that under privatization CANTV focused mainly on expanding its cell phone system, at the expense of its land lines, which Chavez blamed on capitalist profit-seeking, at the expense of any social considerations. “The path of capitalism is the destruction of society, of division, of violence and beyond, the path of the destruction of the human species,” he stated.

Also included in the new business plan for CANTV is the supply of internet connections to all Venezuelan schools, so that by the end of 2007 5,200 Bolivarian schools will have internet access with a minimum of three computers each. By the end of 2008 all school will have access.

Finally, Chavez announced that as of early 2008 coin operated public telephones will be reintroduced in all of Venezuela. Over the past ten years CANTV had completely eliminated coin operated public phones, in favor of pre-paid card phones. The new coin phones will come with the monetary conversion that is planned for January 2008, whereby three zeros will be eliminated from Venezuela’s currency.

The three main new directors of CANTV are women, with Socorro Hernandez as president, Jacqueline Faria, the former Minister of the Environment, heading up the cell phone division Movilnet, and Annie Monage heading up the phone directory system Caveguias.

Communal Telecommunications Committees

Chavez also explained that in order to achieve the expansion plans he outlined, CANTV will need the help of the communal councils, which should form technical telecommunications committees. “Only with community participation will we achieve that these companies will be truly socialist,” said Chavez.

Tens of thousands of communal councils, which represent neighborhoods of 200 to 400 families, have been created in the past year and a half throughout Venezuela. Each communal council has a variety of committees that work on improving the neighborhood’s public services, such as water supply, health care, and community education programs. These work in conjunction with various state institutions, such as the water company, the community health mission Barrio Adentro, or the educational missions, such as Missions Ribas and Robinson.

In connection with this Chavez also mentioned that the new law on a national police, which will be passed soon, will not only create a national police force, but communal police as well, which would work in conjunction with the communal councils.



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