US embassy cable - 04TEGUCIGALPA2312

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002312 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/CEN, WHA/EPSC, EB/CIP, EB/CBA, L/EB 
STATE FOR L/EB (LSVAT) 
STATE PASS AID (LAC/CAM) 
COMMERCE FOR MSIEGELMAN 
 
E.O. 12958: N/A 
TAGS: ECPS, EINV, ECON, HO 
SUBJECT: ACTION REQUEST:  LUCENT SEEKS USG CONCURRENCE TO 
DONATE TELECOMMS EQUIPMENT 
 
 
This cable contains proprietary business information and 
should be protected accordingly ) not for internet 
distribution. 
 
1. (U) This is an action cable.  Please see para 5. 
 
2. (SBU) On October 7, EconChief met with Carlos Aviles, 
Senior Manager for Lucent in Latin America, and Juan Carlos 
Galan, New Business Manager for Lucent, to discuss a pending 
Lucent proposal to donate CDMA-based switching technology to 
Honduran state telephone monopoly Hondutel.  As Aviles and 
Galan explained, Lucent established a presence in Honduras in 
1993 with a contract to install 110,000 lines between the 
capital Tegucigalpa and the business center San Pedro Sula. 
That equipment used now-outdated AMPS technology.  Following 
several years of poor relations with the GOH in which Lucent 
failed to secure additional contracts, Lucent in 2003 won a 
nine-month contract for upgrade and expansion of 11,000 
lines.  Their new management team, on-time delivery, and 
strong customer service on that contract have allowed them to 
repair relations with the GOH and Hondutel, which Lucent now 
hopes to leverage into a re-entry into the Honduran market. 
However, Lucent fears that its future bids could be judged in 
light of their currently deployed (AMPS based) technology, 
rather than on their latest, third-generation compatible CDMA 
technologies. 
 
3. (SBU) To remedy this, Lucent proposes to donate USD five 
million worth of switching equipment to Hondutel, to be used 
to upgrade the Tegucigalpa-San Pedro corridor.  This gesture 
would earn good will, while also showcasing Lucent,s latest 
technology.  For its part, Aviles told us, the GOH would have 
to purchase approximately USD 2 million of additional system 
equipment (base stations, etc).  Similar offers have been 
made and accepted by Ericsson and Siemens, each of which has 
already launched GSM-based demonstration projects in more 
remote regions along the borders with Guatemala, El Salvador, 
and Nicaragua.   Lucent wishes to compete on an equal 
footing, defend its existing market share, and prevent de 
facto lockout of CDMA technologies in the Honduran market. 
Lucent is also positioning itself for December 2005, when 
Hondutel loses its fixed-line telephone service monopoly. 
 
4. (SBU) Lucent officials are requesting that the USG 
publicly endorse the donation as transparent and entirely 
above-board.  Lucent emphasizes that there is no quid-pro-quo 
expressed or implied in the donation (though obviously they 
hope to position themselves for future sales opportunities). 
In the interest of full disclosure, Lucent officials told us 
that they have also submitted a bid for an unrelated October 
28 microwave contract worth approximately USD seven million. 
However, that is a public, competitive bid being managed by 
UNDP, and therefore its outcome should not be influenced by 
Lucent,s proposed donation to Hondutel. 
 
5. (SBU) Action request:  To initiate the donation process, 
Lucent has prepared a letter to Hondutel (an informal 
translation of which appears in para 6) offering the 
equipment and specifying the terms of the donation.  Lucent 
requests that the U.S. Embassy provide a cover letter 
endorsing the donation, thereby protecting them somewhat from 
any potential future allegations of improper behavior. 
(Note:  Lucent is well aware of FCPA constraints and insists 
its lawyers have fully vetted both the proposal and the draft 
letter and found them fully compliant.  End Note.)  Post 
requests L/EB concurrence that the proposed donation does not 
violate FCPA, and suggested wording on a brief cover letter 
to Hondutel endorsing the donation. 
 
6. (SBU) Informal translation of text of Lucent draft: 
 
Dear Mr. Valenzuela: 
 
Understanding Hondutel,s current situation and its need to 
increase tele-density to support governmental objectives, 
Lucent Technologies, with the support of the USG and the U.S. 
Embassy in Honduras, is pleased to announce its desire to 
donate to Hondutel communications equipment sufficient to 
provide CDMA-based fixed wireless telephone service to 
approximately 11,000 subscribers.  This equipment is valued 
at an estimated USD five million. 
 
The equipment includes: 
 
-- Central switching hardware and software for fixed wireless 
telephony (5ESS, Access Manager, OMP/FX, FMS) 
 
-- Replacement parts for Flexent Modcell 4.0 Compact OD 3S/1C 
switches and base stations. 
We bring to your attention the professional services, 
necessary for the proper functioning of the abovementioned 
equipment being offered, as well as related additional 
equipment that are required for optimal system function, and 
to indicate the cost of each. 
 
We consider it our duty to tell you that to reach the zones 
of social interest that Hondutel considers it necessary to 
cover, and for obvious reasons the equipment offered above 
will not be sufficient, whether it be for reasons of 
technology, economics, or any other reason.  If you would 
like to expand the system under discussion, that expansion 
can only be accomplished using equipment manufactured 
exclusively by Lucent Technologies. 
 
Most respectfully, allow us to suggest that one efficient use 
of the products and services being offered would be to use 
them to provide telephone service in the Tegucigalpa-San 
Pedro Sula corridor, where there is already a Lucent 
Technologies WSS system in place. 
 
If this offer is accepted, we sincerely hope that the use of 
the donated products, however Hondutel chooses to use them, 
promote the interests of Honduras, and support reaching the 
economic, financial, and social goals that undoubtedly will 
translate into direct benefits for the people of Honduras. 
 
We respectfully request confirmation of your acceptance of 
this offer, so that we might proceed with the legal 
formalization of the donation. 
 
(Complimentary close).  End text. 
 
PIERCE 
Pierce