US embassy cable - 02TEGUCIGALPA2563

UNCLAS TEGUCIGALPA 002563 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
STATE FOR EB/CIP 
GUATEMALA FOR COMMATT:DTHOMPSON 
 
E.O. 12958: N/A 
TAGS: ECPS, EINV, KPRV, HO 
SUBJECT: PRE-QUALIFICATION FOR 25-YEAR HONDURAN CELLULAR 
SERVICES CONTRACT 
 
REF: TEGUCIGALPA 02043 
 
1. (SBU) Summary.  Two American cellular companies were 
among six who applied for pre-qualification to bid on the 
GOH's 25-year cellular service contract.  The winner of the 
bid will be the only competition for Honduras' current 
cellular provider, Celtel (majority owned by Motorola). 
Conatel plans to announce the qualifying companies on or 
about October 8, 2002 and the official bid opening is 
scheduled for January 2003. The GOH has, unfortunately, 
limited the evaluation criteria to the size of the 
concession fee paid to the government.  End Summary. 
 
2. (SBU) On September 9, 2002, Contatel, Honduras' 
Telecommunications Regulatory Commission, held an open pre- 
qualification process for companies who are planning to bid 
on the Honduran cellular service contract.  Two American 
companies, Bell South Honduras (comprised of Bell South 
Honduras, BS Chile, BS U.S., BS Nicaragua and BS Guatemala) 
and Digicel Honduras (U.S. partners with Salvadoran and 
Italian investment) applied.  The other potential contenders 
include Radio Movil Dipsa, S.A. de C.V. (TeleMex of Mexico), 
Telecomunicaciones de Guatemala (TelGuat of Guatemala), 
Empresa Nacional de Telecomunicaciones, S.A. (Entel Chile - 
an Italian backed Chilean company) and Megatel - Emce 
(ENITEL, a Honduran company owned by Freddy Nasser).  This 
cellular service contract would be for one of Honduras' 
three Personal Communication Systems (PCS) bands, not the 
highly politicized cellular band B (reftel). 
 
3. (U) Conatel will officially announce by October 8, 2002, 
which companies qualify and will go on to the second phase 
of the bidding.  During the pre-qualification process, 
Conatel will check that the firms meet certain business 
criteria, including having annual sales upwards of USD 150 
million and a company user market of minimum 500,000 mobile 
users.  Conatel is looking for large companies only for the 
bid.  The winner of the 25-year contract would be in 
competition with Honduras' only other cellular services 
provider, Celtel (majority owned by the U.S. firm, 
Motorola). 
 
4. (U) Celtel has expanded lines rapidly, and now accounts 
for approximately half of total phone lines in the country. 
However, cell phone rates are very high by Central American 
standards and service coverage is generally limited to 
Honduras' largest cities.  Celtel's contract with Conatel is 
currently under dispute.  Originally, Celtel held a ten-year 
contract that is set to expire in 2006.  However, on 
principles of fairness, Conatel extended Celtel's contract 
an additional 15 years to equal Hondutel's (Honduras state- 
owned telephone company) current 25-year contract.  Two 
deputies in the Honduran National Congress did not agree 
with Conatel's decision.  The Public Ministry is currently 
suing Conatel over the Celtel extension. 
 
5. (SBU) The final bid opening is forecast for sometime in 
January of 2003. The winner of the bid will be based solely 
on the highest bid presented.  Comment:  The GOH's decision 
to not include other criteria in this concession, such as 
expanded coverage and other customer service issues, appears 
shortsighted.  However, it appears that a simple price-based 
concession is considered more likely to obtain congressional 
support.  End Comment. 
 
 
PIERCE