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HONDURAS: GOVERNMENT CANCELS TELEPHONE COMPANY PRIVATIZATION AFTER BIDDING FAILURE.

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Vincent

The Honduran government failed in its efforts to privatize the telecommunications company Empresa Hondurena de Telecomunicaciones (HONDUTEL) in October and will have to start the bidding process all over next year.

The only bidder, Telefonos de Mexico (TELMEX), offered US$106 million, far below the government's target of US$300 million. The sale had been postponed four times this year.

HONDUTEL has been a profitable company, earning US$28 million per year, but the International Monetary Fund (IMF) has been pressing Honduras to privatize it since 1994 (see Chronicle, 1994-05-26).

The government's privatization commission is attempting to sell 51% of HONDUTEL. The government is to retain 46% and 3% is earmarked for HONDUTEL workers and for investment in various social projects. The concession would be for 25 years (see NotiCen, 2000-02-24).

Under legislation governing the sale, 60% of the income from the concession would go into a special trust account in the Banco Central de Honduras (BCH). Interest earned by the fund over the next 20 years would be invested in a plan for improving public education.

Explanations for the relative lack of interest in HONDUTEL vary. Mario Canahuati, former president of the Camara de Comercio e Industrias de Corte (CCIC), said the failure to find a buyer at a price attractive to the government shows that Honduras has a poor image among foreign investors. Companies in the US and Europe were expected to bid but did not do so. He recommended chopping up HONDUTEL and selling its components separately.

Others suggested the terms of the sale were too daunting to investors. Bidders had to show their companies had annual sales of at least US$1.25 billion and operate at least one million telephone lines. The...

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