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Venezuela: Gustavo Roosen no le teme a la competencia
TelePress Latinoamérica / March 2002

By Larry Luxner

Q: What has been your primary accomplishment as president of Venezuela's dominant telecommunications provider?

A: "Taking CANTV from a managed monopoly to a more customer-oriented company has been the principal driver of my vision for as long as I've been on this job."

Q: What is the current ownership structure of CANTV?

A: "The Venworld consortium now owns 34% of the company. Workers own another 10%, the government has 5.6%, and the rest are individual stockholders. Venworld itself is composed of Verizon (65%), and Telefonica de España (20%) with the balance made up of small shareholders. Electricidad de Caracas and Banco Mercantil are now Class D shareholders, and AT&T sold out in mid-year."

Q: What about the company's financial performance?

A: "CANTV is doing well. We've met the expectations of the analysts; our EBIDTA for 2001 is $1.2 billion, and our revenues are close to $2.8 billion. Including Movilnet and other affiliates of CANTV, we have 12,400 employees. In revenue terms, we're one of the largest private-sector companies in Venezuela."

Q: Is CANTV ready for competition?

A: "We have met or exceeded all of the guidelines set out by Conatel before the opening, which was November 2000. There are 5.5 million households in Venezuela, and we're serving 40% of them.

"Under the rules, within 24 months after the opening, or whenever the Agencia Pro-Competencia determines there is effective competition in fixed wireline service, we will no longer have price caps on our service. We have a contract with Conatel to cover price increases for 2001 following that rule, and we're negotiating with Conatel for 2002."

Q: How much competition is actually out there at this point?

A: "When the market opened, we expected to lose 25% of international long-distance, which we did not. There's really not that much competition. CANTV has 99% of the fixed-wireline voice market. Future competition all depends on how many people want to come and invest here."

Q: How is the Venezuelan telecom sector doing, compared to oil and other key sectors of the economy?

A: "Venezuela has 6.5 million cellular users, and about 3 million fixed lines. We're ahead of Mexico but behind Argentina, Chile and even Colombia, because even Colombia has a very subsidized structure of fixed lines. Obviously, the presence of private ownership in CANTV with foreign ownership criteria and planning tools have resulted in consistent improvements over the last nine years, which in turn has resulted in a much better image in the eyes of the consumer, who are happy and content with the quality of service.

"Next year, our capital investment will be in excess of $500 million -- including close to $200 million to prepare Movilnet for 2.5G. So that's proof of our commitment. BellSouth has also made a commitment to pursue investments in telecom. And Telecom Italia, with its purchase of Digitel, is also entering the market. In general, the performance of the telecom sector has been better than the oil sector. But we feel there's a lot more potential. We think that as a percentage of GDP, the telecom sector could expand beyond the current 4.4%."

Q: Several years ago, the government outlawed callback services because they were undercutting CANTV. Is that still the case?

A: "Callbacks are still illegal, but they no longer exist because we are fairly competitive in our long-distance rate structure. Now a one-minute call to the States is only 55 cents a minute, compared to $2 a minute when CANTV was state-owned."

Q: But local rates are much higher than before.

A: "The basic residential phone bill is $11 a month, compared to $5-6 a month before we took over CANTV. So there's been a rebalancing of tariffs."

Q: How has CANTV been affected by Venezuela's economic problems?

A: "It's a fairly contradictory situation. The company is doing very well and we have a very modern telecom law that regulates the entire sector, but nevertheless we are under the cloud of political uncertainty and the lack of a credible macroeconomic plan that's affecting the overall perception of the company."

"Investors are not pulling out, but there is less interest in buying our stock, and therefore our stock price has fallen by 30% in the last three weeks, from $22 down to $15. There is no question that a foreign investor will first look at what Venezuelans are doing before investing his own money. For the time being, the foreign investment community is staying away."

Q: What is CANTV doing to try to lure investors back?

A: "We have put forth a new dividend guideline for the investment community that indicates we are prepared to pay 50% of our free cash flow as dividends in cash for 2002, which is an enhanced policy in order to give a more attractive cash return to our stock to enhance its value."

Q: Has the declining popularity of President Hugo Chávez and his anti-business policies had any effect on CANTV?

A: "As the overall perception of the country has deteriorated, so has our ability to convince shareholders of the quality of our work. By the same token, there is a lot of apprehension and nervousness among the workforce, which sees the critical situation of companies that have been less successful than ours. Therefore the focus and attention of our workforce needs to be worked on constantly."

Q: In the past, CANTV's relationship with its labor union was often bitter. Have things improved?

A: "It's becoming a more mature relationship. A case in point is that we have the only labor contract in Venezuela which includes variable compensation to unionized workers based on their own performance, with measures we look at on a monthly basis. This has been a very powerful tool to make the labor force a lot more efficient. They now earn more money than what a comparable worker would make without these features.

"The union has political overtones, but it's a lot less apparent and effective as a political movement, and more geared now to the day-to-day relationship between labor and management. It's a constructive, healthy relationship."

Q: Yet in order to make the company more efficient, you had to lay off thousands of workers, right?

A: "These people were retired or dismissed, but handsomely paid off with good packages. We have been a fair employer, having to adjust to best practices but doing so by being fair at all times."

Q: Where do you see the cellular business going?

A: "The Internet is growing at a much faster rate than cellular. With the Internet, we feel we're witnessing more or less what happened in the mid-90s in the cellular business. With our Movilnet subsidiary, 90% of our customers are prepaid. Average revenue per subscriber is $23-25, compared to $90 per month for post-paid. It's true that ARPS is declining every year as we penetrate further into lower-income levels, but it's a more efficient use of our network."

Q: Are there any remaining restrictions on CANTV getting into new businesses?

A: "We cannot buy an existing cable company for one more year, but we could invest in a new cable endeavor if we wanted. But we will not, because deployment of ADSL techhology for broadband is a better product for our company."

Q: Why did AES fail in its recent bid to take over CANTV?

A: "When they departed Venworld, they felt they could basically capture back the company as an extension of their activities in Venezuela. It is not so clear at this juncture, but the events of Sept. 11 basically changed the horizon so dramatically that what they had in mind back in June or July was altered. We felt that it was a weak offer.

"They were offering to buy 43% of the company, in addition to the 6.9% that they already owned, for $24 per ADR. That would have given them 51% of the company. But it was highly conditioned, the financing was not sufficiently clear in their filing papers, and they didn't have any experience in running a telephone operation. They also came forth with the idea of spinning off Movilnet, and we felt that was inappropriate."

Q: Is another hostile takeover attempt likely?

A: "Now we have Verizon and Telefónica entrenched with the management, and they're happy shareholders. So whoever wants to come in would have to take them into consideration."

Q: What personal qualities do you feel you bring to the job, based on your experience as minister of education and president of PDVSA?

A: "The ability to select good people and build a consensus management as a way of doing business in Venezuela, which is appropriate for an operation of this size in our country.

"It's important to get people to agree to go in the same direction. One of the unfortunate characteristics of our culture is that it's more power-oriented than results-oriented. So you have to have that in mind at all times when leading a corporation."

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