ECUADOR:
No Dial Tone, No
Contract
By Kintto Lucas
QUITO, (IPS) - The
possible cancellation of
the mobile telephone
operating licence
granted by Ecuador to
Porta Celular, a company
indirectly owned by
Mexican
multi-millionaire Carlos
Slim, could set a
precedent in Latin
America.
Ecuadorean President
Rafael Correa warned
earlier this year that
when Porta Celular’s
contract expires in
2008, its cell phone
operations might be
repossessed by the
state. Porta, a
subsidiary of América
Móvil, runs a lucrative
private business but has
not benefited the
country, he said.
"The party’s over," said
Correa in one of his
regular Saturday radio
programmes, adding that
re-negotiation of the
conditions for cellular
telephone operations in
the country will
continue until December.
The president also
claimed that Porta
Celular pays less taxes
than its competitor
Movistar, which belongs
to the Spanish company
Telefónica, although
Porta has three times as
many customers as
Movistar.
"We’re going to put an
end to the abuses by
certain telephone
companies," he said.
A few days later, when
Spain’s deputy prime
minister María Teresa
Fernández de la Vega
visited Ecuador, Correa
indicated that Porta and
Movistar must get ready
to renegotiate their
concessions, because the
government of Ecuador
will "act vigorously" to
defend the national
interest.
This position was
reaffirmed when the
Internal Revenue Service
(SRI) reported
irregularities in
Porta’s tax payments,
and the Superintendence
of Telecommunications (SUPTEL)
accused Porta of
negligence towards
customers and
sub-standard service.
The SRI started tax
audits in September, on
discovering that Porta
had paid only four
million dollars in
income tax over the last
four years, although its
recorded sales were
worth over two billion
dollars.
The suspicion aroused by
the disproportionately
low tax payments came on
top of nine other
investigations of Porta
for alleged non-payment
of Value Added Tax (IVA)
and Special Consumption
Tax (ICE), and illegal
withholding of taxes.
The head of the SRI,
Carlos Marx Carrasco,
said such a low level of
tax payment by Porta
Celular leads one to
presume that "something
untoward is going on,"
as preliminary
investigations
calculated the company
owes large amounts to
the state.
Porta issued a
communiqué arguing that
the assessment of its
tax liabilities should
take into account the
large debts it inherited
and the severe economic
crisis in Ecuador when
it took over the
concession.
During the period 1999
to 2002, "the balance of
our operations was
negative. The losses
were basically due to
the situation left by
the former company and
the need for profound
restructuring and
investment," the
statement says.
"Therefore, during that
period no taxable income
was generated and no
taxes were payable to
the state."
The allegations of tax
evasion come on top of
repeated problems with
the telephone service.
SUPTEL detected a
serious deterioration in
call quality and
constant interruptions
in Porta’s service on
Sept. 25, which affected
more than 5.5 million
users for over 15 hours.
The problem, which had
occurred to a lesser
degree twice before,
prompted SUPTEL to open
administrative
proceedings against the
firm for negligence,
because in SUPTEL’s
view, "all necessary
measures to ensure
continuity of service,"
as stipulated in the
constitution, had not
been taken.
Furthermore, SUPTEL
claims that certain
clauses in the contract
by which the state
granted Porta’s
concession have not been
fulfilled, like the one
binding the company to
"install, operate, and
maintain in good working
order" the mobile
cellphone system "until
Aug. 26, 2008," when the
contract expires.
The telecoms regulator
also takes the view that
Porta has not met its
obligation to "provide
sufficient capacity to
satisfy the requirements
of phone traffic
generated by customers
throughout the period of
the concession."
The contract stipulates
that in case of
negligence or breach of
quality standards, the
company shall be granted
30 days to justify and
remedy the problem.
Failure to do so will
result in initiation of
legal action to cancel
the concession.
Porta Celular denied the
allegations and launched
an advertising campaign
in the national media to
improve its image and
justify its presence in
Ecuador.
The head of the
company’s legal
department, Daniel
Bernal, argued that the
request to improve its
services within 30 days
is superfluous, because
Porta’s equipment is at
the cutting edge of
technology and it is
continually updating its
software. In 2007 alone
it has invested over 200
million dollars in
equipment and
infrastructure, he said.
He also said that SUPTEL
had reached "hasty
conclusions" in blaming
Porta, which is the
largest cell phone
company in the country,
with nearly 6.6 million
customers, equivalent to
about 70 percent of the
market.
The remaining 30 percent
is shared between
Movistar and the state
firm Alegro, which
received its operating
permit many years later
than the two private
firms.
In response to Bernal’s
statements, SUPTEL
official Darwin Muñoz
Serrano said neither
Bernal nor Porta are
above the laws of the
Ecuadorean state.
"Porta argued that the
interruption of service
on Sept. 25 was caused
fortuitously, by causes
that could neither be
predicted nor prevented,
in an attempt to excuse
itself from legal
sanctions and
compensation payments to
customers, but it was
unable to prove its case
objectively, technically
or legally," Muñoz said.
"The resolution that
Porta was guilty of
negligence, handed down
by SUPTEL in the
administrative procedure
against the company,
protects the right of
six million users to
continuity of service,
as guaranteed by the
constitution, which may
not be interrupted due
to negligence on the
part of an operator," he
stressed.
The SRI tax audit of
Porta, and the time
allowed the company by
SUPTEL to remedy its
service failures, both
end in December.
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