You are today leader in the telecommunication sector with 65% of the cell phone market and 50% of the internet thanks to your services in the cellular telephony, but also thanks to your business units: T-net, T-Data, T-Master, T-Link and Timetrac. For our readers, can you briefly come back on the steps that marked the development of Telcel?
We started in 1991; we were the first company to take advantage of the privatization process. We gained a concession in 1991 to operate in the 800-mega hertz band with cellular telephony. The consortium that made up the company was Bell-South from the U.S, which is the preliminary partner that has to approve all the materials we take in. They own 80% of the company and the other 20% are in the hands of Venezuelan investors.
In 1994, we began our diversification with T-Data, which is the private network business, the business of transmitting high-speed data for the top two hundred Venezuelan enterprises; we built and continue to build our own transmission network. There are only two telecommunications interurban transmission networks in Venezuela. CANTV has one and we own the other. The investment in the transmission network today has been about three hundred million dollars; this is out of better than 2.3 billion dollars that we have invested in the last nine years in the country. Our advantage is that we are the only ones that are one a hundred percent digital transmission network. We are more modern, advanced than CANTV though they have been around much longer. In 1996 we offered our Internet ISP, which is T-Net; it has about 48% market share.
In 1997, we did something revolutionary in Venezuela; prior to 1997 only people who had credit cards had access to cellular telephony. At that time only 11% of Venezuelans had credit cards, the figure today is about 40%, the recession of the last few years has had a toll in the middle class and most Venezuelans do not have a credit card at all. The only alternative was something called pre-payment, which is now very popular around the world. In 1997 there was no pre-payment anywhere in the world. We launched pre-payment; we were the first to really launch this in massive amount that allowed us to grow a hundred percent in 1997 to 1998, seventy percent in 1998 to 1999 and almost sixty percent this year. It has allowed us to go from a million customers in October 1998 to three million customers in September of the year 2000. Pre-payment has been a revolutionary tool, because it has given access to more people that would have never gotten involved with cellular telephony. For a lot of Venezuelans the only phone they own is a cellular. Only eleven out of a hundred people in Venezuela have a fixed phone. The figure for cellular telephony is 20%. Venezuela is now a wireless country; there are almost twice as much cellular phones than fixed phones. The launch of pre paid phones, which is called Telpago, has been recognized. We are in the process of creating a huge distribution network, we have twenty thousands points of sales in this country where a Telpago card can be bought. We are studying a strategic plan to double that amount by the year 2002. That will be by then the third largest distribution network in Venezuela topped only by Polar beer and Coca-Cola. I would say that those are our most significant highlights.
This year important things have happened. We were able to launch and pass the telecommunication laws; Venezuela had been working with a sixty-year-old law that was completely obsolete. It had taken us nine years until June of this year when the government finally signed. This law is very comprehensive, modern, up to date and above all, it was made in consultation with the private and public sector, everyone gave their opinions and the law is probably one of the most advanced in the world. The other thing that happened this year is that in November 28th the last two segments of the industry have been under a monopoly condition, which is the local and international phone access. These really are going to be opened to competition using the new law as the framework to open the market. We are in perfect condition to be there.
In order to complete the image of your company and to give a more accurate idea on the size of your company, could you mention your turnover?
About 1.5 billion dollars a year for 2000. We have twenty five hundred employees; twenty seven hundred authorized agents that sell our products around Venezuela. As I mentioned before we have twenty thousand points of sales for prepaid cards. I believe it is Venezuela's third largest company.
The new telecommunication law will come into force by the end of November 2000, meaning the end of CANTV's Monopoly. This will obviously represent an opportunity to increase your market shares. Can you tell us what your expansion plans are?
We are ready. We have the distribution, transmission, and technology to enter each of those two markets, the fixed telephony and the long distance. We are going to offer all this technology to both local and long distance access. We will be in the market place on November 28. Conantel has announced a bidding process, and they have divided the country in five regions. We have bid for all five regions and both markets using a technology called wireless loop to loop, it operates in the 3.4-3.6 MH. There will be a bid for LMDS, we will also participate in that. The business is the local and long distance market; the LMDS is a way of delivering transmission capacity. We are going to use our distribution network, the prepaid card.
The WAP Protocol is more and more seen as the future of Telecommunications. How do you foresee the development of that protocol within the next few years on the Venezuelan market?
We are pioneers with WAP. I am not sure if we were the first to launch it in South America, but we are certainly among the first three. Last November we launched our electronic mall. We have been forerunners of Internet in Venezuela as well as in Latin America. We have our own portal, and market place, which is the mall with forty stores where you can buy anything from an airline ticket to liquor, books, cigars, anything you want. What remains the big challenge now is to make sure that through WAP, which is the protocol we have adapted that we massify the Internet. In Venezuela there are only eight hundred thousand PCs, there are five million phones. We made the strategic decision last year that the only way we were going to expand the Internet offering is through the use of phone. We are keenly aware that it is still early in the game. Phone.com is the company that provides the platform; it is a very well known company. The cellular phone can easily sign into the web through our portal, which is called mipunto.com. Once I get there I can get my e-mail, the news, buy products, restaurants, hotels, information for aids services, pharmacy.
| What percentage of your subscribers do you intend to attach with this system?
The projection for the year 2003 for local wireless Internet is of about three hundred thousand. That is one out of twelve to fifteen customers will have Internet. The phone is also a two-way pager
You were speaking about WAP system and prepaid communications, which of those two activities are you focusing on the most?
Both, obviously the volumes are in prepaid communications. Everybody needs the prepaid communications. WAP has a more specialized application; not everyone is willing to pay for a phone that is more expensive than a normal phone. You need a digital phone with certain features. You also need to know how to navigate, and in an underdeveloped country that is not always the case. Prepay is really the roots of our business; 80% of our customer base is there. Pre-payment is the future of business here and everywhere else in the world.
What would you say are your competitive advantages regarding Digitel, Movinet who are your competitors?
First of all we are the largest. We have the widest coverage in Venezuela; we cover ninety eight percent of the Venezuelan population. We go to very remote areas, the jungles bordering Brazil; we reach the plains bordering Colombia. Coverage is very important. We have the strongest distribution chain in Venezuela to any seven hundred authorized agent, twenty hundred points of sales. Outside of CANTV, we are the only ones with the transmission facility.
Last but not least in the last seven years we have won every year the best service award of the industry in Venezuela. We are a company that is very focused on the customer. Nine years ago there was no concept of what customer services was in Venezuela. When the company was owned by the State there was a monopoly and the customers were marginalized. We introduced telephone service twenty-four hours a day, the concept of sales and services centers. We have forty-two sales and services centers around Venezuela. Our biggest competitor does not even have ten of these canters. We believe that we have a very good service. All the technology is important but people essentially count on the service.
Is Telcel considering going to the local stock market?
We are not in the local stock market and we do not intend being in it. Except in the IP order we are coming out in New York through Bell South; that IPO will be up on the market in the second half of this year or the first half of next year. It will depend on the market itself. When that stock comes out in New York it will be most likely to be traded in secondary markets in Latin America, Argentina, Mexico, Brazil, certainly the Venezuelan stock market. It will be through Bell South's percentage of ownership that we integrate ourselves to the stock market. Even our sister companies around South America will be part of this. Bell South has twelve companies, in Brazil, Argentina, Uruguay, Chile, Ecuador, Peru, Colombia, Panama, Nicaragua, Guatemala and two others. There are different percentages of ownership. We all share the Bell South brand some way or other. Our call branding is Bell South. Some of these companies are called Bell South. It depends in the strength of the brand in the country. Telcel is the strongest brand in Venezuela today, in the magazine Producto came out with the ranking of the top one hundred brands and for the first time Telcel came out as number one, in terms of market recognition.
You are part of this boom in the telecom sector as president of Telcel, when do you see the end of this trend in Venezuela?
Not any time soon. Our highest telephony penetration in this country is about twenty percent. In Finland it is seventy percent, in France it is probably fifty percent. The Internet is just beginning to blossom, there is a whole revolution building around Internet. Communications is a business and an industry for the twenty first century. I do not think there will be a year in which this industry will not grow. More and more people demand information and this is the only way the world will prosper considering that eighty percent of the world is still living in shacks. Once this people start developing they will want and need more information and access to content. The only way this can be done is through the telecommunications and in a poor country it is through wireless communications, they just do not have the money to put cable in the ground.
Do you believe the legislation is convenient for the foreign investors looking at investment opportunities in Venezuela?
It is now, with the telecommunications law of the year 2000. Prior to that there were no legal safe cards for investors to come, and yet Bell South came and we invested two billion dollars without a law. It says a lot about our belief that this is a good country to invest.
As President of Telcel, what has been your greatest personal achievement?
I was here when the company started, that was a great achievement because we were the first private company to go into telecommunications industry. We are a success story; we have gone very far and very fast. Getting the telecommunication law passed and managing this company to the opening is another highlight. The next step would be to massify the Internet.
What would be your message to foreign investors?
Venezuela is not a country you can come in and go for a quick return, it is a country in which one must be patient, invest for the future and long term. You must have the patience, the quality and the commitment to this country. This is a very nationalistic country, and you have to have Venezuelan front in your company. This company is a hundred percent run by Venezuelans. If some one is willing to invest in long terms then their returns are going to be very, very good. It is a wonderful country to invest. If you have a short vision, and you want to get the money out within a year, run the business like you would do in New York, Paris or Moscow then it will not work. If you want to be patient, invest and build added value in Venezuela, then this is exactly the country to do so.
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