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DE RUEHTG #0838/01 1360018
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P 160018Z MAY 07
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC PRIORITY 5801
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC PRIORITY 0649
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
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C O N F I D E N T I A L SECTION 01 OF 02 TEGUCIGALPA 000838 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD, WHA/EPSC, INR/IAA, DRL/IL, AND WHA/CEN 
STATE FOR L/LEI, EB/OMA 
STATE PASS USTR 
JUSTICE FOR CRIMINAL DIVISION/FRAUD SECTION/MARK MENDELSOHN 
AND WILLIAM JACOBSON 
 
E.O. 12958: DECL: 05/15/2017 
TAGS: ECON ECPS ELAB KJUS KPRV PGOV PINR
SUBJECT: HONDUTEL UNDER FIRE AS NEGOTATIONS OVER NEW LAW 
CONTINUE 
 
REF: A. TEGUCIGALPA 715 06 
 
     ¶B. TEGUCIGALPA 579 07 
     ¶C. TEGUCIGALPA 736 07 
 
Classified By: Ambassador Charles Ford for reasons 1.4 (B,D) 
 
¶1. (C) SUMMARY:  The major actors in on-going effort to pass 
a new telecommunications law met May 11, and agreed to 
reconcile four key issues: license authorizations, naming of 
commissioners, taxes, and mobile licenses.  While the group 
plans to meet again May 18, a related effort by Congress to 
pass the law without Executive branch support may begin May 
15, around a donor nation meeting on telecom.  Meanwhile, 
more information regarding shady activities at state telecoms 
company Hondutel may force the departure of the allegedly 
corrupt interim chief.  END SUMMARY. 
 
¶2. (C) Post hosted an informal discussion May 11 involving 
key representatives from groups involved in the on-going 
effort to pass a new telecommunications law "Ley Marco."  The 
new law would introduce more competition in many services 
while helping to meet commitments outlined in CAFTA.  While a 
strong Ley Marco was introduced with other CAFTA-related 
legislation late in 2005, it was never passed (ref A), and 
the Executive branch recently proposed a version that would 
support Hondutel's exclusivity in key services indefinitely. 
 
¶3. (C) The group distilled the main points of contention down 
to four key issues: 1) who would approve licenses to compete 
in domestic and international services; 2) what branch of 
government will name the commissioners for telecom regulator 
CONATEL; 3) what is the percentage tax that each company 
needs to contribute for international calls and social 
development funds; and 4) the procedure for awarding mobile 
licenses.   ASETEL, the Honduran association of private 
telecommunications companies, promised to provide their view 
on each of the issues, with justification, to the Presidents 
office in time for the next meeting, planned for Friday, May 
¶18. 
 
THE PRESIDENT'S SIDE: LIMITED COMPETITION 
 
¶4. (C) The meeting included some of the key architects of the 
President's recently submitted revised law.  Hector 
Rodriguez, the former head of Central American 
telecommunications association COMTELCA (www.comtelca.com), 
spoke at length on the changes he made in the latest 
revision.  The principles behind his revisions were summed up 
recently in a letter his office wrote to private industry 
group COHEP: competition should be in local services only, 
and long distance, international and mobile licenses should 
be limited for "technical, economic and constitutional 
reasons."  (Comment: Rodriguez was reportedly asked to leave 
COMTELCA, an organization supported by private businesses, 
because of his protectionist position.  Rumors that he is in 
line to be the next head of Hondutel was supported when he 
appeared in the meeting with two senior Hondutel legal 
advisors.  Rodriguez is also the uncle and confidant of 
Hondutel interim head Marcelo Chimirri (ref B).  End Comment). 
 
¶5. (C) Rasel Tome, the head of state telecom regulator 
CONATEL, also supported the President's position.  He 
expanded on the argument that licenses need to be regulated 
by the Congress because of constitutional requirements. 
Specifically, he indicated that each company that wanted to 
compete in international calling required an access code, 
which needed to be auctioned because "the best codes 
contained numbers like 1-2-3."  (Comment: Customers who 
pre-subscribe their service from home do not need to use 
access codes, and the Honduran market is several years from 
competing in U.S. type access code marketing.  End Comment). 
Tome also maintained that he supported President Zelaya's 
position that only the executive branch appoint CONATEL 
commissioners.  (Comment: Appointment of commissioners is a 
powerful and lucrative tool for Honduran presidents.  Tome's 
appointment was President Zelaya's payback to Honduran 
businessman Jaime Rosenthal, who many believe is benefiting 
from illegal international "grey line" traffic terminated 
over his son Cesar Rosenthal's local telephone and cable 
company CableColor.  End Comment.) 
 
TEGUCIGALP 00000838  002 OF 002 
 
 
 
¶6. (C) Maurcio Sierra, the head of the Modernization 
Committee under Minster of the President Yani Rosenthal, 
also commented on the President's desire for an "ordered 
maret opening."  He played more of a facilitator rolein the 
discussion, trying to moderate Rodriguez'rhetoric while 
helping to distill the controversal points that needed to be 
worked.  (Comment: Sierra is generally well thought of in 
private indutry, but has had limited involvement in telecomsdue to Yani Rosenthal's desire to stay far away frm 
potential problems with his brother's CableColr.  In an 
interesting move, Sierra's top deputy for telecoms, Rafael 
Madriaga, recently left the Cmmission to take Rodriguez' old 
job at COMTELCA,and immediately contacted the embassy with a 
desre to improve relations.  End Comment). 
 
PRO-COMETITION FACTION READY TO MOVE 
 
¶7. (C) The other faction at the meeting stood behind the 
original Ly Marco and maintained the law would create 
comptition, lower prices, provide more revenue to stat 
coffers and comply with commitments made under nternational 
trade agreements.  The faction was headed by World Bank 
representatives Adrian Fozzar and Dante Mossi and ASETEL 
president Jose Luis ivera. 
 
¶8. (C) Both major parties of the Nationa Congress were 
represented, by Nationalist, and x-President of CONATEL, 
David Matamoros and Liberal telecommunications committee 
member Marcia Vileda.  Matamoros made some of the meeting's 
most nsightful comments, stating flatly that the Presidnt's 
version was simply a delay tactic and that pecial interests 
that were benefiting daily from the current regulatory 
structure were behind the hanges.  (Comment: Post has heard 
credible evidece that corruption at Hondutel is bleeding 
betwen USD 2.5 million to USD 13 million a month throug 
pirated "grey line" traffic and other schemes. End Comment.) 
 
¶9. (C) Villeda, though of PresidentZelaya's Liberal party, 
is part of rival Presidet of Congress Roberto Micheletti's 
faction and ws firm in her request that any law presented to 
ongress should first be agreed upon by all stakeholders. 
(Comment: The latest version from PresidentZelaya was 
presented without having any other paty first review it. 
End Comment).  Unofficially,Villeda has also been asked by 
Micheletti to preare a version of the law based on the 
original Ley Marco to be presented in Congress without the 
Pesident's approval.  (Comment: Introducing a bill or 
consideration without the President's input aparently has 
not been done in the last 25 years,thanks to a historically 
rubber-stamp Congress.  End Comment). 
 
HONDUTEL UNDER FIRE 
 
¶10. (C) As or Hondutel, a popular radio program, HRN, 
startd on May 14 a series on corruption and mismanagemet at 
the state telecoms company.  Called "Hondutl, Victim" the 
program went on to describe the suspicious contracts that 
were negotiated with 16 international carriers, some of which 
may not actually exist (ref C). Post has also learned that 
leading daily newspaper El Heraldo will be running an 
investigative piece on Hondutel, probably on May 16. 
Finally, with popular suspicion arising regarding activities 
at Hondutel, Post has learned that the Public Ministry is set 
to run a series of operations against key Hondutel executives 
as early as May 15. 
 
¶11. (C) SUMMARY:  While Post supports continued dialogue 
between the opposing factions, the observations of 
Nationalist Congressman David Matamoros were right on the 
mark: with up to USD 13 million a month at stake, even a 
small delay means big money.  So, despite constructive 
dialogue, Post has little faith in Hector Rodriguez and his 
team's commitment to timely reconciliation.  A bold move by 
Congress to present the law may make President Zelaya accept 
broader changes, and the attack on Hondutel could force him 
to finally fire Chimirri.  The link between Zelaya and 
Chimirri has proven too strong to break before, however, and 
may yet weather the storm.  END SUMMARY. 
FORD