Venezuela: Nationalized CANTV Cuts Phone Rates

Cantv to Cut Venezuela Mobile, Fixed-Line Phone Rates
By Alex Kennedy

May 22 (Bloomberg) -- CA Nacional Telefonos de Venezuela, the country's largest telephone company, plans to lower rates on wireless and fixed-line services as the government challenges competitors after taking over the company today.

Cantv, as the company is known, will cut mobile prices 10 percent on June 15 and 10 percent more on Aug. 15, President Hugo Chavez said in a televised speech after swearing in a new board. The company will reduce fixed-line rates in low-income areas by 10 percent for local calls, 15 percent for long- distance and eliminate the country's 11 percent value-added tax on calls in July, Chavez said.

"This puts pressure on the other mobile companies to lower their rates,'' said Andreas Faust, an analyst with Banco Mercantil in Caracas. ``The government looks like it's willing to subsidize prices in a way private companies may not.''

The government is taking on Telefonica SA's Movistar and Digitel SA in Venezuela's booming wireless phone market. Lowering tariffs will also probably cut the country's annual inflation rate, Latin America's highest, Faust said.

"In a way, the government, instead of paying a dividend to shareholders, will pay a dividend to customers,'' Faust said.
"It's a very populist move and will likely slow inflation a bit.''
..
The number of Cantv's mobile subscribers rose to 8.1 million on March 31 from 2.8 million on March 31, 2004, and Chavez reiterated the company's goal to have 10.5 million subscribers by the end of 2008.

"With these announcements, Cantv is starting to act like a socialist company,'' Chavez said in a televised speech in Caracas. ``It's not about the money earnings, but rather the social earnings.''
...
Cantv shares closed up 230 bolivars, or 6.1 percent, to 4,000 bolivars on the Caracas Stock Exchange.