2006News

Verizon buyout still news

Economist Arturo Martinez Moya, writing in his column in Hoy newspaper, says that nobody really knows why Verizon would sell its operation in Puerto Rico the Dominican Republic and Venezuela to the Mexican-Lebanese Carlos Slim Helu, the third richest man in the world. Martinez Moya speculates that it is possible that the five-year projections made by the company’s United States head office, might be the reason. Martinez points out that when the phone company was a monopoly and even when it was competing with other companies (Tricom and Centennial) there was never any news about its fiscal health. This question has arisen because Slim Helu is famous for purchasing ailing companies at deep discounts and restructuring them into healthy enterprises.

Martinez says that the head office might have seen problems ahead due to the tight relationship between public policy (government) and the phone company. No doubts were expressed about the management ability of the company.

What Martinez sees as the real reason for the sale was the fact that the Central Bank will have to raise taxes in order to reduce the quasi-fiscal deficit and the head office did not like this prospect. On the other hand, Telmex is well known for charging very high prices for its services, higher than the current levels in the Dominican Republic. Even though it is INDOTEL that sets the phone rates, this was also the case in several other countries where Telmex is operating – Mexico, Brazil and Argentina, for example.

Martinez says that Verizon Dominicana has a monthly income that varies between US$700 and US$236 million. Because of the sum of money involved, Martinez Moya is urging the Dominican government to look into the sale, especially on the question of quality of service issues and phone rates.