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HavanaJournal.com: Cuba Business

The business opportunity for US companies in Cuba telecommunications

Posted September 10, 2009 by publisher in Cuba Business.
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Reuters

In measures originally announced in April and implemented last week, U.S. President Barack Obama has relaxed aspects of the U.S. trade embargo against Cuba to allow U.S. telecommunications companies to provide services to the communist-ruled island.

But the U.S. companies face major hurdles, from legal obstacles to tough foreign competition and the key question of whether wary Cuban authorities will be willing to open up this strategic area to operators from the country Havana has viewed as its ideological enemy for almost half a century.

Here are some facts about the Cuban telecoms sector:

LOW PENETRATION, BIG POTENTIAL

Most analysts agree that the Cuban telecommunications market represents a major untapped potential because of the low penetration of fixed and mobile telephone and Internet services. Cuban data shows the island lagging far behind in the hemisphere in these services.

Telecommunications data for 2008 released by Cuba’s National Statistics Office in June showed there were only 1.4 million telephones, fixed and mobile, in the country of 11.2 million inhabitants. This gave a total density of 12.6 telephones per 100 inhabitants, the lowest in the region, according to the United Nations International Telecommunications Union.

Computers were also very scarce at just 630,000 and most were believed to be in government offices, health facilities and schools. The Cuban statistics report said 13 percent of Cuba’s population had Internet access, but in most cases this was to a government Intranet. No data was available for access to the World Wide Web, but diplomats and residents say it is severely restricted by the communist authorities.

President Raul Castro, who took over the Cuban presidency from his ailing older brother Fidel last year, introduced a reform allowing Cubans permission to freely buy and use cell phones—use had been previously tightly restricted.

But they can only pay for them in hard currency equivalent convertible pesos, which are not available to all Cubans.

CUBAN TELECOMS COMPANIES DOMINATE

Empresa de Telecomunicaciones de Cuba SA (ETECSA) is the state-owned telecommunications provider of telephone, Internet and wireless services. Telecom Italia has a 27 percent stake in ETECSA, and the rest is owned by the Cuban government.

Cubacel (Telefonos Celulares de Cuba SA) is a unit of ETECSA providing mobile phone services on the island.

In the 1990s, in what was billed at the time as the first large-scale privatization in Cuba since the 1959 Revolution, foreign companies had obtained and held major stakes in the Cuban telecommunications sector.

In 1994, Mexico’s Monterey-based Domos Group agreed to purchase a 49 percent stake in the Cuban national phone system, but then sold 25 percent of its interest to STET International Netherlands, a subsidiary of Italy’s state telecoms company. Domos relinquished its equity stake in 2005 because of the economic crisis in Mexico.

Established in 1991, Cubacel started as a joint venture between Mexico-based TIMSA and the Cuban government. In 1998, Canadian resources company Sherritt International Corp, the largest foreign investor in Cuba at the time, bought a 37.5 percent in Cubacel.

In 2003, the Cuban government bought back Sherritt’s stake and that of a Mexican investor, taking 100 percent control of Cubacel.

READ THE REST OF THE STORY HERE

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Member Comments

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On September 11, 2009, John wrote:

In a country with an impoverished population under a communist government, where basic food requirements are rationed and black market activity is rampant, one would assume there is little profit to be made from telecomunications.
The demand is there, but the money is not.
I say the telephone ‘giants’ should provide a land line service to each and every home in Cuba free of charge.
Profit can wait until the ‘Revolution’ is dead.

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On September 21, 2009, Yeyo wrote:

Still the goverment charge the highest prices in the world for comunications to and from Cuba.

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On September 22, 2009, amado wrote:

is unbelieveable that i have to pay 89 cents a minute and a dollar conection to be able to talk with my family and we are only 90 miles from cuba ,it will be interesting to know how much the regime make on each minute ,this is the most abuse dictatorship against they own people,