Country’s instability and lack of foreign exchange availability to import devices are the two main obstacles, the telecom industry faces today in Venezuela, which for second year in a row will post a slowdown.

It was so stated by several chambers gathering the segments of telecom industry in general, that have their maneuver margin to face new businesses restricted due to limits existing in foreign exchange market.

Mobile phones sale posted a 25% fall in 2009, by totaling something more than 9 million devices, against the 12 million recorded in 2008. It was the second consecutive year of slowdown, since in the year 2008, a similar reduction has been posted in comparison with 20907, when around 15 million mobile phones were placed.

Reasons for this fall is not only due to a market maturity issue –which has already exceeded the 100% penetration–, but also to the effects of the global crisis, lost of purchasing power of different socio-economic groups, country's inflation and restrictions to import handsets due to lack of money. Everything shows that this situation will remain during 2010, and that the only segment within mobile telephony market that will still be dynamic will be that of Smartphones. Venezuela holds the highest adoption index for this kind of handsets, such as BlackBerry, in Latin America. While average participation of this kind of handsets is of 2%, in Venezuela, it climbs to 7%. Therefore, expectations will be laid on this kind of handsets. In fact, three telephone operators, Movistar, Movilnet and Digitel, have updated their platforms for BlackBerry with the purpose of meeting demand of people having those handsets.

Foreign purchases. Import of handsets is a point to be solved this year, since the foreign exchange control prevents these transactions from being solved with the dynamism required by the sector. Digital, probably fostered by this situation, has decided to face import of handsets through the Ministry of Science, Technology and Intermediate Industries. It has already managed to import the first 750,000 handsets and everything shows that this will be imitated throughout the year. Under this modality, the Executive Branch controls the marketing of these handsets, customer's sale price and the foreign exchange. While Digital purchases handsets with Bolívares, the Government acquires them at the official foreign exchange rate.

Televisión. Subscription television market will also suffer a slowdown in 2010. According to data of the Cámara de Empresas de Televisión por Suscripción (CAVETESU) from Venezuela, in 2009 the sector grew 19% against 22% posted previous years. Predictions for 2010 are that it shall post a slight fall due to country’s economic problems and the lack of foreign exchange that prevents products from reaching the market promptly. The same happens when the companies want to spread their service offer. Those pay TV companies willing to offer Double Play with broadband or Triple Play with telephony are also halted for that same reason. In the industry, they consider that open regulation –that enables both telecom companies and cable operators to take part in NPlay– has been positive for the activity; Economic issues are those preventing to go in that direction. “Everything is slow,” assured sources from the chambers.

Within that framework, several companies reduced their investment budget for this year by indexes that go from 30% to 50% depending on the case, after the devaluation that happened on January this year. Although prediction was that there would be a value adjustment of the currency, the calculation was that it would go from 2.15 Strong Bolívares (Bs. F) to 3 Bs. F. But in fact, the dollar for that sector was of 4.3 Bs.F., thus obliging many companies to execute a severe adjustment and others to renegotiate contracts both with equipment suppliers and signals providers (in the case of subscription TV companies) since contracts in dollars were difficult to pay according to the guidelines established before the devaluation.

Lack of foreign exchange availability is increasingly more traumatic in sectors such as telecommunications. In fact, claim does not only correspond to that sector; such is the case that during the first days of April, the Comisión de Administración de Divisas, CADIVI (Foreign Exchange Regulator), delivery of dollars for the imports was expanded by 11%, although the economy is in recession and there are strong restrictions in the private sector in general. In fact, the need to provide currencies is what fostered telecom companies to start operation abroad. (To be continued).