Honduras
Analysis

How likely is a Hondutel bailout?

Bnamericas Published: Wednesday, August 31, 2022

Plunged into a crisis lasting several years, a possible rescue of Honduran state-owned telco Hondutel is once again making the front pages of local newspapers. 

However, finding an investor for Hondutel is far from assured.

"A continuation of the status quo is most probable," Miguel Ángel Alcaine Castro of the ITU office in Honduras told BNamericas.

In mid-August, Hondutel’s CEO Orbin Montoya told reporters he had identified a strategic partner that would invest between US$300mn and US$350mn in a project for telephony, internet and cable.

The announcement was made in the context of a crisis with the Hondutel unions, which are demanding unpaid wages.

It is not the first time that possible partners for Hondutel have been mentioned. However, previous plans came to nothing.

"It’s time to make decisions. I believe that decisions have been postponed. Various rescue plans have been announced but have not seen the light of day and I think a decision should be made on this," Edwin Estrada, a consultant at NAE, told BNamericas.

Alcaine Castro also agrees that it is time to take action since the government, which took office at the beginning of the year, has a window of opportunity to make decisions. "These are difficult decisions that have political consequences," he said.

Hondutel's main attraction for investors is a fiber optic network that could be used as a national backbone and its participation in at least one interoceanic cable. However, the large number of employees, its debt and the little income it generates from its traditional landline business do not make the company attractive.

"Hondutel's problems have been getting worse, and we see how the company is currently unable to pay its electricity costs, much less the salaries of its employees," added Estrada.

According to market data, while private telcos Tigo and Claro operate in the country with approximately 1,000 employees each, Hondutel has more than 2,000 employees.

"If a company wants to buy Hondutel, it obviously has to restructure its personnel and probably lay off a lot of people, and that's where the real cost lies," Allan Ruiz, an analyst at Access Partnership, told BNamericas.

"We do nothing by injecting resources into a company that’s not sustainable," added Estrada.

According to local press reports, Hondutel's H1 loss was 229mn lempiras (US$9mn), up 56% on the same period last year.

Alcaine Castro added that in case of the wholesale network, it must be guaranteed that there are enough retail operators interested in contracting the service, which must also be very efficient.

"Furthermore, we have to see if technology does not end up making our way of thinking about coverage geographically obsolete," he said. The ITU representative added that with the new satellite internet constellations, the entire structure of the broadband market could be reconfigured.

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