A tale of debt and possible privatization: How 2015 is shaping for Hondutel

Honduras' state-owned telecom Hondutel is reportedly on the verge of collapse due to net losses, pending lawsuits and severance packages – and the solution to its financial woes remains unclear.

Hondutel reported losses of 752mn lempiras (US$30mn) in 2013, prompting the telco to close down customer service centers and eliminate more than half of its management positions via an early retirement plan, and the suspension of 700 low-productivity workers who rejected early retirement.

As a result, the company saw its losses fall 63% to 189mn lempiras in the first nine months of 2014 – although not enough to return it to financial health.

Hondutel 's situation calls for a substantial cash injection. Current manager Jesús Mejía said it needed US$200mn, although earlier reports said the company required US$600mn to survive. Congress allocated 86mn lempiras in early-2014 for infrastructure improvements, although the government is "not in a position to pay back [the investment]," according to Mejía.

The telco then decided to look beyond the country and hold talks with potential foreign investors. Costa Rican state telco ICE expressed interest in Hondutel, but a deal has yet to materialize.

Rodolfo Irías Navas, congressional telecom committee president, said that he had met with representatives from various foreign firms, including China, Israel and the US. A Guatemalan-Chinese consortium also expressed interest in Hondutel.

In June, former director Alonso Valenzuela said the company should be privatized. If it were a private company, it could increase its sales volume and the government would benefit through sales and income taxes, according to Valenzuela.