Venezuela consumer protection agency forbids Movistar tariff increases

Bnamericas Published: Thursday, October 17, 2013

Venezuela's consumer protection agency Indepabis has forbidden Spanish telco Telefónica's (NYSE: TEF) local unit Movistar Venezuela from increasing any of its service tariffs, the organization said in a release.

Indepabis previously put a Movistar tariff rate increase on hold while it investigated user complaints regarding the situation.

User complaints about the operator include alleged offenses such as rate increases, unfair charges and deceptive advertising.

"We've approved a lot of promotions for Movistar, and we're going to review these offers again because it's inexplicable that on the one hand they say that they'll give you free seconds, minutes or messages for each top-up and on the other hand they increase the tariff," Indepabis' president, Eduardo Samán, said.

Venezuela is a lucrative market for Telefónica, bringing in 1.5bn euros (US$2.05bn) in revenues and 650mn euros in Oibda during the first half of this year, the company said in a results release.

However, due to restrictions on repatriating profits to Spain, Telefónica is thought to have around 18.8bn bolívares (US$2.99bn) which it is unable to take out of Venezuela.

The company is also battling rising inflation in Venezuela. Inflation was 21.1% in Venezuela in 2012, and that figure is expected to increase to 37.9% this year, according to IMF figures.

The risk of a further devaluation of the bolívar could also eat into the value of Telefónica's Venezuelan cash in foreign currency terms.

The company is reportedly planning to boost its spending in the country ahead of a possible further devaluation. Telefónica has already outlined plans to invest 3.4bn bolívares in Venezuela this year, and is now thought to be spending an additional 1.3bn bolívares on its mobile network.

While Venezuela remains a lucrative market for Telefónica, currency effects are already having an impact on the company's results. The operator's Venezuela revenues increased by 40.2% in local currency terms in H1, but decreased by 0.7% in euro terms.

Indepabis is also planning to investigate pay TV companies in Venezuela regarding similar customer complaints, Samán said.

To combat the ongoing "economic war" in the country, "we must go to the root, to the big companies in Venezuela," he added.

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