Plenty of people shook their heads when Telefonica de Espana SA bid twice as much as rivals GTE Corp and the former Southwestern Bell Corp to secure the acquisition of Telefonica de Peru SA for $2bn in 1994; the Peruvian company was in a dire state , and many Peruvians were heard to say the […]
Plenty of people shook their heads when Telefonica de Espana SA bid twice as much as rivals GTE Corp and the former Southwestern Bell Corp to secure the acquisition of Telefonica de Peru SA for $2bn in 1994; the Peruvian company was in a dire state , and many Peruvians were heard to say the Spanish have finally returned us the gold they stole from Atahualpa. However, a team of 30 executives led by president Rafael Hernandez set to work and have already produced some startling results: net profits of $30m in 1994, followed by $319m in 1995. We don’t make many mistakes in Latin America, Hernandez commented; we offered what we thought the company was worth and now we’re firing on all cylinders. The profits achieved are on a par with those of Telecom Portugal SA for example, but the important difference is Telefonica de Peru is only a third the size. When Spain bid for the operator, there was an average of 2.7 telephones per 100 inhabitants in a country of 24m that has a per capi ta income of $2,400. Six years for a phone. Bearing the latter figure in mind, the Spanish carrier saw the potential for two- or threefold growth to six telephones per 100 inhabitants. If a gamble was made with respect to the political and economic stability of Peru, it has certainly paid off, since the country is now tentatively emerging from years of paralysis and runaway inflation. Two years ago the Peruvians had to wait an average of almost six years for a telephone line; the wait has now been reduced to six months. Speaking to El Pais, Hernandez recalled that as soon as Telefonica arrived, staff numbers were practically halved through a lay-off program, to leave the Peruvian operator with 6,500 employees. But it should also be remembered that more than 10,000 jobs have been created in contractor, supply and services companies, the president said. In terms of productivity, we have jumped from the bottom of the league of telecommunications companies to a position near the very top, Hernandez claimed. Telefonica de Peru has earmarked a total of some $2,500m for investment between 1994 and 1999. Not all the Peruvians are happy, however. Before, I could spend the whole day on the phone and it only cost me eight dollars, one subscriber observed with nostalgia. Controls are much stricter now, and non-payment swiftly leads to lines being cut off. The connection charge would also appear to be exorbitantly high at $800, though there are plans to cut this to $200 by 19 99, when Telefonica de Peru’s monopoly in basic telephony is due to end.