Telefonica Opens Rate Talks in Venezuela After Maduro’s Threat

  • President said state could take over phone carriers if needed
  • Telefonica’s July price increase blocked by government

Telefonica SA is holding talks with the Venezuelan government to adjust phone-service rates after President Nicolas Maduro blocked an attempt to increase prices and said the state was open to taking over carriers if necessary.

The company is in “talks with the authorities to define new prices," according to a statement on its Venezuelan website Friday. The Madrid-based company also plans to reimburse customers who already paid bills after a July price increase, which was later overturned by the government.

As Venezuela struggles with the world’s fastest inflation, Telefonica and rivals had raised prices to stay afloat and be able to pay interconnection fees for international data and call traffic. Nobody can “set prices just like that," Maduro said Aug. 1 on national television, and warned that he was open to taking control of phone carriers if they can’t manage their businesses amid the country’s worst economic recession in decades.

Telecom companies had increased prices as much as 10-fold until the government stopped them. Telefonica’s cheapest pre-paid package, called Full 1.2, currently costs 1,045 bolivares ($1.62) a month, according to its website.

In February 2015, Telefonica wrote down the value of its Venezuelan assets by 2.8 billion euros ($3.1 billion) to adjust for a lower exchange rate. At the time, the company used an exchange rate of 50 bolivares to the euro. In this year’s second-quarter earnings report, it used an average exchange rate of 697.3 bolivares per euro and said that it considers the country as hyper-inflationary for accounting purposes.

Venezuela accounted for less than 1 percent of Telefonica’s revenue last quarter.

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