Venezuela’s consumer agency has prevented Telefonica subsidiary Movistar from increasing its prices in the face of an annual national inflation rate of nearly 50%.
Reactions to the move have been varied. Analysts at Espirito Santa noted that operators should be able to react to inflation, saying “naturally this adds risk to the business profile of this unit, namely in terms of profitability considering that Telefonica is not able to pass onto consumers the inflation levels it is seeing on the cost side.”
However, Indepabis agency president Eduardo Saman seemed sceptical over the operator’s motivation. “It doesn’t make any sense that on the one hand they say they will give you free seconds, minutes and messages for every top-up and on the other they increase your tariff,” he said in a statement.
Telefonica has long faced difficulties in Venezuela. The country’s regulation makes it notoriously difficult for foreign firms to repatriate money that they have made there, and Telefonica has fallen afoul of this. In addition, the foreign exchange value of its profits has dropped dramatically.
A Bloomberg report put Telefonica’s Venezuelan dividends at around $3 billion over the past seven years, taking into account a recent value drop of $1.4 billion. Venezuela’s depreciating currency is aggravating the situation, but worst of all for Telefonica is the regulation that prevents any foreign companies from repatriating dividend cash of less than $12 billion.
