August 23, 2000

Cuba slowly edges into telecom world as pay phones finally appear

By Doreen Hemlock Sun-Sentinel. Web-posted: 9:43 p.m. Aug. 22, 2000

Only two years ago, it was tough to find reliable pay phones in Cuba. Residents without phones often depended on favors from neighbors or corner stores to make calls.

But now, modern pay phones in air-conditioned booths are sprouting up in Havana and other cities. Locales abound that sell prepaid phone cards, some with ads for local businesses.

As telecommunications takes off throughout Latin America, the push is extending into communist Cuba, too -- even though the cash-strapped island has limited funds and few investors to finance its much-needed telecom growth.

Spearheading the expansion is Etecsa, the Cuban joint venture company owned by the island government and a unit of Italy's Telecom Italia SpA.

Etecsa has plans to add about 100,000 phone lines yearly over the next five years. That would about double Cuba's phone density to nine phones for every 100 residents in 2004, said telecom consultant Enrique J. Lopez, president of Miami-based AKL Group Inc.

Etecsa plans to install lines mainly in high-density areas, such as business and tourist districts, where the company can recoup its investment faster. About 70,000 lines are expected to be added this year, as well as about 8,000 pay phones, Lopez said.

"To reach the goal of an average 100,000 new lines a year is attainable," and a modest aim by world standards, Lopez told a recent conference of the Association for the Study of the Cuban Economy, held in Coral Gables.

Other Latin nations are expanding their telecom sectors even faster and from a larger base, he said.

Brazil, for example, already had about 10 phones per 100 residents in 1997, before it sold its state phone company to investors who are adding millions more lines. It now has about 15 phones per 100 residents, said Pyramid Research of Cambridge, Mass.

Etecsa has money to grow these days, partly because of rising international phone traffic in Cuba, including calls by tourists and foreign business executives. It also is getting savvier in billing, boosting revenues. The company has stopped providing unlimited services to clients, and instead has started to set caps: for example, 300 minutes a month for a set fee with a per-minute charge after that.

"It's no longer, 'We give and give,'" Lopez said of Cuba's phone company. "Now, they have more of a business focus to recover costs."

In addition, Etecsa can count on revenues from strong phone traffic with the United States, home to the world's biggest Cuban community outside the island. U.S. calls to Cuba, which pay a connect-fee to the island grid, generate at least $50 million a year for the Cuban phone company, Lopez said.

Nor are land lines the only area of telecom growth in Cuba.

The island's 9-year-old cellular phone company, Cubacel -- now partly owned by Mexico's Timsa and Canada's Sherritt International Corp. -- has 5,000 to 7,000 subscribers. A second wireless system is planned, Lopez said.

Furthermore, Cubans are assembling phone handsets for the local market and for export in Latin America. Parts for the phones come largely from the People's Republic of China.

China this spring announced a $200 million credit for Etecsa to buy Chinese telecom equipment, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, a New York-based group that studies Cuba's economy. Some of that money may be used for assembling and installing China-built wireless phone systems.

Cuba's vice president, Carlos Lage, said in 1998 that the island planned to spend $900 million to upgrade its telecom system through 2004. That's a hefty sum for the cash-strapped island, but paltry by global terms. A venture led by Atlanta-based BellSouth Corp., for example, is investing more than $5 billion to expand cell-phone systems in Brazil's Sao Paulo alone.

Even so, for Cubans, it's a big improvement to make calls from air-conditioned pay phones, instead of asking neighbors for a favor.

Doreen Hemlock can be reached at or 305-810-5009.

Copyright 1999, Sun-Sentinel Co. & South Florida Interactive, Inc.


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