privatization deals were able to swap low-value debt for an attractive business.
Moreover, by becoming owners of telecom service companies these financial
groups participate in the control of a sector that is key to their own business
operations. Those not directly involved in the sale, but who held LDC debt,
enjoyed spillover effects with the increase in the value of their bonds in
secondary debt markets.
Finally, contrary to carefully considered forecasts, equipment suppliers faced
a murky and unpredictable market profile in which politics affected procurement
decisions as much as it did in the past. The only clear consequence of privatization for equipment vendors was that the dismantling of monopsonies has
pushed them to drop equipment prices considerably.
The material presented here draws on a rich collection of data on early trends
in telecom reform in LDCs. However, this information grants us only a
preliminary, provisional assessment of the socioeconomic impact of these
transformations. More detailed analysis will be needed to accurately evaluate the
implications of this unprecedented phenomenon in the field of communications
in developing societies.
The other telecom operator, Dirección General de Telecomunicaciones,
transferred to the central administration US$100 million and received back only
US$30 million for operations and new investments.
TELMEX's first-year operating profit totaled US$2.3 billion. The
company expressed confidence that it will be able to generate 70 to 80 percent of
the funds needed for future investment internally.
In Venezuela, the new private owners of CANTV spent US$500 million
throughout 1992, increasing fivefold the average yearly investment of the
company compared to when it was under state control. In Chile, the availability of
new funds gained through privatization allowed the company to expand internally.
This, in turn, led to output diversification into nonregulated, value-added services
and also to improved productivity, which generated more funds internally and
allowed further expansion into long-distance and other new services. According to
assessments of the World Bank study, this impressive investment-expansion cycle
would have been mostly absent under a publicly owned business ( Galal et al. 1992b).
However, the dismantling of cross-subsidies--if not replaced by other
financial mechanisms--could discourage service expansion in rural and non-
profitable areas of the country. As companies become profit-oriented businesses,
development of services tend to concentrate in the most economically attractive
segments of the market. In Thailand, for example, in 1989 rural users accounted
for only 10 percent of Telecommunications Organization of Thailand (TOT)
earnings. Yet, that same population absorbed 40 percent of the company's
expenses. Paul Handley, "Progress by Numbers," Far Eastern Economic Review, 23 March 1989, 83-84.
Similar trends are reported in the now-private Syrikiat Telekom Malaysia.
From the time of its establishment as a private company in 1987, it has increased