Telecom Italia Tired of Tapping Cuban Phones

January 3, 2011

Advocates of normalizing relations with the Castro regime constantly argue that the U.S. is "losing" business opportunities in Cuba -- due to sanctions -- and that foreign companies are taking advantage.

We recently discussed this farce pursuant to a Wikileak-released cable in which Brazil's government admits that investing in Cuban ports only makes sense if the U.S. and Cuba developed a trading relationship.

In other words, that the target market for foreign investment in Cuba was the U.S., not the bankrupt Castro regime.

It seems Telecom Italia has learned the same lesson.

In 1995, Telecom Italia purchased a 27% stake in Cuba's provider, ETECSA. The rest is owned by the Castro regime's Ministry of Information and Communication, led by ruthless General (and former Minister of the Interior) Ramiro Valdes.

Thus, ETECSA is responsible, together with Castro's secret police, for tapping phone lines, monitoring conversations, Internet censorship and persecuting Cubans with home-made satellite dishes.

Think of the Oscar-winning movie about life in pre-1989 East Germany, The Lives of Others.

After 15 years of violating the Cuban people's rights, Telecom Italia has apparently had enough and is looking to sell back its stake to the Castro regime.

Yet now, it's doubtful whether it can even obtain a premium for its repugnant work, as the Castro regime is broke and facing a severe liquidity crisis.

Meanwhile, there are still people in the U.S. distastefully lobbying to invest in ETECSA, in order to collude in censoring the Cuban people.

According to Business Monitor International (BMI):

TI To Sell Etecsa Stake, But BMI Has Questions

Telecom Italia (TI) is understood to be on the point of returning its 27% stake in incumbent Empresa de Telecomunicaciones de Cuba SA (Etecsa) to the Cuban state. TI's decision comes as no surprise after talk of it selling to Spanish incumbent Telefónica circulated in 2009 and TI's CEO Franco Bernabè announced in October 2010 that the company was in advanced talks on the matter. The government wishing to take full control of Etecsa seems easy to understand, but BMI is skeptical the Cuban government is in a position to pay the 'premium' reportedly sought by TI.

At the time of Telefónica's reported interest in 2009, TI was said to have asked for US$780mn for the 27% stake. In its H110 report, the stake was reported to be worth EUR367mn (US$490mn). However, Cuba's mobile market, at less than 10% penetration, has exceptionally high potential for growth, a factor likely to attract considerable interest from potential investors.

Cuba's Attitude

Cuba's government has been enacting austerity measures in an attempt to bring the country out of its deep economic crisis. Rules regarding small businesses and self-employment have been relaxed, while it was announced in October 2010 that a million state employees are to be laid off by 2012. As the government seeks to cut spending and state subsidies, it is difficult to see how it might afford to buy back TI's share in Etecsa, particularly with the premium the Italian company is believed to be seeking.