Venezuelas Intercable Announces Overbuild Plans

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Caracas, Venezuela -- Venezuelan cable operatorIntercable's aggressive expansion plan will pit it against two incumbents here nextyear.

Backed by a $100 million investment budget, Intercable haslicenses to build in 123 Venezuelan cities, including Caracas, where it plans to establishoperations by the second quarter of 2000, Intercable spokesman Mario Seijas said.

Although the company has not said which Caracasneighborhoods it will target, it has staked a claim to both the eastern and western sidesof the capital. These areas are currently served by two of Venezuela's other largeMSOs: SuperCable in the east and Cabletel in the west. The arrival of a third player onlyexacerbates an existing overbuild situation.

Intercable's planned expansion confirms its voraciousappetite for acquisitions, which have been bankrolled in part by minority shareholderHicks, Muse, Tate & Furst Inc., the Dallas-based private-investment fund. Last year,the company almost swept the western part of the country clean of mom-and-pop operationswhile establishing a presence in 35 towns and cities. In the process, it has almostdoubled its customer base to 190,000 subscribers.

The MSO's goal is to increase its subscriber base byat least 30 percent in both 2000 and 2001. The strategy in Caracas is to compete againstentrenched cable operators in high-density areas and to delve into less densely populatedneighborhoods usually deemed unworthy of coverage.

However, those plans are on hold until Intercable completesits infrastructure build in the central-west states of Aragua and Carabobo. Electricutilities in that region have objected to Intercable's plans to use their power-linepoles and underground conduits for its overhead lines, delaying that project.

At present, the utilities either prohibit the use of theirposts or ask too high a price for the privilege, according to Intercable. Seijas sees thesticking point as no more than a glitch, however, since the existing TelecommunicationsLaw states that electric and telephone utilities are obliged to provide pole space for thefiber-optic cable of third parties.

Intercable also plans to add new services. It has soliciteda license from the National Telecommunications Commission to become a full-fledgedcommunications company to provide telephony, Internet access and data transmission.However, in many ways its hands are tied until the Venezuelan Congress implements a newTelecommunications Law. That legislation is now making sluggish progress.

Venezuela is set to deregulate its telephone industry inNovember of 2000. However, until a Telecommunications Law is passed providing a legalframework for the sector, Intercable will not be able to allocate any funds toward itstelephony plans.

The new Telecommunications Law would also eliminate thepresent 20 percent cap on foreign investment in companies such as Intercable, which couldenable Hicks, Muse to throw further weight behind the operator.

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