Compania Anonima Nacional de Telefonos de Venezuela

Cancelled

Compania An¢nima Nacional de Telefonos de Venezuela (CANTV) was the state owned company of Venezuela which provided local, national, and international long distance services in the whole country. The privatization of CANTV started in November 1991 when a 40% controlling stake was sold for US$1,885 million to Venworld Telecom consortium which was led by GTE Corp. (51% stake in the consortium) and integrated by Telefonica Internacional (16%), Electricidad de Caracas (16%), Banco Mercantil (12%) and AT&T (5%). In addition to its cash payment, Venworld assumed US$ 125 million out of US$ 600 million owed by CANTV in foreign debt. In a second transaction, a 34.8% stake in CANTV was sold for US$ 1,100 million in November 1996 through an International and Domestic Public Offering. In a third transaction, a 9.04% stake in CANTV was sold for $53 million through a Public Offering in the New York Stock Exchange in July 1997. In a fourth transaction a 10.98% stake was sold in the domestic market for 15.5 million (8,016 million bolivares) in three tranches (two in December 1997 and one in March 1998). The Venezuelan government owned 14.18% stake in CANTV through Fondo de Inversiones de Venezuela by May 1998. In April 2006, Telmex and its sister company America Movil (AM) agreed to buy Verizon Communications' 28.5% stake in CANTV for USD676.6 million. CANTV received a thirty-year concession, which included a nine-year exclusivity period to operate basic local, national and international phone services. In exchange, CANTV committed to install 355,000 new digital lines per year and modernize 75,000 lines per year. CANTV also committed to establish a plan for the development of basic services in rural areas with inhabitants of 5,000 or less. In addition, CANTV was obliged to dramatically improve service quality in aspects such as completion for calls, repair response time, operation response time, waiting time for obtaining a new line, among other aspects. CANTV also had to progressively eliminate the cross-subsides from long distance to local services. The company obtained one of the two bands to provide cellular phone services in 1992. CANTV created its affiliate Telecomunicaciones Movitel to provide cellular phone services. Although Movitel operates as a separate company from CANTV, all corporate figures of CANTV group are reported consolidated. For that reason, Movitel is recorded as part of CANTV. Movitel competes with Telecel Celular, which won its national cellular phone service concession through a competitive bidding in May 1991. CANTV increased the number of installed fixed phone lines from 1.5 million to 3.07 million between 1991 and 1997. The company also dramatically increased its cellular phone service, which was created in 1992. CANTV had 1,705,990 subscribers by 2000. CANTV received financial support from IFC in June 1996 when a US$250 million financial package was signed. The funding from IFC had two components: a 10 year loan for up to US$ 75 million for IFC's own account, and a B loan of US$175 million to be syndicated with commercial banks. Movilnet/CANTV also obtained additional US$ 50.6 million in syndication supported by the IFC in 1997, besides US$ 35 million in direct loans. In 1998, Movilnet was granted an additional US$ 20 million in syndication from the IFC. In 2005, CANTV's net income fell by around 50% from 2004 as a result of an increase in pension payments. Profits fell to USD100 million in 2005, down from USD198 million in 2004, despite revenues rising by 32.7% from USD1.78 billion to USD2.37 billion. CANTV’s financial results were heavily impacted by a Supreme Court ruling in July 2005 ordering it to raise pension payments in line with the new minimum wage requirement. If the company were to comply then it would cost them USD356 million. In a national television, President Chavez threatened to nationalize the Company if it were failed to comply with the ruling. As of December 31, 2006, Cantv’s customer base numbered 8 million mobile subscribers, 3.4 million fixed telephony subscribers and 467,000 broadband subscribers. On 2007-01-08, President Hugo Chávez announced that Venezuela would nationalize CANTV, a move aimed at returning the company's control to the state. On April 8, 2007, the Venezuelan Government launched a tender offer to acquire Cantv’s shares in Venezuela (Class D) and in the United States (ADS). One month later on expiring the offer, the Government acquired 79.6% of the outstanding shares of the Company, in addition to the 6.6% which it previously owned, obtaining control of the Company with a total of 86.2% of its total shares. In 2006, CANTV planned to invest USD500 million with the largest chunk earmarked for its cellular business. The firm planed to spend USD260 million in the first half of the year to expand its CDMA-based operations, and is also planning to invest heavily in broadband services. On May 9, 2007 Venezuela's government bought back an 86.2% share of CANTV after a tender offer for shares outstanding on the NYSE and Caracas stock exchange (BVC), and took control of the company. The government agreed to pay US$1.33 billion for 79.62% of CANTV, including the 28.5% stake that it agreed to buy from Verizon in February 2007 when the government owned a 6.6% stake in the company. The government planned to continue buying remaining shares in the stock exchanges. Telephone contact: +58 212 500 1831; +58 212 500 1828 1995 capacity breakdown: fixed 2,956,788; mobile 169,768 1996 capacity breakdown: fixed 3,208,977; mobile 213,875 1997 capacity breakdown: fixed 3,403,521; mobile 374,875 1998 capacity breakdown: fixed 3,551,706; mobile 639,107 1999 capacity breakdown: fixed 3,546,538; mobile 1,181,273 2002 capacity breakdown: fixed 3,128,000; mobile 3,126,000 2003 capacity breakdown: fixed 3,126,000; mobile 2,681,000 2004 capacity breakdown: fixed 3,108,797; mobile 3,106,363 2005 capacity breakdown: fixed 3,125,163; mobile 5,188,170 In February 2007, Venezuela's National Assembly yesterday unanimously agreed to grant President Hugo Chávez special powers to make rulings by decree without the need for parliamentary vote. The decision means Chávez can proceed with his plan to nationalise fixed line incumbent CANTV and its mobile unit Movilnet as well as energy sector assets and companies in other ‘strategic’ segments. CANTV planned to invest USD500 million in 2006 with the largest chunk earmarked for its cellular business. The firm planed to spend USD260 million in the first half of the year to expand its CDMA-based operations, and is also planning to invest heavily in broadband services.