Telecom Argentina

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Since November 1999, Telecom Argentina (TelA) has been one of the four providers of fixed and mobile (local and long distance) phone services in Argentina. It competes nationally with Telefonica de Argentina, Movicom Bell South, and Compania de Telefonos del Interior. TelA was created in 1990 from the assets of the state-owned company Empresa Nacional de Telecomunicaciones de Argentina (ENTel) to provide basic telephone services in the Northern region of Argentina. ENTel's assets were also divided into Telefonica de Argentina (basic local and long distance services in the southern region), Telintar (international telephone services), and Startel (competitive services such as value added, telex, trucking, and paging). The shares of the four companies created from ENtel were separated in two packages for their privatization. One, known as Telecom de Argentina, consisted of Telecom de Argentina (local and long distance services through fixed lines), 50% of Telintar (international services), 50% of Startel (competitive services), and 50% of the right to operate the second band of cellular phone services for the entire country. The other package consisted of Telefonica Argentina and the remaining stakes in Telintar, Startel and the cellular license. A 60% stake in the package of Telecom de Argentina was sold through a competitive bidding to consortium led by to STET and cable and radio, a subsidiary of France Telecom, in November 1990. The consortium was also integrated by Perez Company (25%) and JP Morgan (10%). The private consortium paid US$ 100 million in cash and US$ 42,295 million in debt papers valued at their face value. Considering the market value of Argentinean debts papers at the time of the Telecom privatization ($0.19 per $1 nominal debt), the winning consortium paid $538 million for 60% controlling stake. In a second transaction, a 10% stake in TelA was sold to Entel's employees for $16.7 million, which represented the same price per share paid in cash by the winning consortium. In a third transaction, the remaining 30% stake at Telecom was sold through public offerings for 1,227 million in December 1991. TelA privatization included a 7-year exclusive period (from November 1990 to November 1997) to provide local and long distance services within its concession area and to provide international services through its affiliated Telintar. The exclusive period might be automatically extended for additional three years based on fulfillment of minimum performance requirements. TelA was required to add 609,500 customers (6.2% annual growth rate) in exchange of the seven-year exclusive period, but it would be to increase its customers by 792,000 to secure a three-year extension of its exclusive period. The company increased the number of lines from 1.4 million to 3.09 million between 1990 and 1997, thereby extending the monopoly rights of TelA until November 1999. In addition, Telintar, the joint venture for international phone services, was dissolved in December 1998, and the assets were equally distributed between Telefonica de Argentina and TelA. The other 50% went to Telefonica de Argentina (TCP). In 2003, Argentine regulators approved the sale of France Telecom's indirect 55 percent stake in fixed-line server Telecom Argentina. Investment group W de Argentina (Los W Group, part of local investment group Werthein) was reported to have agreed to pay US$121 million for France Telecom's 48% stake in Sofora Telecomunicaciones SA. Sofora is a new holding company created by Telecom Italia and France Telecom and owns a 51% stake in Nortel Inversora SA. Nortel Inversora in turn owns 55% of Telecom Argentina. In 2005, France Telecom filed for arbitration to the International Centre for the Settlement of Investment Disputes (ICSID) against the Argentinean Government on the ground that the price freeze of public services has caused it financial damages. The claim against the Argentine Government was withdrawn in 2006. A settlement was agreed upon by the parties and the proceeding discontinued. (Order taking note of the discontinuance pursuant to Arbitration Rule 44 issued by the Acting Secretary-General on March 30, 2006). http://www.worldbank.org/icsid/cases/conclude.htm (case # ARB/04/18) Investment and capacity information excludes Telefonos Personal, the mobile subsidiary of Telecom Argentina