[NYTr] Venez Govt Issues Offer for Majority Stake in National Telecom
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Venezuelanalysis - Apr 12, 2007
http://www.venezuelanalysis.com/news.php?newsno=2268
Venezuelan Government Issues Offer for Majority Stake in National Telecom
By Chris Carlson
Mirida, April 12, 2007 (venezuelanalysis.com) The Venezuelan government
made an offer this week to buy the remaining stocks of the national
telephone company CANTV. By buying the majority of the shares in the
company, the government will return the company's control to the state.
Government officials have said that the intention is to lower costs for the
customers and to remove the company from the New York Stock Exchange.
Jesse Chacsn, Minister of Telecommunications and Information, made the
announcement on Monday that the public offer for CANTV began this week and
will last until May 8th, when the government expects to have at least 70
percent ownership of the shares. Chacsn said that the company will come
under state control by June 4th.
CANTV, one of the largest companies in Venezuela, was privatized in 1991,
resulting in a modernization of its technological infrastructure. But
Chavez announced in January that he would renationalize those companies
that were privatized in the 1990's. The U.S.-based Verizon Communications,
which held almost 30 percent of the company, agreed to sell its shares to
the government at market price.
"The intention is to take CANTV out of the New York Stock Exchange," said
Chacsn during a press conference on Monday. In this way the Venezuelan
government seeks to eliminate a way of evading exchange controls used by
many Venezuelans. By buying shares of CANTV, converting them into ADRs
(American Depository Receipts) and later selling them in US dollars,
Venezuelans can get around the currency restrictions.
On June 4th, when the company comes under state control, the government
will appoint new directors to the company and will begin an aggressive
policy of reducing prices and expanding services all over the country,
according to the minister.
Chacsn said that the government's objective is to offer lower prices that
will be fairer for the customers. By doing this the government will
generate competition in the telecommunications market, forcing other
companies to be more competitive and to lower their prices. According to
Chacsn, the telecommunications companies in Venezuela set prices as they
wish due to a lack of competition in the market.
The Venezuelan government has offered to pay US$ 2.12 (Bs. 4,560.42) for
the remaining shares of CANTV, which will rise to US$ 2.55 with the
inclusion of a dividend. The government hopes to eventually buy 100 percent
of the company's shares.
But workers of the company have complained that this price is not
sufficient since share prices were higher before the nationalization
announcement. Stock prices dropped about 18 percent upon the government
announcement of nationalization. Current workers and retired workers
together own about 11 percent of the shares of the company.
Meanwhile, investors have tried to buy up shares for higher than the
government offer in a last attempt to convert them into dollars while they
can. But Venezuelans were recently able to buy state oil company bonds,
which are denominated in dollars, and can resell these in dollars as a
legal way to convert their money.
Venezuela signed a US$ 572 million agreement in February to purchase the
28.5 percent stake of Verizon Communications out of New York. They paid
$2.55 a share, the same value it now has on the market.
Other shareholders in CANTV include Telefsnica of Spain, which holds 6.9
percent. The government holds 6.5 percent, along with the CANTV workers who
hold 11 percent. The company also has about 43,000 minority shareholders.
*
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