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Colombia: Colombia Telecomunicaciones sets conditions Print E-mail
Wednesday, 01 March 2006
State-owned Colombia Telecomunicaciones (Telecom) has made the bidding conditions for its auction available. Telecom expects interested parties to purchase the terms and conditions during the first two weeks of March. Then, the following week Citigroup will reveal the minimum bid amount.

The winning bidder will receive the assets of the liquidated companies belonging to Telecom, 7% of the company's EBITDA until 2010 and 3% of its EBITDA starting in 2011. However, the main asset is 50% plus one share of Telecom's stock. When asked if this constitutes the de facto privatization of Telecom, Yankee Group analyst Wally Swain said, "Nobody's going to answer that question. That's the 'P' word – 'privatization'…Also, what people may miss is that there may be golden share provisions or something else... that would mean that (the winning bidder) would not gain control of the company."

Interested parties must pay 160 million pesos (US$ 71,000) for the bidding rules, in addition to 40 million pesos for access to the company's data room. Seven companies have already paid the fees in question: Colombian municipal telcos ETB and EPM, Telefónica, Cantv, Phone One, Cablecentro, and Ortiz Rey. Participating companies must also obtain approval from Colombia's industry and commerce watchdog, which will monitor the situation for transactions that reduce competition in the sector.

Companies interested in Telecom must meet a long series of requirements, both economic and technical. The winning bidder will be required to pay off Telecom's pension debt of 7.58 trillion pesos in 17 annual payments, and will also need to sign a sales agreement with a mobile provider having a minimum of 1.5 million subscribers in Colombia, or else pay a penalty of 150 billion pesos. In addition, the winner must demonstrate that it has 1 million fixed lines in operation, though it is not known whether these lines must also be located in Colombia.

It will further be required to sign a non-compete agreement covering data transmission and guarantee that it will continue to provide service in all municipalities in which Telecom currently has a presence. Furthermore, the winning bidder must pay over 600 billion pesos in pending debt arising from the operating contract between Telecom and Telecom en Liquidación over a six-month period, as well as pay some 445 billion pesos in addition financial obligations. Telecom en Liquidación is a vehicle representing the debts left by Telecom when it was liquidated. There are also a number of technical requirements that the winning bidder must meet. For instance, they must possess a corporate data services business worth at least 50 billion pesos and covering a minimum of 50,000 subscribers, in any part of the world.

Source: Business News Americas - WDR/Intelecon Regulatory News