World Dialogue on Regulation

Venezuela’s government has purchased a controlling stake in Nacional Telefonos de Venezuela (CANTV), the largest Venezuelan telecommunications operator. The government increased its ownership of CANTV to 86.2% from 6.6% after buying shares through a tender offer on the Caracas and New York stock exchanges.

Venezuela’s Telecommunications Minister, Jesse Chacon, said the government spent US$ 1.3 billion to increase its ownership. The government has said it intends to assume operational control of CANTV during the first week of June. The total payment includes US$ 572 million that Venezuela agreed in February to pay Verizon for its 28.5% stake.

The government will pay for the purchase by asking Congress to add about US$ 700 million of oil income to the budget and by withdrawing about US$ 700 million from an off-budget fund known as Fonden, Chacon said.

During the process, the government also plans to buy up all of CANTV's remaining American depositary receipts. Removing CANTV from the NYSE will eliminate a chief method Venezuelans have used to skirt currency exchange controls. Venezuelans often buy local CANTV shares and convert them into American depositary receipts that can be sold for dollars, bypassing the currency restrictions. Venezuelans also buy dollar-denominated bonds to skirt the controls.

Other CANTV shareholders include Spain’s Telefonica, which owns 6.9%. CANTV employees own a small stake. The company also has about 43,000 small shareholders.

The government will seek to retain current CANTV, Chacon said. The company is having a hard time retaining executives who have already announced plans to resign, Chacon added.

The company’s new board of directors will have to find ways to fulfil Venezuelan president Hugo Chavez's promises to improve customer service and quality. Chavez also recently announced plans to add millions of fixed lines and expand mobile service during the next 18 months.

Source: International Herald Tribune - WDR/Intelecon Regulatory News.