Argentina Unveils Bids for Phone Firm

Bell Atlantic Corp. and Telefonica of Spain have won bids for control of Argentina’s state telephone company, newspapers reported Tuesday.

Bids for both sections of ENTel (Empresa Nacional de Telecomunicaciones), notorious for its poor telephone service and money-losing operations, were opened Monday. Winners of the northern section and southern section bids--both sections will split the most populous city in the country, Buenos Aires--will be announced Thursday.

Telefonica, Spain’s state-controlled telecommunications monopoly, submitted the highest bids for both sections of ENTel, the Public Works Ministry confirmed.

But Telefonica chose the southern section, so under terms of bidding designed to prevent one private company from owning both sectors, Philadelphia-based Bell Atlantic was allowed to raise its bid slightly and won control of the north section that extends to the Bolivian and Paraguayan borders.

The sales of the two sections are notable because Argentina, the third-most-indebted country in the developing world behind Mexico and Brazil, is trying to sell many of its money-losing state companies, which employ tens of thousands of workers but are criticized for chronic inefficiencies.

President Carlos Saul Menem, in power since last July, has pushed for increased privatizations as a way to prove Argentina is serious about righting its economic situation. But his powerful labor-based Peronist party has balked at the moves, saying too many state workers would lose their jobs.

Telefonica director Enrique Used Aznar was quoted as telling the newspaper La Nacion that his company chose the south sector, which would range all the way to Tierra del Fuego, because “we think it has greater potential to develop our plans of investment and expansion.”

Bell Atlantic’s representative in Argentina, Carlos Joost Newbery, was quoted by La Nacion as saying his company, which submitted a higher initial bid for the north sector than STET of Italy, increased its offer past Telefonica’s to obtain the bid.

Nearly one-third of Argentina’s 32 million residents live in the metropolitan Buenos Aires area.

In all, ownership of 60% of ENTel was sold for $214 million in cash, $5 billion in long-term debt and accompanying interest payments, and $379 million to be paid over six years.

Ten percent of the new companies will be sold to employees, and the remaining 30% will be sold to the public via the Buenos Aires Stock Exchange.