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Saturday, Jul. 25, 1998
Brazil to auction off controlling stake in phone firm
$11.7 billion is the minimum bid; citizens hope privatization will bring them better service
By MICHAEL ASTOR
Associated PressRIO DE JANEIRO, Brazil -- Many Brazilians often must wait longer than a minute for a dial tone -- and they're the lucky ones who have telephones in a nation where 18 million people are on a waiting list for new phone service.
The government hopes to improve the situation by selling its controlling stake in the telecommunications company Telebras, a sale that promises to be the largest privatization deal ever in Latin America. The minimum bid in the auction Wednesday: $11.7 billion.
BellSouth of the United States, Telefonica SA of Spain and Italy's Telecom Italia are among the 76 companies, pension funds and investment groups who have signed on to bid.
Telebras will be broken up into 12 parts: three fixed-line services, eight cellular phone companies and one long-distance carrier.
The government will sell a 19 percent stake in the company, which corresponds to about 51 percent of the holding company's voting capital.
Many here expect Telebras, which had a $3.4 billion net profit last year, will fetch twice the minimum bid price.
``The biggest dispute will be for the cellular companies, where we could see a premium of as much as 100 percent (above the minimum bid),'' Communications Minister Luis Carlos Mendonca de Barros told reporters Thursday.
Much is riding on the privatization during this election year and the sale has many critics, including the left-wing Workers' Party, which accuses the government of giving away the state-run company.
When the model for the privatization was announced early last year by the late Communications Minister Sergio Motta, he said Telebras would sell for around $30 billion -- almost three times the minimum bid.
The main reason for the lower minimum bid price is that emerging market stocks, like Telebras, have lost much of their shine in the wake of the Asian financial crisis.
But opposition presidential candidate Luiz Inacio ``Lula'' da Silva, sees another reason -- and has accused Cardoso of selling Telebras cheap in order to use kickbacks to finance his re-election campaign.
Cardoso has denied the allegations and has even taken da Silva to court over them.
Opponents have filed 40 actions before judges nationwide seeking to stop or delay the privatization.
The government has set up a team of 400 lawyers to undo the injunctions as fast as they pop up.
``If there's a delay it will probably be something like a week long, and then things would go ahead,'' said Alexandre Gartner, a telecom analyst at the Bozano, Simonsen bank. ``I don't see a delay that could make privatization impossible.''
Bracing for violence on Wednesday, police plan to close off the area around the Rio de Janeiro Stock Exchange before the auction and 1,500 officers were ready to hold off protesters.
But despite the size of the privatization, the protests will probably be small, if only because most people are tired of poor service and hope privatization might finally get them a telephone.
Telebras can't meet the demand for phones in a country of 160 million people with only 20 million phones -- a ratio of 11.3 phones for every 100 people.
If all goes as planned, the new owners of Telebras will have to install about 10 million new lines by the end of 1999, and by 2005 customers should have to wait no longer than a week for their new phones to be installed.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web