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Telefónica de España In Negotiations To Acquire PRT

The telecommunications giant stays strong in expansion efforts across Latin America


March 17, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

CARIBBEAN BUSINESS has learned that Telefónica de España S.A, is in negotiations to acquire Puerto Rico Telephone Co. (PRT). However, sources confirm the negotiations are still in the early stages.

The last time the PRT changed hands was in 1999 when the company was privatized and sold to a consortium made up of Texas-based GTE Corp., Popular Inc., the government of Puerto Rico, and PRT employees. The PRT received approximately $2.04 billion from the transaction. The sale took place under former Gov. Pedro Rosselló’s administration, and the transaction unleashed a wave of union protests. Nevertheless, the sale was successfully completed. In 2000, parent company GTE underwent a merger with Bell Atlantic, creating Verizon, the PRT’s current parent company.

Before that, in 1992, then-Gov. Rafael Hernández Colón had already attempted to sell the company to the private sector. Under his term, the PRT’s long-distance service was sold to Telefónica Internacional S.A, a subsidiary of Telefónica de España S.A. However, Hernández Colón was unsuccessful in his efforts to completely privatize the company.

During the past decade, Telefónica de España has concentrated its worldwide expansion efforts in a great part in the Latin American region. In 1990, Telefónica commenced acquiring participation in telecommunications companies in the area. Since then, they have expanded their operations to Chile, Argentina, Brazil, Peru, Colombia, El Salvador, Ecuador, Mexico, Guatemala, Nicaragua, Panama, Uruguay, Costa Rica, the Dominican Republic, Chile, Honduras, and Venezuela.

In 2004, Telefónica completed the acquisition of Bell South Latin America mobile operations, with which it added 14.7 million new cellphone clients to its portfolio. Last year, the Telefónica Latin America Group operations accounted for 34.8% of Telefónica’s consolidated revenue.

The telecommunications industry as a whole has witnessed strong consolidation and acquisition transactions during the past year. Verizon, the PRT’s current parent company, recently completed the purchase of MCI. In December, Sprint agreed to merge with Nextel creating a company with a combined equity value of approximately $70 billion.

In January, SBC announced its plans to buy AT&T, the nation’s largest long-distance company for $16 billion. Cingular finalized its $41 billion purchase of AT&T Wireless creating the nation’s largest cellular service with more than 49 million subscribers. In the end, if all the outstanding deals are completed, there will be just four major phone companies in the U.S., BellSouth, Qwest, SBC, and Verizon. However, according to data provided by Standard & Poor’s Compustat, in 2004 the telecommunications service companies decreased their profit margins by more than 5% from the previous year.

This Caribbean Business article appears courtesy of Casiano Communications.
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