Changes to come in Colombia

01 September 2011 |


Having sold a majority stake in Colombia Telecomunicaciones to Telefónica in 2006, the Colombian government is planning to further reduce its stake in the business.

According to Dow Jones, the Colombian finance minister Juan Carlos Echeverry said that the proposal is in response to a “financial weakening of the company during recent years” that could create an “enormous risk” in its ability to meet its financial obligations.

 

Telefónica originally took control of Colombia Telecomunicaciones in April 2006, when it acquired a 51% stake in the Colombian operator, while the remaining 49% of the company’s shares remained in government hands. Telefónica’s declared intent upon completing the acquisition was “to successfully develop the fixed-line business in Colombia – both the traditional and broadband businesses”. The deal cost Telefónica over 853 million Colombian pesos (approximately US$ 368 million).

 

Echeverry, however, drew attention to the fall in fixed-line phones in Colombia, which fell from 7.4 million subscribers in 2005 to 6.4 million last year. Meanwhile, the number of mobile subscribers has risen from 22 million to 45 million during the same period.

 

This has led the government to suggest that Colombia Telecomunicacionies could merge with mobile phone operator of Movistar, a unit of Telefónica, and has sent a proposal to Colombia’s Congress.

 

Changes are clearly afoot in Colombia. The Colombian government has announced that it intends to promote innovation as “an engine that plays a key role in economic and social development”, and is bringing together the private sector and academics to join government officials to discuss these issues at a major conference next week.