Telefonica to merge Movistar, Colombia Telecomunicaciones

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Spain’s Telefónica(NYSE: TEF) said Monday it has reached an agreement with Colombia‘s government to merge fixed-line operator Colombia Telecomunicaciones (Coltel) with mobile operator Telefonica Moviles Colombia.

Telefónica owns 52% of Coltel, with the Colombian government controlling the remaining 48%. Under the agreement, the Colombia government will assume 48% of pension payment obligations, helping reduce Telefónica’s net financial debt of around $1.734 billion (1.3 billion euros).

With the agreement, which is subject to approval by both companies’ shareholders, Telefónica will hold 70% of the combined company and the Colombian state will own 30%, with the possibility to increase its stake by 3% at a future date.

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Last year, the Colombian government had said that a merger with a mobile phone operator was necessary as fixed-line growth had stalled due to consumers switching to mobile devices. In December, country’s congress economic committee approved a bill sent by the executive branch to strengthen Coltel’s capital position by $ 1.81 billion.

The proposed merger could boost competitiveness and help pay for “onerous” pension obligations of more than 17,000 former public employees.

One Response to “Telefonica to merge Movistar, Colombia Telecomunicaciones”

  1. So this is privatization spurred by consumer shifts to the superior technology of the private sector? Imagine that flowing the other way around, if state owned industries were making the tech that consumers wanted. Hard to imagine that happening, isn’t it?

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