The government of Puerto Rico last week elected to stay with a bid made by a GTE Corp.-led consortium for Puerto Rico Telephone Co., after receiving a competing bid from Spain’s Telefonica Internacional S.A.
A spokeswoman for GTE confirmed the government’s decision.
GTE in May signed a definitive agreement with the Puerto Rican government to purchase a controlling interest in PRTC. The agreement allowed the government to review any competing bids.
Early this month, TISA entered a last-minute bid for Puerto Rico’s local phone company that would have provided the Puerto Rico Telephone Authority nearly $2 billion, about $50 million more than GTE’s bid of $1.75 billion. GTE was allowed five days to counter the offer, which it did. GTE’s new offer gives the government proceeds of $2.009 billion.
PRTC serves more than 1.3 million access lines, 155,000 cellular subscribers and 237,000 paging customers. In order to comply with Federal Communications Commission requirements, PRTC will separate into two wholly owned subsidiaries.
The new pact with GTE calls for the government to sell 51 percent plus one share to GTE for $444 million. A special dividend of $1.57 billion will be paid by PRTC to the Puerto Rico Telephone Authority. Popular Inc., a Puerto Rico-based bank holding company, agreed to acquire at closing a 5-percent interest in PRTC from the shares GTE has agreed to purchase.
The government declared the bidding process for PRTC closed and said other offers from TISA or others will not be considered.
Puerto Rico is a natural gateway between GTE’s operations in the continental United States and Latin America, a region GTE considers strategically important, said the company.
In addition to its North American operations, GTE has three major business operations in Latin America and the Caribbean. In Argentina, a GTE-led consortium, Compania de Telefonos del Interior, provides cellular service in the north and south interior regions of Argentina. GTE also provides telecommunications services, including wireless, in the Dominican Republic, through Compania Dominicana de Telefonos; and Venezuela, through Compania Anonima Nacional Telefonos de Venezuela.
Bound by U.S. federal telecommunications laws, Puerto Rico no longer is allowed to operate a monopoly local phone service following the telecom act of 1996. Puerto Rico’s move to privatization began last year under the direction of Gov. Pedro Rossello. Privatization of the phone company is part of sweeping economic reforms on the island.
A broad movement against privatization of PRTC has developed, which has led to demonstrations, violence and a strike by thousands of telephone workers. Dissenters worry thousands of jobs will be lost through privatization.
The transaction is subject to FCC and other regulatory reviews. The deal is expected to close late this year.
