Venezuela Blocks CANTV Purchase Of Cellular Company

CARACAS -(Dow Jones)- Venezuela's telecommunications regulator, Conatel, Thursday rejected plans by CA Nacional de Telefonos de Venezuela (VNT), or CANTV, to acquire a competing cellular phone company.

"We want to prevent the creation of a duopoly in Venezuela's telecom sector," Alvin Lezama, head of the telecom regulatory agency, told reporters Thursday.

At least three different companies must compete with each other in this market, he said.

Regulators also pointed out that the deal would have led to a concentration of the mobile communications business in the hands of a powerful company.

CANTV, the country's top telecom operator, planned to pay $450 million for Digitel, the third-largest telecom company in the country. It would have left only two big telecom operators in the market - the other being Telcel, a company owned by Spain's Telefonica (TEF), which recently renamed the company Movistar.

Last November CANTV announced plans to acquire Digitel and had been awaiting regulatory approval ever since.

CANTV officials couldn't be reached for comment.

"We're putting the interest of users and consumers ahead" of business considerations, said Lezama.

He said the government concluded that although CANTV's bid for Digitel would create private business efficiencies it also would result in less competition among companies.

Lezama dismissed concerns that the decision could send a negative message to foreign investors. "Foreign investment must also promote competition," he said.

Government officials said the decision actually confirms that Venezuela respects the rule of law and promotes competition.

CANTV can appeal the decision, regulators said. Company officials also could restate their acquisition plan, but that would require another full review, regulators said.

"This process is closed," said Lezama.

Investors interpreted the decision as bad news for CANTV. Around midday, the company's share price on the New York Stock Exchange had fallen 2.44% to $19.16 per American Depository Receipt.

"Investors do not view this as a good decision," said Leonardo Emperador, a trader at Intervalores Casa de Bolsa in Caracas. "You can see this in the U.S. market."

He noted, however, that CANTV's cash flow would have been hurt if the sale had gone through. "The amount of cash going out was a lot," he said.

Telecom Italia Mobile SpA (TIM.MI), which owns Digitel, still plans to sell its Venezuelan unit, Marco De Benedetti, Telecom's chief executive, said Thursday.

-By Raul Gallegos, Dow Jones Newswires; 58-212-564-1339; raul.gallegos@dowjones.com

(Peter Millard contributed to this story.)

(END) Dow Jones Newswires"

Posted to the site on 5th May 2005