Telecom Argentina

France Telecom sells its stake in the company to a private Argentine group. Telecom Argentina S.A. is one of the two enterprises that dominate telecommunications services in Argentina (the other being Telefónica de Argentina S.A. and its affiliated companies) and one of the nation's biggest businesses. It vies with Telefónica for leadership in fixed-line services, including local, long-distance, and international telephone service, and is the nation's leading operator in cellular telephone services and access to the Internet. A Belgian company and an American company provided the first commercial telephone service in Argentina in 1881. Both were acquired the following year by a British company that formed Unión Telefónica del Río de la Plata Ltd. This company merged with a British rival, Compania de Telefono Gower-Bell, in 1886. In 1929 it was acquired by the U.S.-based multinational International Telephone & Telegraph Corp. The Argentine government purchased Unión Telefónica in 1946 and renamed it Empresa Nacional de Telecomunicaciones (ENTel) in 1956, by which time telephone service was virtually a government monopoly. Under government control ENTel was a deficit-ridden, poorly administered behemoth. By 1990 the bloated workforce of 47,000 had been under 28 chief executives in the last 30 years. People were waiting as long as 15 years to obtain a phone line, and installation cost as much as $1,500. One journalist called ENTel the most corrupt telephone company in the world, "served" by staffers who took bribes and kickbacks. Telecom Argentina adopted a five-year plan to spend $3.3 billion in order to achieve a 60 percent, 1.1 million increase in the existing lines (only one-ninth digitalized) in its concession area. The company had to revise the architecture of the network because of apparent sabotage by employees who opposed privatization. It reduced employment from 19,234 to 16,101 in its first 13 months of operation (and 9,275 by late 1999) and increased productivity by 18 percent in that time. By 1994 some 300,000 new lines had been connected and even more replaced, raising the proportion of digitalized lines to more than half of the total. Demand for new lines remained heavy, with the waiting list totaling 215,000 by the end of 1993. Telecom and Telefónica were equal partners in three other companies: Telintar, which had a monopoly on international long-distance calls; Startel S.A. for domestic value-added services such as telex, telegraph, videoconferencing, data transmission (including Internet service), and ship-to-shore radio communication; and Movistar (later Miniphone S.A.) for cellular mobile telephone and paging services. Telintar installed the first optic fiber cable in Latin America. After several years of double-digit earnings growth, both Telecom Argentina and Telefónica de Argentina developed problems in the mid-1990s. The companies had met unfulfilled demand for new lines and were slashing fees to connect poor people and those living in sparsely settled rural areas. The most profitable part of their business, long-distance services, was meeting competition from credit cards issued by foreign telephone companies and U.S.-based providers offering call-back for overseas calls. Telecom downgraded its commitment to Movistar, the joint cellular company, by establishing Telecom Personal S.A. to operate this mobile service in its concession area. By late 1998 Telecom Personal had signed up 490,000 customers--64 percent of the Argentine market. As with the parent company's fixed lines, however, the growth in cellular customers was reaching a point of diminishing returns, especially in view of competition from CTI Holdings, S.A., the Argentine subsidiary of Verizon Communications Inc., and Moviecom, another rival formed by a consortium led by BellSouth Corp. To keep its impetus, Telecom Personal purchased 75 percent of a new company competing for such service in neighboring Paraguay. These problems did not keep