Telecom Argentina

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Telecom Argentina logo.

Telecom Argentina S.A. (NYSE: TEO, Buenos Aires Stock Exchange:TECO2) is the major local telephone company for the northern part of Argentina, including half of the Buenos Aires city. Briefly known as Sociedad Licenciataria Norte S.A., it quickly changed its name, and is usually known as simply Telecom within Argentina.

Telecom Argentina's local telephone market, together with Telefónica de Argentina on the southern part of the country, was a monopoly until 1999-10-08. Telecom also operates mobile phone service Personal and Internet service provider Arnet.

1 History
2 Criticism
3 Ownership
4 See also
5 External links

[edit] History

Telecom building in Puerto Madero, Buenos Aires.

In 1990, Argentina started to privatize most of its state-owned utilities: power, water, trains, and telecommunications, just to name a few. The monopoly of state-owned phone service ENTel was split into two territories: France Télécom was given the "upper half" of the country, from the middle to the north, and Telefónica was given the southern part. Each company was given an initial 7 year monopoly beginning on 1990-11-08. Initially other companies were given exclusive licenses for International long distance and cellular phone service also.

Both local phone companies turned their systems into profitable operations in just a few years, despite the terrible conditions they inherited from ENTel. In the worst years of ENTel, a line activation would take several years. The telephone wiring layout across the country was undocumented. At privatization in 1990, the wait was still 4 years to get new service and 40 days for repair. (See [1].)

Starting off with severe downsizings, Telecom Argentina started to invest into the country, but there was little outside capital investment; rather, a small portion of earnings were reinvested. Years later, all of the phone network was upgraded to a state-of-the-art system, from central telephone exchanges up to the wires going into homes; by 2005, 98% of the ENTel network infrastructure had been replaced. Finally, the dream of many people, having their own phone line, was a reality.

Unlike many other privatized companies, Telecom got a totally degraded and inefficient company and turned it into a working, profitable company. In contrast, the train lines (which cost the state roughly US$1,000,000 per day in losses to operate 30,000 km of railroads), were sold to private corporations, it still cost the state US$1,000,000 per day in subsidies to operate 1,400km of railroads.

In 2005, the Bank of New York was appointed as trustee, registrar and paying and transfer agent for Telecom Argentina's $1.5 billion debt restructuring. "The transaction was Argentina's largest corporate debt restructuring to date", according to the Bank of New York November 3, 2005 press release. The restructure involved the exchange of $2.8 billion in outstanding debt for newly issued exchange notes and cash; "As the settlement agent in the transaction, The Bank of New York received and processed electronic and manual instructions from investors holding bonds in Euroclear, Clearstream, the Depository Trust Corporation (DTC), and from creditors holding debt in physical form." [2]

[edit] Criticism

Critics of Telecom argue that, when it received government subsidies to provide service in remote areas, it either didn't provide the service, or just installed public telephones. Critics also point to the high prices charged by the company, and to the fact that, unlike much of the world, Argentine customers have to pay per minute, rather than a fixed price.

In contrast, defendants of the system point out that the 011 area code (called AMBA, most of Gran Buenos Aires) provides local phone access to five to six million users (15-16% of the total population of the country), making a flat-rate type of service economically impossible.

Due to the lack of long requested flat telephone rates for local calls, specially to connect to Internet, a lot of users installed ADSL services from Arnet, Telecom's Internet service provider. The company was heavily criticised when it decided to limit ADSL users to 4 GB per month, and charge for extra traffic.

Other critics to the company are centred on the lack of information on their offers, and obscure contracts with prices not including taxes, and other important information.

[edit] Ownership

France Télécom sold its part of the company to the Argentine Werthein Group. As of 2005, current approximate ownership of Telecom Argentina is:

55% by Nortel Inversora S.A., itself a consortium made up of Telecom Italia group (50%), the Werthein Group (48%), and the France Télécom group (2%)
40% publicly traded
5% employee stock ownership program