VZCZCXYZ0013
PP RUEHWEB

DE RUEHLP #1144/01 1141952
ZNR UUUUU ZZH
P 241952Z APR 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 3337
INFO RUEHAC/AMEMBASSY ASUNCION 6725
RUEHBO/AMEMBASSY BOGOTA 4054
RUEHBR/AMEMBASSY BRASILIA 7943
RUEHBU/AMEMBASSY BUENOS AIRES 5192
RUEHCV/AMEMBASSY CARACAS 2422
RUEHPE/AMEMBASSY LIMA 2548
RUEHMD/AMEMBASSY MADRID 3432
RUEHMN/AMEMBASSY MONTEVIDEO 4561
RUEHQT/AMEMBASSY QUITO 5061
RUEHRO/AMEMBASSY ROME 0286
RUEHSG/AMEMBASSY SANTIAGO 9644
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUMIAAA/USCINCSO MIAMI FL
RUEHUB/USINT HAVANA 0277
RHEHNSC/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS LA PAZ 001144 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
TREASURY FOR SGOOCH 
STATE FOR EB/CIP/BA/NFETCHKO 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EINV BL
SUBJECT: PARTIAL GOB TAKE-OVER OF BOLIVIA'S LARGEST 
TELEPHONE COMPANY 
 
REF: 2006 LA PAZ 2770 
 
------- 
Summary 
------- 
 
¶1. (SBU) On April 23, the GOB reportedly issued a decree 
taking over 47 percent of the nation's largest telephone 
company, Entel, from the Bolivian Pension Fund 
Administrators, who previously held the shares in trust to 
pay pensions to the Bolivian public.  GOB negotiations with 
Telecom Italia, who owns 50 percent of Entel, are ongoing to 
acquire the remaining 3 percent plus one share that the 
government needs to gain majority ownership of the company. 
The GOB aims to complete the take-over by May 1.  According 
to Entel contacts, the negotiations have progressed minimally 
to date.  End summary. 
 
----------------------------- 
GOB Gains 47 Percent of Entel 
----------------------------- 
 
¶2. (U) On April 23, in a first step towards its goal of 
majority ownership of the country's largest telephone company 
Entel, the GOB reportedly issued a decree to gain 47 percent 
of the shares of the company.  (Note: The press did not 
indicate the decree number, and Emboffs have been unable to 
verify that the decree was actually issued yet.  End note.) 
These shares were held by the Bolivian Pension Funds 
Administrators (AFPs) in trust for the Bolivian people, to be 
used to pay a pension, "Bonosol," to the elderly, following 
Entel's partial privatization (capitalization) in 1995. 
(Comment:  Although the GOB has pledged to continue paying 
the "Bonosol" pension, it seems that such payments will not 
be feasible.  The GOB plans to use the earnings from these 
shares, and previously confiscated hydrocarbons shares, to 
revamp formerly state-owned companies, expand rural 
telephony, and implement other social programs, which implies 
that they will not be available for the Bonosol.  End 
comment.)  Fifty percent of Entel's shares are privately held 
by Telecom Italia, while the remaining three present are 
owned by former state company workers. 
 
¶3. (SBU) On April 23, the GOB also reportedly issued a decree 
abrogating a decree issued in 2005 related to the 
certification that Telecom Italia had completed the 
investments that it promised to undertake as part of its 
purchase agreement for Entel in 1995.  The GOB's action is 
likely an attempt to pressure the company in negotiations for 
majority control by claiming that the company did not fulfill 
its contract and is thus subject to GOB intervention. 
 
--------------------------------------------- -- 
Entel Take-Over Mirrors Hydrocarbons Take-Overs 
--------------------------------------------- -- 
 
¶4. (U) The GOB stated in its national development plan, 
released in June 2006, that it intended to gain majority 
ownership of nine companies that were capitalized in the 
1990s.  Thus far, in addition to Entel, it has recouped the 
shares formerly held by the AFPs for three hydrocarbons 
companies (Chaco, Andina, and Transredes), but has not yet 
negotiated with the private investors the sale of the 
additional shares necessary to control 50 percent plus one 
share of those three companies. 
 
--------------------------------------------- ------------- 
GOB Plans Uncertain -- 50 Percent Plus One or 100 Percent? 
 
--------------------------------------------- ------------- 
 
¶5. (SBU) GOB telecoms officials told Econoff previously that 
the government would seek to gain majority control of Entel, 
but not operating control (reftel).  They said that the 
government would allow a private company to continue running 
Entel, but wanted access to Entel's profits to expand rural 
telephone services and school internet access.  However, 
recent press reports indicate that the GOB may be seeking 
total ownership.  According to such reports, the GOB began 
negotiations with Telecom Italia on April 2 to either gain 
majority or total ownership of the company by May 1. 
 
--------------------------------------------- ------- 
Telecom Italia Wants to Sell All of its Entel Assets 
--------------------------------------------- ------- 
 
¶6. (SBU) Entel's president previously told Econoff that 
Telecom Italia was seeking to sell its 50 percent ownership 
of Entel (reftel).  Telecom Italia has already begun 
negotiations with other private companies regarding such a 
sale.  According to recent conversations with Entel contacts, 
the negotiations with the GOB have not progressed.  The 
delegation that came to Bolivia from Italy in mid-April was 
low-level and lacked the authority to strike a deal with the 
GOB on Telecom Italia's Entel assets.  The delegation was 
sent to listen to the GOB's points and report back to the 
board, but not to negotiate.  Telecom Italia would rather 
sell its entire interest in Entel, rather than the three 
percent and one share to the GOB that would grant the 
government majority ownership.  If the GOB obtained operating 
control of the company, Entel would likely decline and 
Telecom Italia would suffer profit losses.  According to 
press reports, the Italian foreign minister sent a note to 
the GOB requesting it to respect prior agreements regarding 
the company and has requested the intervention of the 
European Commission. 
 
------- 
Comment 
------- 
 
¶7. (SBU) Based on the failed, delayed hydrocarbons sector 
negotiations as an example, it is unlikely that the GOB will 
reach its May 1 deadline for negotiating majority ownership 
of Entel.  Post will continue to monitor the progress of the 
so-called telecommunications "nationalization," which seems 
to be the government's next big political deliverable, 
symbolically scheduled for May Day -- the one year 
anniversary of hydrocarbons "nationalization."   End comment. 
 
GOLDBERG