Telecom Italia: evaluates all initiatives aimed at safeguarding the Entel Bolivia investment

04/26/2007 - 00:00 PM

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Telecom Italia, with regard to news reports about the Bolivian government’s decision to “recover” Entel Bolivia - in which ETI has a 50 % stake -  announces that it will evaluate all initiatives aimed at safeguarding its investment in Entel Bolivia.
ETI, a company wholly controlled by Telecom Italia, acquired 50% of Entel Bolivia in 1995, during the Bolivian government’s privatization drive, and as a result of the agreements struck, has the power to nominate the majority of Entel’s Board of Directors.

On 28 March 2007, the Bolivian government issued Decreto Supremo no. 29087  with the purpose of "recovering” Entel in favour of the State. The decree included unfounded accusations of irregularities in the administration and management of Entel, which were meant to have emerged following a unilateral investigation conducted by the government, the conclusions of which are obviously arbitrary. The decree also instituted a Ministerial Commission with the sole objective of negotiating and defining a friendly agreement with ETI aimed at the above mentioned “recovery” within 30 days of the decree’s publication.

ETI, regardless of the accusations and brevity of the period contained  in the decree (which suggest an attitude which is anything but friendly on the Bolivian side), has been open to meeting the Commission. In this context, a few meetings took place in La Paz during which the Ministerial Commission adopted an ever more aggressive and intimidating stance, repeating a series of points on presumed (but never proven) irregularities in the management of Entel. The Ministerial Commission’s attitude was accompanied by a very aggressive media campaign against ETI and Entel which was prejudicial to Entel’s image and interests and which obviously go against the Commission’s declared aim of wanting to reach a mutually satisfactory agreement with ETI’s representatives.

ETI maintains that these observations and accusations have been mounted to justify unilateral action aimed at transferring the equity, operational and managerial control of Entel to the Bolivian government, in violation of the agreements signed by the Bolivian government and ETI at the time of Entel’s privatization, the Bolivian law, and the international treaties for the protection of foreign investments.

On 23 April 2007, the date set for a new round of meetings, the Bolivian government issued two new surprise decrees. With the first it repealed the administrative and legislative acts with which the preceding government certified Entel’s investments in Bolivia, which testified to the fulfillment by Entel and ETI of the obligations taken with the government at the time of privatization, and declared expressly against the law all acts brought into being in implementation of those provisions. The legislative and administrative acts abolished by the government have been declared legitimate by a sentence of the Constitutional Court which has fully rejected an appeal of unconstitutionality presented by members of the present government.

With the second decree, the government instead decided the transfer within 24 hours and without payment the stake in Entel – equal to 47% of company’s capital – managed by two private pension funds as well as the annulment of a series of other administrative provisions, including those dating 1995 relative to Entel’s privatization, altogether removing, always with retroactive applicability, the legislative basis on which 12 years ago the privatization of Entel was conducted. 

The Bolivian government’s intention to re-appropriate Entel in violation of all the fundamental norms of a state based on the law appears clear. With the two decrees issued, the government has profoundly modified the regulatory-legislative framework of the sector affecting past operations which had been conducted in full respect of the existing laws. ETI reasserts its absolute propriety in the management of Entel, having always acted in accordance with Bolivian law and the operating standards of main telecommunications operators worldwide, and is ready to demonstrate this in all relevant circumstances.

Milan 26 April 2007