Seeking Alpha

Caiman Valores'  Instablog

Caiman Valores
Send Message
Caiman Valores is a Colombian based independent investment analytics and risk management consultancy. The consultancy specializes in South American listed companies as well as conducting regional economic and risk assessments. The consultancy is currently located in Colombia. The principal of... More
My company:
Caiman Valores
  • Argentina: Is It Anti-Spanish Or Being Driven By Economic Necessity? 0 comments
    May 16, 2012 8:30 AM | about stocks: TEF, TEO, TI, NTL, YPF, REPYY

    First we saw the expropriation of YPF SA (YPF) from its Spanish owner Repsol (OTCQX:REPYY) by the Argentine Government. Now the government has fined Spanish telecommunications giant Telefonica $43 million for a service outage in Argentina on April 2nd 2012.

    The outage occurred in Telefonica's wireless unit Movistar, which has operations offering wireless voice and data services across South America. During this outage 18 million clients of Movistar were without phone and data services for several hours on April 2 due to technical problems.

    After the outage, the company had moved to compensate customers but the Argentine government decreed that the compensation wasn't sufficient. The fine translates into $2.25 for each customer affected and $1.4 million for the government.

    Interestingly, as this article in MercoPress points out, the Argentine Planning Minister has also asked telecommunications companies to increase their investment in fixed infrastructure in Argentina. He was also quoted as stating:

    Cell-phone service quality has declined in recent months, . . We need to have full service, not service that gets worse when you walk a few meters one way or another.

    All of which I believe indicates that the government is using the regulatory stick to pressure telecommunications companies to increase investment in infrastructure in Argentina. Especially as any investment will improve government popularity, as it seen to create jobs in a country with high unemployment. It also alleviates the government's inability to raise the necessary funds to invest in critical and much needed internal communications infrastructure, because they can't tap international credit markets for those funds.

    Even more cynically, I would think that the fine is nothing more than a much needed capital injection, as the government faces renewed balance of payments pressure and attempts to raise funds for investment in newly nationalized YPF. Telefonica has around 40% share of the Argentine wireless communications market so it is unlikely the company will depart the country as a result of the fine.

    Interestingly Argentina's biggest communications company Telecom Argentina (TEO), which is majority owned by Nortel Invesora (NTL) a company that is majority controlled by Telecom Italia (TI) paid a dividend to investors earlier this year. This was in defiance of government demands for companies to retain capital and re-invest it in Argentina in preference to the payment of dividends, particularly to foreign investors. Could the telecommunications industry be the next target for expropriation, in particular Telecom Argentina?

Back To Caiman Valores' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.