France Telecom completes Telecom exit

Wednesday, December 17, 2003

France Telecom (NYSE: FTE) on Friday completed the sale of its stake in Argentina's Telecom Argentina (NYSE: TEO) to investment group W de Argentina, a Telecom spokesperson confirmed for BNamericas.

In September, France Telecom announced the sale for US$125mn to the affiliate of the Los W group, an Argentine family investment group with annual revenues of US$300mn. Los W group assets include a significant stake in Argentine insurance company La Caja alongside Italy's Assicurazioni Generali, as well as agriculture, real estate and fruit export interests.

Prior to the sale, France Telecom and Telecom Italia held approximately 34% of voting rights and a 25.5% economic interest in Nortel Inversora (NYSE: NTL), the holding company that owns 54.7% of Telecom Argentina's share capital.

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Under the sale agreement, France Telecom and Telecom Italia contributed their stakes in Nortel to a new company called Sofora Telecomunicaciones, co-owned on a 50-50 basis by the two European operators.

France Telecom then sold 48% of Sofora to W de Argentina, along with an option for the purchase of the remaining 2% exercisable at any time between January 31, 2008 and December 31, 2013.

Minority investors hold the other 49% of Nortel. Aside from Nortel, the other shareholders in Telecom Argentina are employees, with 4.7%, and the free float, with 40.6%.

The ownership change will probably not have a major impact on Telecom's business or strategy as France Telecom has never been as active as Telecom Italia in the day-to-day management, Standard and Poor's Argentina director Marta Castelli told BNamericas.

Telecom Italia has a regional presence and strategy in Latin America, giving it a greater interest to make major strategic and financial decisions, Castelli said.

Los W is a local investment company with a strong, profitable track record, but it is not a telecom operator, she said. As a result, it will probably be content to follow France Telecom's example and take the backseat to Telecom Italia in providing strategic guidance at the Argentine operator, she said.

Reflecting France Telecom's departure, the legal name of Telecom Argentina was simplified to Telecom Argentina S.A. from Telecom Argentina - Stet France Telecom S.A.

Nortel Inversora's American Depositary Receipts (ADRs) on the New York stock exchange closed at US$5.03 apiece on Tuesday, down from Monday's close of US$5.28. Since France Telecom's exit was announced, the ADRs have risen from just over US$2 apiece.