Colombian government sets mínimum price for “ColTel” shares

Posted on Tuesday, July 17, 2018

I get a perverse kick out of seeing news articles that seem coded so that no one really understands what is going on.

La Republica, July 17, 2018, Precio mínimo de acciones de participación de la Nación en Coltel será $2.075

Come on.

How many out there know what ColTel is? Or why the Colombian government might be selling its share?

OK there is a hint in the article: ColTel is short for Colombia Telecomunicaciones. Maybe not such a great hint if you are not familiar with the Colombian telecommunications industry.

Times up!

ColTel is probably better known as Telefonica Colombia, the Spanish multinational’s fixed and mobile subsidiary. You could have got that by reading the La Republica article. It has a chart showing the shareholder composition and Telefonica is prominent in the list. The Colombian government only owns 32.5%. It used to own more but was diluted when the fixed telecom company merged with Telefonica’s mobile operation.

As far as I am concerned this was more than overdue.

I am sufficiently right-of-center in economic terms to think that governments have no business being in any company that is not a public service for which there are no private investors prepared to assume the risk. That was the reason the Colombian government owned Telecom Colombia, originally the ‘flag carrier’ who also provided fixed telecom services to a large number of small towns throughout the country and underserved areas in the capital of Bogotá. In 1998, the long-distance market was liberalized which ended the ‘flag carrier’ status.

Eventually my second reason governments have no business being in any company – they normally do it very badly – drove Telecom to the brink of collapse and that led to the need to find a ‘strategic partner’ i.e. someone with cash and experience in running a telecom operator. After a soap opera that does not bear repeating, Telefonica wound up the happy controlling shareholder.

This led to a situation which is my third reason why governments have no business being in any company – they are on both sides of the regulatory equation: both regulator and regulated.

That is not fair.

I cannot come up with a clear case of bias – perhaps there were none – but that was more due to the integrity of individual politicians than industry structure.

However, the Colombian government refused to divest until the OECD made a big deal of it. Colombia has been wanting to get into the so-called “rich nations’ club” for quite some time but membership came with some ‘ToDos’ one of which was getting out of the telecom business.

About time.


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