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Paraguay may soon privatize Antelco, bumbling telecom
The Miami Herald / June 22, 1995

By Larry Luxner

ASUNCION, Paraguay -- One of South America's least efficient phone companies might soon be up for grabs, in what would rate as the biggest privatization in Paraguayan history.

Politicians are currently debating whether to sell off Antelco, the country's overstaffed, mismanaged monopoly. Antelco's 7,000 workers bristle at any talk of privatization, though most other Paraguayans seem to think it's a good idea.

José Maria Espinola Manzoni, director of the government's privatization committee, says Antelco could easily fetch $500-600 million once a measure that authorizes its privatization is passed into law.

"Whoever buys it will have to make an investment of another $500 million in the first three or four years," he says. "It will cost a lot of money, but it's worth it to the country. There are a thousand new things Paraguay doesn't have."

A U.S. diplomat is more conservative, estimating Antelco's value at no more than $200 million.

"Antelco has twice the number of employees it needs. Even a labor leader who doesn't like privatization admitted this to me," said the diplomat. "But to fully privatize Antelco takes an element of control away from the military and the Stroessner interests, or those who want to keep the patronage system alive and well."

Sen. Armando Vicente Espinola of the opposition Liberal Party, which is now sponsoring legislation to privatize Antelco, claims that for years, ex-dictator Alfredo Stroessner shamelessly used Antelco to spy on his enemies, with the help of a sophisticated eavesdropping device made by Alcatel.

"During the Stroessner regime, to get a job at Antelco it was absolutely necessary to belong to the party," said Espinola, who is not related to the Privatization Committee's Espinola. "Today, Antelco has one employee for every 16 lines, compared to Chile, which has one employee for every 160 lines. Antelco has more than 100 doctors and dentists on its payroll. Obviously, they have 90% more people than they need."

On the other hand, few public phones work, only 30% of domestic long-distance calls go through on the first try, and absolutely no new phone lines are available in Asunción -- even for large, multinational companies willing to pay for them. At the moment, Paraguay has only 150,000 lines in service, giving it a teledensity of 3.3 per 100 inhabitants -- the lowest in South America.

"We have the market for a big development of the telecom sector, yet almost nothing is done," Espinola complains. "We don't have any service besides basic telephony. Paraguay is the only country that has no access to Internet."

All that will change quickly if and when Antelco is privatized. Pedro M. Duarte, director of Antelco's radio and frequency division, says at least four global telecom firms -- including Telefonica de España, EntelChile, AT&T and BellSouth International -- have expressed interest in buying the company. Under terms of Espinola's proposed legislation, 45% of Antelco would be sold to an international firm, 45% to local investors and 10% to the employees.

Duarte says the breakdown should be 60%, 20% and 20% respectively, with the international company committed to adding 200,000 new lines in the first three years of the concession and 800,000 in the first 10 years.

Earlier this year, Antelco was forced to temporarily postpone the pre-qualification process for a turnkey project for 215,000 new digital lines, after the World Bank pressured the Wasmosy government to reduce the project. According to the newsletter Pyramid Research Latin America, the World Bank -- in addition to seeking quick passage of a law that would create an independent telecom regulatory body -- demanded that Antelco's project be scaled down to 80,000 lines and that it be supervised by a well-known international organization or bank. It is also urging the passage of a law that would create an independent National Telecommunications Commission to oversee Antelco.

"My personal view is that the phone company should be separated into two entities; one should be the operator, and the other, the regulator," said Duarte. "This will happen with the new telecom law proposed by the executive department. After that, we can privatize the company."

Duarte added rather optimistically that "if we do it cleanly and transparently, and we present it to the workers that way, I don't think we'll have any problems."

Yet even Duarte concedes that at least half of Antelco's current workforce would be fired as a result of any selloff. Knowing that, the phone company's chief union, Sinattel, has promised massive unrest if Espinola's privatization bill is approved.

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