Product details

This is the second of a five-case series (ESMT-305-0041-1 to ESMT-305-0045-1). In 1991, a small task force of government officials in Peru began laying the groundwork for the sale of a controlling 35% stake in the country''s telecommunications duopoly: Compania Peruana de Telefonos (CPT) and Empresa Nacional de Telecomunicaciones (ENTEL). The telecom privatisation was part of a larger programme launched by President Alberto Fujimori, which aimed to turn Peru''s many state-owned enterprises over to the private sector by the end of the decade. Although the telecommunications industry was not the first to be privatised under the Fujimori initiative, it would be by far the biggest to date. Eight international telecommunications consortia qualified to take part in the bidding process. The winning consortium would face the challenge of being the major economic player in the country, would obtain high visibility and would have to form a partnership with the government in order to continue the economic reforms. Case (A) provides background on Peru''s economy and the telecommunications industry, describes its privatisation programme, including the privatisation plan developed for the telecommunications industry, and the key players in the process, including regulatory agency OSIPTEL, government committee CEPRI-Telecom, and the three consortia bidders Telefonica (Spain), Southwestern Bell (USA) and GTE (USA). Case (B) provides background on the three consortia of bidders in Peru''s telecommunications privatisation, including business group data for each of the three. Case (C) describes the day of the bid (28 February 1994), on which each of the three bidders submitted their offers for a 35% controlling stake in both CPT and ENTEL. Telefonica Group''s winning bid of $2,002 million was more than double the other two bids, to the surprise of all players involved. Case (D) looks at Telefonica del Peru''s financial performance, and the appreciation of Spanish Telefonica''s investment. By late 2003, Telefonica Group of Spain had significantly outperformed its competing bidders (Verizon and SBC) for seven consecutive years. Its performance was due to its strong domestic operations but more to its successful international growth strategy, focused on Latin America. Case (E) describes Telefonica''s position in 2004, as the largest telecommunications operator in the Spanish and Portuguese-speaking world, and provides supporting data.