TELECOM ITALIA: ENTEL BOLIVIA “EXPROPRIATION” ENTIRELY UNJUSTIFIED
The company confirms its intention to undertake all possible actions to safeguard its investments
The Bolivian government has commenced the renationalization of significant industries of key economic importance, notably the oil, mining and telecommunications industries.
The method of intervention adopted to seize equity interests held by foreign companies following the privatization of these companies is taking the form of a true “expropriation”, on trumped-up grounds of general management issues, based on unfounded allegations of illegitimate conduct by these foreign companies.
The Bolivian government has accused 100%-owned Telecom Italia subsidiary ETI, in particular, of failing to observe contractual obligations regarding investments undersigned during privatization, and of enacting a capital reduction of Entel, which is controlled by ETI, in 2005 alleged by the Bolivian government to be illegitimate.
In actual fact, to date Entel has undertaken investments of USD$720 million, a sum that exceeds the USD$610 million contractual pledge made by ETI to the Bolivian government at the time of privatization. The Ministry of Economic Development certified fulfillment of this commitment in Ministerial Resolution no. 194, on August 12, 2005.
The Bolivian government’s Supreme Decree no. 29100 (April 23, 2007) retroactively repealed the above-mentioned executive laws from 2005 regarding certification of the company’s investments, dismissing rulings by the Constitutional Court and, in point of fact, placing the capital operation outside the legal framework in effect in 2005.
At the time, ETI and Entel solicited the opinions of a number of independent Bolivian and international experts to certify the legal, accounting and fiscal practicability of the Entel capital reduction, and obtained independent certification from KPMG, in confirmation that the investments made had exceeded contractual obligations.
Indeed, the capital reduction was unanimously approved by local stakeholders (pension funds, employees and other investors).
It is therefore evident that the allegations levelled at ETI/ENTEL are instrumental and designed to justify unilateral actions by the Bolivian government in its attempt to take back shareholder, operational and management control of Entel, in violation of agreements signed by the Bolivian government and ETI when Entel was privatized, Bolivian law and international treaties for the protection of foreign investments.
The company consequently confirms its intention to undertake all possible actions to safeguard its investments.
Milan, May 3, 2007