CARACAS, Venezuela, June 6 (UPI) -- Colombia's finance minister warned Thursday that the government is considering liquidating state-owned telecommunications provider Colombia Telecom.
The company has been badly affected in recent weeks by a combination of employee industrial action and ongoing guerrilla attacks against its infrastructure. Telecom is also facing costly legal proceedings by its former international partners who are demanding compensation for the disappointing performance of joint ventures carried out in Colombia in the 1990s.
"If there is no solution and if the union and the multinationals maintain their intransigent stance, then the company will cease to be viable and we will have to close it down," Juan Manuel Santos told local radio. The finance minister said it would make more economic sense to liquidate the company than to continue maintaining it in its current form, given that the partial strike is costing the company around 25 percent of its projected daily revenue, while it also faces a potentially ruinous bill for compensation from its former partners.
Workers presented a 23-point list of demands to Telecom management in early May, relating to issues such as pay, redundancies and union recognition. Despite compromise agreements on some of the points, negotiations between the two sides soon broke down and employees began a campaign of protests.
While the majority of the company's services have not been affected by the protests, the strikers have prevented essential maintenance and upgrading work by blocking technicians' access to key installations. In particular, protesters prevented technicians from making alterations to Telecom's system prior to Saturday's number changeover in Colombia, during which an extra digit was added to all cell phone numbers. This created difficulties for around 180,000 fixed-line Telecom customers who were unable to call the new cell phone numbers.
The protest action has also prevented technicians from repairing system faults promptly, leading to a number of short-term shutdowns in regional services.
Prior to the finance minister's stark warning to both sides Wednesday morning, the industrial dispute appeared to have reached an impasse. The Colombian government has repeatedly criticized both sides' handling of their differences, and Labor Minister Angelino Garzon last week accused both the board and the workers of lacking "the political will to resolve the dispute."
Telecom Colombia President Hernan Roman had insisted that he would not return to the negotiating table unless employees suspend their protests. Meanwhile, union representatives insisted the company had reneged on earlier interim accords.
However, Santos' threat to liquidate the company unless a solution is found may have created a new and necessary sense of urgency among the parties to the dispute. Shortly after the minister's statement, the president of the Syndicated Telecom Workers' Union, Rafael Valdovino, said his members were willing to end their embargo on system repairs and upgrades if the board was willing to restart negotiations.
Valdovino described his offer as "a mark of goodwill" and expressed his optimism that a negotiated accord was possible. The union leader nonetheless warned management that some administrative stoppages would continue until a final agreement was signed.
It remains to be seen whether the minister's threat to shut down Telecom altogether will have a similarly salutary effect on the international telecommunications companies, which are pursuing legal claims worth $1.8 billion against the company.
A total of six foreign companies -- Alcatel, Nortel, Ericcson, Siemens, Itochu and NEC -- have filed for damages on the grounds that they participated in joint-venture projects with the Colombian service provider that proved to be significantly less profitable than they had been assured. Telecom reached agreements with the six companies in the early 1990s to install a total of 1.6 million fixed telephone lines in the impoverished Andean country.
The agreements included a shared-risk clause obliging Telecom to make up any difference between the profit levels it guaranteed the international companies and actual profits.
Colombia's business magazine Semana has described this arrangement as "possibly the worst deal in history" because Telecom drastically exaggerated the profit levels likely to be generated by the sales and rental of the lines. The company thereby ended up with a huge and unnecessary bill when results failed to live up to expectations.
The case of Telecom's agreement with Canada's Nortel Networks is illustrative. Under the terms of the 1993 joint-venture contract, the Canadian company was to install 200,000 fixed telephone lines in exchange for guaranteed profits of $143 million by 1999. This optimistic level of profits never materialized and in late April an arbitration court in the Colombian capital Bogota awarded Nortel $72 million in compensation. A system designed to provide Colombians with telephone lines without the need for huge investment by a cash-starved state-owned company in fact ended up costing Telecom almost as much as if the company had installed all the lines itself.
Small wonder then that during his campaign, Colombia's now President-elect Alvaro Uribe described Telecom as facing a "delicate" situation.
Uribe's plan is to appoint two well-respected public figures to act as conciliators between the company and its former partners. The conciliators will oversee negotiations between Telecom and its former partners and try to broker a "reasonable" agreement that will not bankrupt the company. The finance minister's statement may, though, make the conciliators' job easier by reminding the international companies that it might be wiser for them to settle for less than they had hoped rather than risk seeing Telecom liquidated and their debts canceled.
