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Argentina escalates quarrel with Spain

April 4, 2012 at 5:18 PM   |   Comments

BUENOS AIRES, April 4 (UPI) -- Argentina escalated its quarrel with Spain over the fate of largest oil producer YPF, controlled by Spain, and threatened action against another Spanish company accused of failing its telecommunications customers.

Argentine President Cristina Fernandez Kirchner's hard line on YPF has sent its shares plummeting in value amid fears the government wants to take it under state control.

Argentine media said the government has already decided to seize YPF and is looking into ways of how to go about taking control.

The row between YPF and the Fernandez administration erupted after the government accused YPF, controlled by Spanish oil major Repsol, was not reinvesting enough of its profits into finding new oil and developing capacity at existing oil installations. YPF countered the charges with detailed statements of its investments in the country.

The dispute threatens to go beyond diplomacy after telephone calls to Fernandez from Spanish King Juan Carlos failed to break the deadlock, analysts said. Bilateral government talks on the YPF dispute have been inconclusive.

YPF is battling a campaign by Argentina's provincial governments to revoke its licenses one by one.

Argentine media said the provinces that revoked YPF licenses had begun looking for new investors.

YPF has seen its market value fall about 25 percent this year and its stock is at its lowest level since July 2009 amid media speculation a state takeover is imminent.

Critics said a direct expropriation of the company's assets is in the cards unless the government can find cash to purchase YPF shares.

If carried through, a takeover of YPF would be the most controversial intervention into Argentine business since the government nationalized private pension funds and the largest airline, Aerolineas Argentinas, in 2008.

Investor fears mounted over government plans to impose heavy fines on the local unit of Spanish telecommunications company Telefonica S.A. mobile phone service provider.

The government sanctions follow a service disruption that left more than 16 million clients without phone and data service for several hours.

Officials accused Telefonica Argentina, which provides mobile phone service under the Movistar brand, of not investing enough in improving its service.

Federal communications regulator boss Ceferino Namuncura said his agency planned to impose "the highest fines" and require Telefonica to compensate consumers affected by the disruption Monday.

"It worries us a lot at a time when companies, especially Movistar, are very profitable and which we understand should be offering excellent service," Namuncura told reporters.

"That profitability allows them to make the investments that the government and consumers demand."

Other senior officials piled on the pressure, indicating Telefonica Argentina was their next target for sanctions.

Telefonica Argentina ranks third in Argentina's telecommunications industry with about 16.8 million out of 55 million subscribers. Investors are apprehensive the government may see Telefonica Argentina as a potential target for nationalization.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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