Hugo Chavez, President of Venezuela, has announced his intention to reverse recent privatizations and mentioned companies in telecommunications, electricity and oil and gas, although there haven´t been too many privatizations with the most visible being the phone company, Compañía Anónima Nacional Teléfonos de Venezuela (CANTV).
CANTV is listed on the New York Stock Exchange and has the US telecom company, Verizon, as an 28.5% investor.
Assuming that President Chavez wants to compensate existing shareholders, analysts have valued the total cost of his latest escapade at more than €11,600 million.
However, the issue then becomes what valuation President Chavez intends to use.
In recent months, the Verizon stake in CANTV has been the subject of takeover discussions by the Mexican billionaire, Carlos Slim, through his telecom companies, América Móvil and Teléfonos de México. The price being discussed for this takeover valued the company at €1,839 million. Will this valuation be used in a renationalization?
They could also set the value by taking the average value of the respective companies on the stock exchange for, say, the last six months, to obtain a theoretically justified valuation.
At the moment of the announcement of the renationalization, the Venezuelan stock exchange fell by 18.8% and every time that President Chavez gives a speech, the exchange keeps falling. Is this President Chavez´s strategy to reduce the price of the companies he plans to renationalize and thereby reduce the total cost of his new plan?
Onésimo Alvarez-Moro
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Verizon Communications had been looking to lighten its exposure to Latin America for some time when it struck a deal in April to sell investments in three properties in Puerto Rico, the Dominican Republic and Venezuela.
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Now, it probably wishes it had disconnected its Latin lines even sooner.
The company could possibly lose up to several hundred million dollars, thanks to President Hugo Chávez of Venezuela, who threatened to nationalize the country’s main telephone and electricity companies.
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