GTE leads group that agrees to purchase a controlling stake in the Puerto Rico Telephone Company for $375 million; privatization agreement yields proceeds of$1.875 billion to government.
STAMFORD, Conn. - GTE Corp. today said that it has executed a definitive agreement with the government of Puerto Rico for the purchase of a controlling interest in the Puerto Rico Telephone Company (PRTC). The government will initially sell 50 percent plus one share to GTE for $375 million. Popular, Inc., the holding company of Puerto Rico's largest financial institution, will immediately purchase from GTE a 5 percent share for $37.5 million, and an additional 5 percent will be sold for the same price to other local partners in the GTE group.
GTE will elect a majority of PRTC's directors and have operating control of the company. As part of the transaction, PRTC will borrow $1.5 billion in the financial markets, which will be raised without any credit support by GTE or the government and be paid as a special dividend to the government of Puerto Rico. GTE will retain a 40 percent share in PRTC at a cost of $300 million.
Puerto Rico is a natural gateway between GTE's operations in the continental United States and Latin America, a region GTE considers strategically important.
"The agreement announced today builds upon GTE's existing strength as one of this hemisphere's leading telecommunications providers, with operations from Canada to Argentina. PRTC's customers will benefit from these compelling strengths," said GTE Chairman and Chief Executive Officer Charles R. Lee.
Michael T. Masin, GTE vice chairman and president - international, said, "Like GTE, the Puerto Rico Telephone Company is a full-service, facilities-based provider of telecommunications services, with tremendous growth opportunities in wireless, data, Internet and enhanced services. We are excited about this opportunity, and we look forward to working with PRTC's highly skilled and motivated employees to bring the latest technologies and highest levels of service to all the people of Puerto Rico."
Popular, Inc., the holding company of Banco Popular, Puerto Rico's largest financial institution, is the lead local partner in the GTE consortium. Banco Popular has current total assets in excess of $20 billion and deposits of $12 billion.
"As Puerto Rico's financial leader, we see our involvement in this consortium as a major step in our commitment to Puerto Rico's increased economic competitiveness. We are proud to be a partner in helping PRTC fulfill its strong potential as a private company," said Richard Carrion, president of Popular, Inc.
The transaction is subject to receipt of regulatory approvals, including approval of the Federal Communications Commission, and is expected to close in late 1998.
Transaction Part of Island's Privatization Program
The transaction is the culmination of a sale process begun last year by the government of Puerto Rico and the Honorable Pedro Rossello', governor of the Commonwealth of Puerto Rico, as part of a comprehensive privatization program on the island. Under that initiative, the government has outlined sweeping economic reforms designed to ensure the island's global competitiveness.
"The process we developed last year has served us well, and we believe this result - an agreement with one of the most prominent and successful global telecommunications companies, bears this out," said Marcos Rodriguez-Ema, president of the Government Development Bank (GDB) for Puerto Rico, chairman of the Puerto Rico Privatization Task Force and president of the Negotiating Committee for the Sale of Assets of the Puerto Rico Telephone Authority.
"GTE will provide PRTC with the opportunity to effectively participate in the competitive global telecommunications industry. GTE's expertise and resources will bring increased product innovation, service quality, productivity and technological capabilities to the benefit of all of PRTC's customers. Employees of PRTC will benefit from being part of a company better positioned to succeed in a highly competitive industry, and will be able to participate in the future of their company through the ESOP established for their benefit," Rodriguez-Ema added.
In addition to its North American operations, GTE has three major business operations in Latin America and the Caribbean:
Argentina: CTI (Compania de Telefonos del Interior), a GTE-led consortium that provides cellular services in the north and south interior regions of Argentina. GTE, as operator, has a 41.9 percent ownership interest in CTI. CTI serves more than 345,000 cellular subscribers.
Dominican Republic: CODETEL (Compania Dominicana de Telefonos), the largest telecommunications provider in the Dominican Republic. Owned and operated by GTE for more than 40 years, CODETEL provides local, wireless and national and international long-distance telephone service, serving approximately 649,000 access lines and 92,000 cellular customers.
Venezuela: CANTV (Compania Anonima Nacional Telefonos de Venezuela), a full service telecommunications provider offering local, wireless and domestic and international long-distance service throughout Venezuela. GTE owns, directly and through a multinational consortium, a 25.9 percent interest in CANTV which operates approximately 2.7 million access lines, and more than 375,000 cellular subscribers.
With 1997 revenues of more than $23 billion, GTE is one of the world's largest telecommunications companies and a leading provider of integrated telecommunications services. In the United States, GTE provides local service in 28 states and wireless service in 17 states; nationwide long-distance and internetworking services ranging from dial-up Internet access for residential and small-business consumers to Web-based applications for Fortune 500 companies, as well as video service in selected markets. Outside the United States the company serves more than 7 million telecommunications customers. GTE is also a leader in government and defense communications systems and equipment, directories and telecommunications-based information services, and aircraft passenger telecommunications. Additional information about GTE can be found on the Internet at http://www.gte.com.
Puerto Rico Telephone Company (PRTC) is the principal subsidiary of the Puerto Rico Telephone Authority (PRTA). It is the Island's largest provider of telecommunications services to both the business and consumer markets, including local exchange, long-distance, wireless and Internet access services. PRTC serves over 1.3 million access lines, over 155,000 cellular subscribers and over 237,000 paging customers. In 1997, PRTC reported assets of $2.4 billion, with operating income of $242.2 million and operating revenues of $1.2 billion.