Bogota Mayor Begins Talks On Plan To Merge Utility Companies
January 11 2012 - 9:19AM
Dow Jones News
Bogota's new mayor Gustavo Petro begins work Wednesday on his
controversial plan to merge two city-controlled utility firms,
money-losing phone company ETB (ETB.BO) and moneymaking power
company EEB (EEB.BO).
An official from Petro's office said the mayor was meeting
Wednesday morning with company representatives from ETB to discuss
the possible merger, but said any final decision may be months
away.
"There are still many steps to go, including feasibility studies
and other things," said the official. "I don't see any final
decision for many months."
Petro, a former Marxist guerrilla with the now disbanded M-19
movement and also a former senator, caused a firestorm in financial
markets when he said in early December that once he took office he
would follow through with a campaign promise to merge EEB and
ETB.
Shareholders of EEB felt it would be unfair to saddle the
company with ETB's debt, and as a result EEB shares have fallen 19%
since Petro made the comments, closing Tuesday at COP1,025. Shares
of ETB, which could benefit from a merger with EEB, are up 5% since
the comments were made, and closed Tuesday at COP461. ETB is in
desperate need of cash at it faces increasing competition from the
local units of Spanish telecommunications company Telefonica SA
(TEF, TEF.MC) and Telefonos de Mexico SAB de CV (TFONY, TMX).
The share prices of EEB and ETB were unchanged early Wednesday
in Bogota.
The drop in ETB shares was so sharp in mid December that
Colombian regulators suspended trading for three days, saying it
wanted to protect investors.
Petro has stood by the merger plan, and said his comments about
a tie-up aren't the cause of ETB's share price decline. He noted
that he originally made the merger proposal months ago during his
campaign. Petro has asked regulators to investigate the "true"
causes of the decline.
-By Dan Molinski, Dow Jones Newswires; 57-310-867-6542;
dan.molinski@dowjones.com