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Argentina's Great Phone Sale Stalls

LATIN AMERICA: PRIVATIZATION

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ARGENTINA'S long-suffering telephone customers must go on waiting for deliverance. Monday's planned privatization of ENTel, the inefficient state phone company, had to be postponed. The delay is a setback for the government's economic policy, say businessmen and foreign diplomats here. The sale of ENTel was to be the largest privatization in President Carlos Sa'ul Menem's drive to trim the public sector.

Mr. Menem has made his privatization program the keystone of his economic recovery plan. Nearly 40 companies from Argentina's bloated state sector have been sold off so far. Though few observers believe the difficulties with ENTel are grave enough to change the direction of government policy, the confusion has proved embarrassing.

Putting off the privatization indefinitely ``has hurt the government certainly,'' one official admits. ``But it is not fair, because it is not our fault.''

Though trouble had been brewing behind the scenes for some time, the storm broke last Thursday when a consortium led by Bell Atlantic, which had won the bidding to take over half of Argentina's telephone network, refused to sign the purchase contract.

The price of the state-owned company included buying up a chunk of Argentina's foreign debt. Manufacturers Hanover, Bell Atlantic's bank, was unable to attract the $2.3 billion in Argentine foreign-debt paper that made up the bulk of the price. The bank does not hold that much debt itself and other banks refused to come in on the deal they were offered.

One businessman in the Bell Atlantic consortium criticized the bank for ``irresponsibility'' in its financial negotiations. But the consortium itself was also unable to come up with its share of the $100 million cash price and admitted at the Thursday deadline that it was not in a position to sign a contract to take over ``Northern Telco,'' on Oct. 8. This was a major blow to Bell Atlantic, which had invested about $3 million establishing operations in Buenos Aires.

The government refused to give Bell Atlantic any more time to find the money, however, and handed the northern zone to a European consortium composed of Italy's state-owned STET phone company and the French public company France Telecom, which lost the bidding in June. But France Telecom is asking ``for a month at least'' to sign a contract. The Spanish company Telefonica, which had won the rights to operate the the southern telephone network, is refusing to sign until STET does so.

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