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On October 14 Spain’s Grupo Telefonica Moviles consummated its purchase of most of BellSouth’s Latin American assets, including control of BellSouth Panama. The $657 deal (for its Panamanian component) gives Telefonica the right to be Cable & Wireless’s only competitor in the national cell phone business here until 2007. Currently BellSouth has about half of the Panamanian cell phone market, which is characterized by competition mainly in promotion rather than by price.

In Panama as in most of its other Latin American operations, BellSouth had minority shareholders, who will in most cases continue with their shares in the new Telefonica -run business.

Telefonica has brought in Claudio Hidalgo, who had been general manager of MoviStar Puerto Rico, to head its cell phone business here.

In addition to BellSouth’s assets in Panama, Telefonica bought similar operations in Guatemala, Nicaragua, Colombia, Ecuador, Peru, Venezuela, Argentina and Uruguay. The acquisition of BellSouth’s assets in Chile are being challenged by telecommunications companies there, which allege that the move would be monopolistic. All told, the Spanish company has acquired or is in the process of acquiring some 10.5 million new customers, who generated around $2.5 billion in annual revenue, for about $5.85 billion.

The deal will make Telefonica Latin America’s principal cell phone company and give BellSouth the cash it needs for its Cingular Wireless subsidiary’s purchase of ATT Wireless.

To the extent that a changing political landscape will end Cable & Wireless’s illegally extended monopoly on fixed-line telephony, the longer term implications of the deal probably are that the UK-based telecommunications firm will be pushed to the margins of the Panamanian market. If Telefonica decides to seriously compete with C&W on price, either now or after the two present companies’ exclusive rights end in 2007, C&W, whose parent company’s stock plunged to near junk status after a major international accounting scandal and whose continued privileged spot in Panamanian telecommunications is yet another scandal, would likely be at a serious disadvantage.

Thus Telefonica’s entry into the Panamanian market may presage further changes, as BellSouth’s principal competitor may be compelled to either bolster its position with new investment or withdraw to a smaller and more defensible market share.














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