Argentina Said to Urge Telefonica to Settle Clarin Grievances

  • Rivalry intensifies as media group Clarin preps phone service
  • Spanish carrier said to threaten World Bank arbitration case

Argentina’s government is encouraging phone carrier Telefonica SA to hold direct talks with media company Grupo Clarin SA, urging the rivals to work out differences over market rules as they target each other’s turf, according to people familiar with the situation.

Spain’s Telefonica, which operates in 14 Latin American countries, has publicly complained that the administration of President Mauricio Macri has favored Clarin since coming to power in December. Clarin, the politically powerful media group, is snapping up mobile-phone and spectrum assets with plans to sell packages of internet, pay-TV, landline phone and mobile services. Telefonica can’t offer similar bundles because Macri extended a ban on phone carriers doing so through at least early 2018.

Under Macri’s pro-business government, each company is jockeying to be the first to enter the other’s industry, aiming to take advantage if economic growth leads to higher demand for telecommunications and media. At present, Clarin hasn’t started offering phone service because it still needs final government approval, while Telefonica in July filed a complaint alleging Clarin unfairly acquired its mobile-phone licenses. A consensual resolution would allow Macri to avoid being perceived as favoring one side over the other.

Telefonica sent two top executives to Argentina about two weeks ago to have several meetings with government officials and came away concerned about policies under consideration, including letting Clarin have a 4G mobile license by paying 1/10 of the amount it paid, said one of the people, who asked not to be named discussing the conversations. Telefonica has told the government that if it isn’t satisfied it will seek arbitration at the World Bank’s International Centre for Settlement of Investment Disputes, the person said.

Representatives of Telefonica and Buenos Aires-based Clarin declined to comment.

Telefonica, Spain’s former telephone monopoly, has been in Argentina since 1990 and controls about one-third of the country’s mobile-phone market and is one of Argentina’s top foreign investors. One of Macri’s top legal advisers is Fabian Rodriguez Simon, who prior to joining the current administration was a lawyer working for Clarin in a court battle against the previous government.

Macri faces another decision that could make life difficult for Telefonica. While the current rules prevent the company from offering bundled deals until January 2018, the president has the option to extend the restriction an extra year.

An additional concern for Madrid-based Telefonica is that the government could authorize Clarin’s acquisition of Telecom Argentina SA, Telefonica’s main fixed-line rival, said two of the people. Clarin intends to combine its cable-TV unit with Telecom Argentina as soon as possible, people with knowledge of the plan said in March.

The government wants Telefonica and Clarin to work out their differences before it decides whether to intervene with regulation, one of the people said. Argentina’s ambassador to Spain, Ramon Puerta, is holding regular meetings with Telefonica executives as he tries to iron out the Spanish carrier’s concerns, the person said.

Clarin battled the previous administration of Cristina Fernandez, who passed a new media law that critics said was aimed at breaking up the company. Key parts of the law were scrapped soon after Macri came to power.

London-listed shares of the media group, which also owns the nation’s most widely read newspaper, have gained 27 percent since Macri took office last year. Telefonica, which has struggled to pare down debt, has dropped 26 percent in the same period.

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