Entel Privatization: Telefonica De Argentina Public Offering

13 Pages Posted: 21 Oct 2008

See all articles by Samuel E. Bodily

Samuel E. Bodily

University of Virginia - Darden School of Business

Cathy Lloyd

affiliation not provided to SSRN


A public offering to complete the privatization of the Argentine phone company is planned. The initial pro form analysis suggests a negative net present value for the offering. The task is to check the assumptions of the firstcut analysis and make more consistent assumptions about Argentine and US inflation about the business performance of the phone company. A risk analysis (using Monte Carlo simulation, for example) is needed to capture the full range of risks and rewards and determine what to bid for the company.





Carla Menendez had been with Chancellor Investment Corporation for just four months in late December 1991, and was now ready to make her first big pitch to the portfolio managers of the Latin American Fund at Chancellor. The challenge was to capture the risks and rewards of the upcoming ENTel privatization, and there were enough of both to allow Menendez to show what she could do. Her initial analysis, however, showed a negative net present value for the offering she was to pitch! She anxiously read the operating assumptions provided by ENTel's investment bankers and could find no blatant error in her work. Of course, some of the forecasts could be varied to highlight various risks and rewards, but that was true of any analysis.


Empresa Nacional de Telecomunicaciones (ENTel) had been providing telephone service to Argentina for a number of years, but was incorporated by the Argentine government in August 1989 in an effort to privatize the company. The incorporation process was designed to separate the telephone company from the government, both organizationally and financially. ENTel, the primary provider of local telecommunications services in Argentina, had been split into the Northern (Telecom) and the Southern (Telefonica) regions. The international long-distance portion (Telintar) and domestic telex/data-transmission (Startel) businesses were to be jointly owned by the two regions' holding companies, Telecom and Telefonica (see Exhibit 1). The government had placed 60% ownership of the holding companies to private consortia (Cointel and Nortel) through competitive bidding, while retaining 40%.

. . .

Keywords: bargaining/bidding, inflation, Monte Carlo simulation, risk analysis, valuation, international, diverse protagonist, gender (female protagonist)

Suggested Citation

Bodily, Samuel E. and Lloyd, Cathy, Entel Privatization: Telefonica De Argentina Public Offering. Darden Case No. UVA-QA-0432. Available at SSRN: https://ssrn.com/abstract=1283416

Samuel E. Bodily (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4813 (Phone)
434-293-7677 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/bodily.htm

Cathy Lloyd

affiliation not provided to SSRN

No Address Available

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