Case Study Analysis Compania de Telef
Case Study Analysis: Compañia de Teléfonos de Chile
By Mathew Stubbs (13199991)
Company Background
Compañia de Teléfonos de Chile (CTC) is a telecommunication company residing in Chile. Chile is lacking an extensive telecommunication network and by the late 1980’s CTC has saturated the Chilean telephony market. The Chilean telecommunication market is commonly characterised by low penetration rates of basic telephony, protracted waiting lists for new services and customers and high levels of regulation.
Consequently, in 1987 CTC shifted from a state owned corporation to a private company due to the underdevelopment of telecommunications, the essential need for expansion, an inability to service customers and the transformation of the industry (Cuervo-Cazurra, 1998). The Chilean government put CTC up for bid in an attempt to attract a firm that would, “expand, modernize and improve the current telecommunication and offer financial security,” (La Follette, 1993).
Numerous bids with a range of financing structures were submitted, and Alan Bond’s firm was accepted. The Chilean government selected the Bond Group’s bid due to the structure of the offer. Although significantly lower than competing bids, Bond submitted an all cash bid of $114.8 million for roughly 35% of the company. This was favourable for the Chilean government as it provided a feasible vehicle to pay off their immense foreign debt and accumulated interest arrears. The Bond Group invested further and acquired roughly 49.5% of CTC stock by the end of 1988, securing majority voting rights.
In 1990 CTC embarked on an aggressive expansion program under the approval of Alan Bond. The expansion aimed to significantly reduce the development time of infrastructure and expand the telecommunication capabilities of the company. CTC has been significantly helped by the Bond Group’s ownership as it simulated the growth CTC required, set them on the right path for the future and firmly established them as a
By Mathew Stubbs (13199991)
Company Background
Compañia de Teléfonos de Chile (CTC) is a telecommunication company residing in Chile. Chile is lacking an extensive telecommunication network and by the late 1980’s CTC has saturated the Chilean telephony market. The Chilean telecommunication market is commonly characterised by low penetration rates of basic telephony, protracted waiting lists for new services and customers and high levels of regulation.
Consequently, in 1987 CTC shifted from a state owned corporation to a private company due to the underdevelopment of telecommunications, the essential need for expansion, an inability to service customers and the transformation of the industry (Cuervo-Cazurra, 1998). The Chilean government put CTC up for bid in an attempt to attract a firm that would, “expand, modernize and improve the current telecommunication and offer financial security,” (La Follette, 1993).
Numerous bids with a range of financing structures were submitted, and Alan Bond’s firm was accepted. The Chilean government selected the Bond Group’s bid due to the structure of the offer. Although significantly lower than competing bids, Bond submitted an all cash bid of $114.8 million for roughly 35% of the company. This was favourable for the Chilean government as it provided a feasible vehicle to pay off their immense foreign debt and accumulated interest arrears. The Bond Group invested further and acquired roughly 49.5% of CTC stock by the end of 1988, securing majority voting rights.
In 1990 CTC embarked on an aggressive expansion program under the approval of Alan Bond. The expansion aimed to significantly reduce the development time of infrastructure and expand the telecommunication capabilities of the company. CTC has been significantly helped by the Bond Group’s ownership as it simulated the growth CTC required, set them on the right path for the future and firmly established them as a
References: Cuervo-Cazurra, A. (1998). Hypercompetition in the Chilean Telecommunications Industry. Sloan School of Management, MIT. La Follette, C. (1993). Compañia de Teléfonos de Chile. Harvard Business School.