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Minority rights

Author: John Norton


The value of Latin internet subscribers is at the heart of a controversy that is raging in Chile and further worsening relations between this part of Latin America and Spain.

Minority shareholders in Chile's former telephone monopolist, Telefónica CTC Chile, are complaining that the company's largest shareholder, Spain's Telefónica, has not given them a fair deal. Last month Mark Mobius, president of Templeton Emerging Markets, which owns ADRs in Telefónica CTC Chile, threatened to sue Telefónica for compensation. The minority shareholders are rumoured to be seeking as much as $1 billion in compensation.

Early in 1999, Telefónica gathered together various of the internet businesses run by itself and its affiliates into a new company, Terra Networks. Among the internet assets transferred to Terra was Telefó, CTC's residential internet dial-up business. Terra paid CTC $40 million for the business and took on debts of $9.7 million. Following Terra's highly successful IPO in November, in which the company's market capitalization soared to over $8 billion, CTC's minority shareholders began to complain that the value the company had put on Telefó was too low.

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