Tax debt won't affect Telefónica's contract renewal, says MTC official

Thursday, November 17, 2011

The concession renewal of Peruvian mobile operator Movistar, fully controlled by Spain's Telefónica (NYSE: TEF), will be analyzed independently from its tax debt, the transport and communications ministry's (MTC) head, Carlos Paredes, was quoted as saying by local press.

The ministry's decision - expected in the next few weeks - will be based on a legal and technical analysis of the company's contracts, Paredes said. Tax issues are not the domain of MTC, but rather of tax agency Sunat.

Telefónica reportedly owes Sunat some 2bn soles (US$740mn) in overdue tax, leading a list of 10 companies in the country with more than 6.3bn soles in outstanding fines for tax debts.

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Movistar and the government are in negotiations to renew the concession contract to operate in capital Lima and Callao. The contract was first signed in 1991 and expired May 26 this year.

Movistar is asking the government to renew the concession for another 20 years. The previous administration had reached a preliminary agreement with the operator to renew the concession, but that was put on hold by current President Ollanta Humala.