"We approved the acquisition of Digitel and its merger with other companies," said Alvin Lezama, director of telecommunications regulator Conatel. Telvenco, owned by Venezuelan Oswaldo Cisneros, will acquire Digitel from Telecom Italia and will own a controlling stake.

The Digitel deal also includes a merger of Digicel and Infonet, two regional providers, which will compliment Digitel's service. The merged operations will serve about 1.9 million mobile subscribers and will offer fixed-lined services nationwide. Cisneros is expected to hold a 66% stake in the new company.

Conatel officials also extended a permit so the new company can offer fixed-line services, placing it in direct competition with CANTV, the country’s largest operator. Digitel is expected to offer fixed-line services to the equivalent of 15% of its mobile subscribers within three years.

Venezuela’s President Hugo Chavez is not comfortable with the influence CANTV has in the market. Lezama said the regulators would attempt to reduce the dominance of CANTV.

Digitel will be the third mobile operator and would compete against Movistar, a company owned by Spain's Telefonica, and Movilnet, the mobile arm of CANTV. The approval of Digitel's sale comes a year after Venezuela's telecommunications regulator blocked a US$ 450 million bid by CANTV to purchase Digitel. At the time, the government argued the acquisition would restrict competition. Today, regulators believe that competition would not be strained by the purchase.

Source: Dow Jones - WDR/Intelecon Regulatory News