UPDATE: Colombia's ETB Delays Search For Controlling Partner

Colombia's state-owned telephone company Empresa de Telecomuncaciones de Bogota SA (ETB.BO) postponed the process of seeking a controlling partner, sending its share price down 6.5% Friday.

ETB said on its Web site it will hold a public auction to pick a controlling partner on Dec. 21 instead of Oct. 16. The company didn't say why it decided to delay the auction.

The company's Chief Executive Fernando Panesso didn't return phone calls seeking comment.

The delay, though, comes two days after the company revealed the workers' labor union filed a lawsuit to block the process.

ETB, which is controlled by the city council, plans to sell new shares, equivalent to a 36.6% stake, to the new partner, which will be selected during a public auction to be held around Dec. 21. The winner will be the one that offers the highest price per share.

The city council, which controls the company, will change its current shares into non-voting shares.

The new partner will then commit to hold a tender offer to buy minority shareholders' stakes at the same price as offered in December. In the case all minority shareholders decide to leave the company, the partner would end up with a stake close to 49%, but with a majority of voting shares.

That part of the process pushed the price upward over the past few months as investors speculated the new controlling shareholder would pay a significant premium to get the control of ETB, said Estefania Leon, a market analyst with local brokerage Correval.

The company also delayed the deadline for the tender offer to June 9, 2010, instead of April as was originally scheduled.

The company's shares had gained 41% between July 6, when the company announced the process, and Wednesday, when it revealed the lawsuit. The price fell 10% between Wednesday and Friday and 6.5% on Friday alone to close at 1,150 Colombian pesos ($0.59).

"The price will fall more than that, because it is now clear that the process will take much longer than expected," said Leon.

ETB needs capital to face rising competition from Spain's Telefonica SA (TEF) and Mexico's Telefonos de Mexico SA (TMX).

ETB's revenues from fixed-line and long-distance calls are stagnating as the three firms are now offering fixed-line, Internet connection and cable TV bundled together, a service known as triple play.

ETB is controlled by the Bogota city council, which holds 86.59%, while minority shareholders have the remaining 13.41%, according to the company's Web site.

-By Inti Landauro and Taos Turner, Dow Jones Newswires; 57-1-610 70 44 Ext. 1131; [e-mail]