UPDATE: Colombia Court Lets ETB Seek Controlling Partner

A Colombian court authorized state-controlled telephone company Empresas de Telecomunicaciones de Bogota SA (ETB.BO), or ETB, to proceed with the search for a controlling partner, the company's top official said Thursday, sending shares up 19%.

The Colombian court turned down an order imposed on Sept. 22 to halt a process to seek a controlling partner, Fernando Panesso, ETB's CEO, told Dow Jones on Thursday.

The order was part of a lawsuit lodged by the company's labor union, which fears massive layoffs if a private operator takes the company over.

The lawsuit isn't over, though, Sol Marina de la Rosa, ETB's vice president for legal affairs, said.

Shares gained 19% to close at 1,150 Colombian pesos ($0.58), while the benchmark IGBC index had gained 1%.

The Bogota city council now holds 86.59% of ETB, while minority shareholders have the remaining 13.41%, according to the company's Web site.

The city council plans to grant the majority of voting shares to a private operator, while keeping a 51% ownership in the company. The new partner would be picked during an auction that was originally scheduled in October but was indefinitely postponed.

ETB needs capital to face rising competition from Spain's Telefonica SA (TEF) and Mexico's Telefonos de Mexico SA (TMX). ETB's revenue from fixed-line and long-distance calls has stagnated as all three companies now offer fixed-line, Internet connection and cable TV bundled together, a service known as triple play.

According to terms of the partial privatization, the new partner would have to buy shares from minority holders at the same price it offers to the city council.

That last part of the process has spurred speculation on the shares over the past few months. In the month to Sept. 15, when the court started the lawsuit, the share price had gained 28%, then lost 24% as the process was suspended.

It is not clear that ETB will attract many bidders, Johanna Castro, a market analyst with local brokerage Corredores Asociados, said.

She said the shares are worth about COP1,000.

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