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The shares of Colombian state-controlled telephone company Empresa de Telecomunicaciones de Bogota SA (ETB.BO) on Wednesday fell after the company said the workers' union sued to block the sale of a controlling stake to a private company.

The shares ended 3.1% lower than the previous day at 2,140 Colombian pesos ($1.09). Earlier in the session, before the news about the lawsuit, the shares were up 3.9%.

The union asked a court to "suspend the process of obtaining a strategic operator for ETB," the company said. The court gave 24 hours to ETB to give details of process and the legal justifications.

The company plans to sell new shares, equivalent to a 36.6% stake, to a new "strategic" partner, which will be selected during a public auction scheduled next month. The winner will be the one that offers the highest price per share.

The minimum price will stay secret until the auction.

The Bogota city council, which currently controls the company, will change its current shares into non-voting shares so that the new partner will control the company. The new partner would have to buy the shares owned by minority holders at the same price.

The approaching auction had spurred speculation on the shares of ETB over the past few days, said Cesar Tovar, a market analyst with local brokerage Nacional de Valores.

ETB badly needs capital to face rising competition from Spain's Telefonica SA (TEF) and Mexico's Telefonos de Mexico SA (TMX), which entered the Bogota market over the past three years and quickly gained significant market shares.

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

Bogota's city council holds 88.4% of the company while minority shareholders have the remaining 11.6%, according to the company's Web site.

-By Inti Landauro, Dow Jones Newswires; 57-1-610 70 44 Ext. 1131; colombia@dowjones.com