Ecuador Reaches Deal To Extend Telefonica Contract4-4-08 5:35 PM EDT
(Updates with comments by telecommunications secretary, Movistar)

QUITO -(Dow Jones)- Ecuador's national telecommunications agency said Friday it had reached an agreement to extend the concession held by the local mobile telephone unit of Spain's Telefonica SA (TEF) for 15 years.
Telefonica operates in Ecuador under the Movistar brand. Its contract was set to expire in November.
"It is an important advance in the negotiations, although there are still some minor aspects in the contract terms that we have to polish before ending the process," Jaime Guerrero, the nation's telecommunications secretary, said.
He said the final decision will be made by the National Telecommunications Council, or Conatel, which will receive a report from the secretary's office next week.
If Conatel approves the agreement, a new contract will be signed, which will include new services like modern video and data transmission.
Guerrero didn't disclose the concession amount, but he said the company will make an initial payment at the end of this year and progressive payments through the 15 years, based on the firm's annual income.
Jose Luis Diaz, president of Movistar, said Friday in a statement released by regulator Senatel that the company is "very satisfied to offer its services to Ecuador with a new concession."
Senatel had earlier said it wanted a reduction in calling rates as one of the requirements for extending the company's concession.
Movistar and competitor Porta Celular were reportedly set to pay around $700 million to extend their concessions in Ecuador, but the government didn't release the amounts for each company.
Porta Celular, a unit of Mexico's America Movil (AMX), was given a similar model contract that also contained a proposal for a rate decrease.
Guerrero told Dow Jones Newswires in an interview that "Porta's proposal didn't fulfill the government's expectations."
On Feb. 18, Senatel gave Porta Celular the new contract model to extend its concession. The new contract model was sent to Movistar on March 5.
Guerrero added he wants to finish negotiations with Porta Celular next week.
Guerrero and other government officials had said that if the companies didn't accept the new contracts, then Senatel would begin a process to revert the concession to the state, and after this, the government will international call for bids to award the concessions again.
Porta has just over 7.01 million customers, while Movistar has 2.6 million and state-owned Alegro 471,576 clients.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@ dowjones.com