From The Hartford Courant Editorial Page
July 6,1997 _1998 The Hartford Courant

Puerto Rico's Phone War

This editorial ran in the Courant July 6, 1998
If you've bought into the hype, you probably think the revolution over the future political status of Puerto Rico begins at midnight on Tuesday. That's when tens of thousands of workers promise to walk off their jobs to protest the pending sale of the government-owned telephone company to a consortium headed by Stamford-based GTE Corp.
A strike of that magnitude could bring the island to a standstill. Some polls indicate that more than 65 percent of Puerto Ricans oppose the sale. Many opponents of the sale contend that the telephone company is a sacred cash cow. La Telefonica employs about 8,000 people, one-third more than other similarly sized American companies.
But the company is technologically up-to- date and probably could operate efficiently with fewer than 8,000 employees. Although it still charges 10 cents a call on pay phones, La Telefonica makes a profit from the monopoly it has on intraisland calls.

The profits help hold the line on taxes and fund education. Gov. Pedro J. Rossello's political opponents claim the deal is part of his strategy to push the island into statehood by selling anything that differentiates Puerto Rico from the mainland. He already has privatized the government shipping company, hospitals and other facilities.

The governor characterizes his opposition as fringe groups. Sabotage, including bombings, has cut service to about 345,000 telephone users.

Police officers clubbing protesters to the ground, a la Rodney King, have been seen on the nightly news.

In Hartford, a labor group has demonstrated in front of Puerto Rico's government offices on Pearl Street.

Turning the issue into a confrontation over the island's status polarizes Puerto Ricans without getting at the underlying truth. Under the terms of the agreement, the GTE consortium would acquire a 50 percent-plus-one- share controlling interest in La Telefonica for $1.87 billion. But the money is to be paid from future telephone company profits. The GTE group would make a $375 million downpayment, but would get $350 million in accounts receivable.

In effect, the consortium will acquire majority interest for an upfront payment of only $25 million - a little more than 1 percent of the asking price.

The GTE group has agreed to honor existing labor contracts until they expire next year. After that, there are no job guarantees. The real issue then is whether GTE is getting a sweetheart deal.

Critics say Mr. Rossello could have negotiated better terms. Spain's Telefonica Internacional has made a counterproposal that includes more money and job cutbacks only through buyouts and attrition. Under Puerto Rican law, the government must consider rival proposals until the Federal Communications Commission signs off on the deal.
The governor, a man who brooks no nonsense, says he's not going to renege on the GTE deal. He has adopted a take-it-or-leave-it attitude toward the unions.

That's wrong. If there is an opportunity for a better agreement, he owes it to his 3.5 million constituents to secure it.

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