RIO DE JANEIRO – As MCI and Sprint waged an intense bidding showdown Wednesday over the "jewel in the Telebras telecommunications crown," military police fired bullets and tear gas at barricade-burning demonstrators protesting the government's massive telco sell-off.
Protesters yanked stones from the street to throw at police, who promptly threw them back, and witnesses said they heard shots being fired at demonstrators, several of whom lay injured and bleeding.
The protesters – students, union members, and people from Brazil's radical landless movement – vigorously oppose the sale of Telebras to foreign companies, saying the huge holding company is the property of the Brazilian people.
But global telecom giants like MCI, Sprint, France Telecom, and Telefonica of Spain think the holdings – from long distance to Internet to cellular – should belong to them.
MCI and Sprint battled over long-distance carrier Embratel. Government regulations forced the companies into live bidding after their sealed bids showed just a 5 percent difference – MCI's at US$2.13 billion, Sprint's at $2.15 billion.
After 10 minutes of intense bidding, MCI won with a $2.28 billion offer.
"MCI believes Embratel is the jewel in the Telebras telecommunications crown," said Jerry Di Martino, an MCI senior vice president.
MCI will control 51 percent of Embratel, which also provides high-speed data services, Internet services, and frame and packet-switched services.
The Embratel sale was contested before it even began. On Tuesday, a judge enjoined the government from putting the carrier on the block, responding to a lawsuit brought by independent federal attorneys who alleged irregularities in the privatization. They argued the sale of Embratel would create a private monopoly over long-distance and international calls.
However, a court on Wednesday morning halted the injunction and cleared the sell-off.
The government sold eight of the 12 companies that make up Telebras for $17.5 billion, well above the $14 billion forecasts for the entire sale.
Telesp, the phone-line company, was sold to the Telebrasil Sul consortium for $4.97 billion, 64.3 percent above its minimum price. The Telebrasil group was led by Spain's Telefonica and BBV Bank.
Tele Centro-Sul went for $1.78 billion, a 6.2 percent premium. The winning bidder was a group of investors led by Brazil's investment bank Opportunity.
Tele Norte-Leste Participacoes went for $2.95 billion, 1 percent above its minimum price. Brazilian construction group Andrade Gutierrez led the winning group.
Four cellular phone companies also sold for a total of $5.5 billion.
Analysts have predicted the Telebras sell-off could bring in more than $45 billion in new investment over the next three years and generate thousands of jobs.
But the sale did not sit well with thousands of Brazilians who started gathering outside the Rio de Janeiro stock exchange Tuesday night.
About 3,000 military police arrived in Rio this week to help control the crowd.
The sale comes two months before national elections in which President Fernando Henrique Cardoso hopes to be re-elected for a second four-year term. The Telebras sale was designed to be the high point of Cardoso's program to sell off state assets.
Reuters contributed to this report.
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