(Associated Press via NewsEdge) Shares of Venezuela's CANTV and major stockholder Verizon Communications fell after Venezuela's largest telecom reported stunning 2006 profits, suggesting a nationalization deal with the government may have been undervalued.
Compania Anonima Nacional Telefonos de Venezuela CA, or CANTV, reported that net profits rose 427% to $526 million last year, up from $100 million in 2005.
The company cited strong growth especially in its broadband and cellular services.
The results follow a preliminary agreement struck by President Hugo Chavez's government to buy out Verizon's 28.5% stake in CANTV on Monday for $572 million, the first step toward bringing CANTV under state control.
CANTV's American Depository Receipts closed down $0.40, or 2.29%, at $17.05 on the New York Stock Exchange.
Verizon shares fell $0.23, or 0.60%, to $38.40.
Under the deal, the government agreed to pay Verizon $17.85 per CANTV ADR. It also agreed to issue a public offer within 45 days to acquire all remaining CANTV shares from other stockholders at that price.
Luis Gustavo Richard, an analyst with brokerage InterAcciones Casa de Bolsa CA, explained that while that purchase price had appeared a little low at first glance, investors had expected CANTV dividend payments to raise the final sale price by about $3 a share, which would have valued the company more or less at market expectations.
But CANTV instead said that the government's final purchase price could end up lower than $17.85. According to details of the deal, any new dividend payments subsequently announced by CANTV will be subtracted from the purchase price.
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