NATIONAL COMPANY OF TELECOMMUNICATIONS

Decree 731/89

Regulations to which privatization will be adjusted.

Bs. As. 12/9/89

VISTO is prescribed in Act No. 23.696 and,

CONSIDERING:

It is necessary to dictate the regulations to which the privatization of ENTel will be adjusted, expressly provided in Annex I to the aforementioned Law.

That the potential growth of telecommunications services requires the adjustment of the laws and regulations aimed at channeling their provision and adapting them to the decision taken by the NATIONAL LEGISLATIVE PODER, which is why it is necessary to exclude certain provisions of Decree-Law No. 19 798/72, in use of the powers granted to the NATIONAL EXECUTIVE PODER under article 10 of Act No. 23,696.

That the National Government aims to demonopolize and deregulate the telecommunications service to make it more efficient for users.

In order to give transparency to the privatization of ENTel, this will be done through an international public contest.

That the granting of licences will involve the assumption by the licensee of certain obligations regarding the minimum quality and services to be provided.

Therefore,

THE PRESIDENT OF THE ARGENTINA NATION

RIGHT:

Article 1.- PRIVATIZATION OF ENTel. The MINISTERY OF ARTWORKS AND PUBLIC SERVICES will elevate the NATIONAL EXECUTIVE POWER for approval the General and Particular Bases and Conditions for the privatization of the NATIONAL COMPANY OF TELECOMUNICATIONS (ENTel), by 10 December 1989. The folds shall be made in accordance with the guidelines set out in this decree and shall be made for consideration by the Ministry appointed by the Intervention of ENTel by 30 November 1989.

Art. 2°- DIVISION IN THE AREAS OF TELEFONICAN RED. Privatization of the basic telephone services of the urban network will be carried out on the basis of the total or partial award of the actions of DOS (2) anonymous companies, to which they will be granted license for the provision of the basic telephone service in different regions, which will be defined in the Pliego de Bases y condiciones del Contest Público a realizar, y que compreán todo el territorio nacional. Such a Submission shall provide for the submission of tenders in respect of the actions of each of the licensee companies. Without prejudice to the preference of awarding the actions of each company in favour of a different offerer, the Form and Conditions of the Competition may authorize the award of both shareholders to the same offerer.

The definition of the concept "basic telephone service" will be included in the Competition Bases and Conditions to be made, which will also establish everything concerning the exploitation of the services that will operate the interurban and international networks and the modalities applicable to the operation of those services".

Art. 3. INCORPORATION OF PRIVATE EMPRESS OF TELEFONICAL SERVICES. The MINISTERY OF ARTWS AND PUBLIC SERVICES shall issue the necessary acts to facilitate the participation in the telephone plan approved by this decree of private companies currently providing basic telephone services.

Art. 4°- COOPERATION SOCIEDADES. Cooperative companies currently providing telephone services shall maintain their rights without prejudice to their eventual participation in the capital of the licensee to whom the region corresponding to their geographical location is adjudged.

Art. 5°- EXCLUSION OF RULES. Under article 10 of Act No. 23,696, the deregulation of the telephone service implies the exclusion of the provisions contained in articles 4, subparagraphs (a) and (b), 14, 28, 29, 37, 55, 67, 128, 130, 131, 141 and 142 of Decree-Law No. 19,798/72. This exclusion shall have effect from the date of commencement of operations by the licensee companies of the basic telephone services or the commencement of the activities of the services to be provided under the competition regime under articles 12 and 17 of this decree.

Art. 6°- BETWEEN. In order to facilitate the privatization of ENTel, the NATIONAL EXECUTIVE PODER will decide on the occasion to approve the respective and prior opinion of the MINISTERY of ECONOMY on the assumption of the liabilities of the company.

Art. 7°- LABORAL REGIME. The awarding companies shall respect the existing Collective Labour Conventions at the time of the privatization of ENTel.

Art. 8°- ADJUDICATION OF ACTIONAL SMALLS. Prior to the award of the Competition, DOS (2) anonymous companies will be constituted to which they will be granted licenses for the provision of the basic telephone service in each region and will be transferred the assets of the ENTel assets that are defined in the Bases and Conditions of the Competition as corresponding to each region. At the same time, other TOS (2) companies shall be constituted to which the assets of the ENTel corresponding to the international service shall be transferred respectively, which shall be provided in initial conditions of exclusivity and those goods corresponding to the services that shall be provided in conditions of free competition, all according to the definition contained in the Pliego of Bases and Conditions and whose actions shall belong equally to the licensing companies. The transfer values to the CUATRO (4) listed companies shall be set by the MINISTERY OF ARTS AND PUBLIC SERVICES, depending on the values of ENTel books and those established in the valuation that is made in accordance with article 19 of Law No. 23 696. The four (4) societies shall be constituted under the regime of Chapter II, Section V, Articles 163 to 307 of Law No. 19.550 (t or 1984) and its amendment, and the respective statutes, which shall be approved by the MINISTERY OF ARTS and PUBLIC SERVICES, shall limit the social object to the provision of the services permitted by the Competition Bases and Conditions. The staff currently serving in ENTel will be distributed between the CUATRO (4) mentioned companies, in accordance with their tasks and the place of performance. The shareholders referred to in article 2 of this decree shall be awarded in accordance with the procedure of public examination prescribed in article 18, paragraph (2) of Act No. 23,696.

The respective awards shall be made on a deadline of 28 June 1990.

Art. 9°- SOCIAL CAPITAL OF LICENCIATARIA. The social capital of the awarding company will be represented by shares of different categories. The operating group will retain at least CINCUENTA AND UNO BY SCIENTO (51 %) of the shares entitled to vote, having to reserve a percentage of capital up to TEN BY SCIENTO (10 %) for the employees of ENTel, who go to the awarding company, whose participation may be channelled through the Participated Property Program provided for in articles 21 and following of Law 23.696. A CINCO per CENTO (5 %) of the social capital must also be reserved for cooperatives referred to in article 4 of the present decree. The corporate status will provide adequate attention to the cooperative partner on issues that link directly to the telephone service he provides or to the area where such cooperatives are located.

The actions of the operating group shall be nominative and intransferable without the consent of the control authority, who may authorize the respective transfers to equivalent or similar private groups. The rest of the actions will be the bearer.

Art. 10 .- TEMPORAL EXCLUSIVITY OF LICENCES. The Bases and Conditions will be able to grant the awardees the first five (5) years of exclusivity to provide the basic telephone services in the awarded region.

Art. 11 .- COMPETENCE REGIME. Once the time limit of exclusivity established in favour of the licensee society has expired, the total or partial provision of the basic public telephone service in an area or area of the national territory shall be open without time limits and under the same conditions of the initial call, without prejudice to the proper updating of the original technical and economic aspects. In this case, any interested party may apply for licences for the area or territory concerned, in competition with the licensees providing services at that time. The application authority shall be issued within the maximum period of NOVENTA (90) days.

Art. 12 .- Please refer to MINISTERY OF ARTWORKS AND PUBLIC SERVICES, to call for public competition to authorize the provision of specific basic services in areas or activities where there is a clear need to improve the current provision. These public contests can be made before the call to public contest for the privatization of ENTel.

Art. 13 .- CONDITIONS OF THE EXCLUSIVITY OF BASIC SERVICES. The basic services provided in exclusivity should be open to the use of other unencumbered service providers in such exclusivity, by paying fees that will control the enforcement authority, while the said regime lasts. Companies to which they are ensured the exclusivity in the provision of certain basic services in the assigned area should make their technology compatible with the existing one, so that there is an interregional communication, without additional costs for other companies installed in other regions.

Art. 14 .- CONTABILITY SYSTEM. If enterprises that operate telecommunications services subject to the exclusivity regime, compete in any other service or make provision of materials through linked companies, they may not subsidize the result of these activities with the origin of the former, for which purpose they may not charge for such services or provision less than their actual costs.

Art. 15 .- OBLIGATIONS OF ADJUDITARY COMPANIES. Companies that operate telecommunications services within the exclusivity regime will be required to provide a minimum service plan as well as minimum quality and efficiency in the provision of such services. If they do not comply with such requirements, except for duly justified cases of force majeure, the control authority will automatically have the opening of the region or the service to the competition of other private lenders, and may choose to maintain or not the reservation of exclusivity for a new provider of the service, without prejudice to the eventual expiration of the original award.

Art. 16 .- TELLS. The Bases and Conditions will define the rate-forming method, which should be fair and sufficient to cover the costs of efficient administration and provide reasonable utility. The application authority shall be responsible for the verification of fees.

Art. 17 - The aggregate, expanded, information, data-processing, mobile telephony and any other service not considered basic in the Base and Conditions fold, as well as the provision of terminal equipment, shall be provided or provided in an open competition regime, without exclusivity or division of regions.

All new services not included in the concept of basic services shall, in principle, be governed by the competition regime by excluding the application of the rules referred to in article 10 of this decree. The exceptions to this principle shall be established, in each case, by decree of the NATIONAL EXECUTIVE PODER.

Art. 18 .- CONTRATATIONS. The Intervention of ENTel, upon authorization of the MINISTERY OF ARTWORKS and PUBLIC SERVICES, may hire the services of accounting, technical, legal and economic advisers, the services of international consultants and/or those of international financial advisers, which it considers appropriate to assist in the preparation of the international public competitive examination, through which ENTel will be privatized. In no case will these contracts mean erogation for the THIRD NATION.

Art. 19 .- PUBLIC MINISTERY FACULTIES AND SERVICES. Please refer to the MINISTERY OF ARTWORKS AND PUBLIC SERVICES to: (a) issue all regulations, administrative acts and perform all traffic regulations that are necessary for the proper implementation of this decree; (b) proceed to the pre-adjudication of the respective licenses.

The award will be made by the NATIONAL EXECUTIVE POWER

Art. 20 .- Contact the Bicameral Commission established by article 14 of Act No. 23.696.

Art. 21 .- Communicate, publish, give to the NATIONAL DIRECTION OF THE OFFICIAL REGISTRATION and archvese. MENEM - José Roberto Dromi - Eduardo Bauza -Néstor M. Rapanelli - Italo Argentino Lúder - Alberto jorge Triaca.