Schymura denies Anatel audit of Embratel

Sources both inside and outside Anatel indicate that the regulator recently began an audit of Embratel, but Luiz Guilherme Schymura, director-general of Anatel, rebuts the reports. Embratel?s management also says no official audit is under way. ?Anatel is not, repeat not, conducting an audit of Embratel?s operations,? stresses Purificación Carpinteyro, vice president for external affairs. Two weeks ago, a member of Anatel?s board informally admitted that the decision to begin an audit had been taken. According to our sources an audit is indeed under way. It?s being conducted by Ernst & Young, which regularly works under contract for Anatel on routine verification missions. Observers tell us that Anatel took the decision with the aim of preempting loss of financial control and operational control by Embratel following the collapse of WorldCom, its parent. An attempt to sell Embratel would potentially lead to a regulatory impasse. When Embratel was privatized in 1998, WorldCom signed an agreement undertaking not to transfer control for five years in accordance with the law. The audit, if there is one, is also presumably geared to detecting any deterioration in financial health and quality of service. There is also a concern with spending controls at a time of crisis.

Saving face

An important aspect of the decision relates to how it was put into effect. According to more than one source close to the affair, Luiz Guilherme Schymura, director-general of Anatel, initially agreed to a face-saving proposal from Embratel CEO Jorge Rodriguez and VP Purificación Carpinteyro whereby the carrier would ask Anatel to conduct an audit in order to prove it has nothing to hide. Mr Schymura accepted the idea in principle, say the sources, but the rest of Anatel?s board turned it down and forced a resumption of the original approach. On this point the same board member mentioned above as confirming the audit decision is somewhat evasive. ?Our director-general was a little ingenuous in the initial stages but we?ve moved on since then,? he says. Asked about these reports at a news conference Wednesday, September 11, Mr Schymura said: "None of the reports is true. Anatel is constantly monitoring all the telcos and in particular the incumbents. It?s our obligation to do so. The incumbents are granted a concession under which their assets are public property, so the public interest is always in jeopardy. As regulators it?s our job to monitor and audit. We?re not interested in whether a telco is profitable. We?re concerned about the assets that belong to the Union. When the WorldCom affair blew up we already had consultants retained and ready to go into Embratel on a routine inspection. We told them to inspect Telemar first to avoid an overt connection with the WorldCom scandal. These reports in the press are old hat. None of this matters any more.?

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