Peru says to renew Telefonica's license despite tax row

LIMA Mon Jan 21, 2013 6:01pm EST

LIMA Jan 21 (Reuters) - Peru's government on Monday said it will renew Spanish firm Telefonica's operating license for 18 years despite an ongoing row over unpaid taxes.

Telefonica's 20-year contract to operate in the Andean country expired in May 2011 and the company, the dominant telecom in Peru, had asked for its renewal.

The decision comes at the same time as the company is embroiled in a tax dispute with President Ollanta Humala's government.

Peru's tax agency says the company owes at least $850 million in taxes and accumulated interest from 2000 and 2001. The tax dispute hinges on whether Telefonica made investments that can be used to offset tax liabilities.

The communications minister had previously said the dispute would not be a factor in deciding on the renewal of Telefonica's license.

Telefonica, which bought companies in most Latin American countries in privatization auctions in the 1990s, has been in Peru since 1994.

Currently, Telefonica's cell phone unit has 61 percent of Peru's mobile phone market of about 33 million lines, according to Osiptel, Peru's telecoms regulator.

It is also the dominant firm in Peru's fixed-line phone sector.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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