UPDATE 1-EU concerned by Bolivia plans for Telecom Italia

Wed Apr 11, 2007 7:24pm EDT

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(Updates with start of talks in Bolivia between Telecom Italia and local government)

BRUSSELS, April 11 (Reuters) - The European Commission expressed concern on Wednesday about the Bolivian government's plans to take over that country's unit of Telecom Italia (TLIT.MI).

"The Commission is following this development with a lot of concern. We are monitoring the situation very carefully," said Martin Selmayr, a spokesman for European Telecoms Commissioner Viviane Reding said.

He expressed concern that the Bolivian government's plans would "put Telecom Italia's investment at risk."

Bolivia's leftist government issued a decree on April 2 setting a 30-day deadline to negotiate a return to state hands of Telecom Italia-controlled Entel, Bolivia's largest telecoms company, which was privatised in the mid-1990s.

The company made a net profit of $188 million in 2006.

A commission of three ministers and two vice-ministers was charged with leading talks to return Entel to state control.

The first formal talks between Telecom Italia and Bolivian government officials took place on Wednesday in Bolivia's administrative capital, La Paz. Presidential Minister Juan Ramon Quintana told reporters the meeting was "cordial, pleasant and polite," but gave no further details.

Bolivia has already taken similar nationalisation steps in other sectors of the economy.

Swiss-based commodities trading firm Glencore International is fighting against nationalisation of its Vinto tin smelter by the Bolivian government. Bolivia nationalised the operations of Spanish oil company Repsol last year.

Bolivia's tax office this month said Entel owes some $25 million to the impoverished South American country.

Entel controls 80 percent of Bolivia's long-distance calls market and nearly 70 percent of its mobile phone market.

In late January, a government minister said Telecom Italia was seeking $170 million for its 50 percent stake in Entel. (Additional reporting by Eduardo Garcia in La Paz)