Telefonica Restored

Favorite target of General Franco's Rebel gunners in the Spanish civil war was Telefonica, International Telephone & Telegraph Corp.'s 17-story skyscraper, tallest building in Madrid. Bruised but unbowed by some 186 shells which struck it during the two-and-a-half-year siege, the big steel and reinforced concrete structure served as a home for I. T. & T.'s skeleton staff and their families, occasionally as a bomb shelter for harassed Loyalists. Even heavy bombardments failed to faze its automatic dial system.

At war's end I. T. & T. spent $220,000 to repair Telefonica and got ready to resume operations over Spain's 346,000-telephone circuit. But Dictator Franco had other ideas. Paying lip service to eventual restoration of foreign property rights, he kept the system and its 8,000 employes under Government management, quibbled with I. T. & T. over rehiring some of its 20 American executives. I. T. & T., with a $67,372,241 investment (nearly one-seventh of its total assets) in the Spanish subsidiary, was troubled. Fortnight ago Franco put an end to the utility's anxiety by returning the management of its properties. Condition: that certain of the former executives (presumably pro-Loyalist) would go to I. T. & T. branches in other countries.

Since its founding in 1920, I. T. & T. has installed nearly 1,000,000 telephones in ten foreign countries. But wars and currency fluctuations have kept it in hot water most of the time. In 1937 the company netted $10,236,000. Last year's net was down to $4.894.000. Reason: I. T. & T. took a $1,537,000 loss on foreign exchange, got nothing at all from its German, Polish. Spanish subsidiaries. Not since 1935, when the Spanish companies earned $3,234,000, have I. T. & T. stockholders made a penny from Spain. And Franco insists on keeping Spanish pesetas at home.

The dickering with Franco that led to last fortnight's settlement was done by lanky Sosthenes Behn. I. T. & T.'s closemouthed, much-traveling president, who lived under fire in Telefonica during part of the Spanish war. Three weeks ago Internationalist Behn saw another hole blasted in his war-scarred income account when the Nazis took over a big I. T. & T. manufacturing plant , in Antwerp, which had exported telephone equipment to Latin America and other I. T. & T. customers abroad. But having made peace with Franco, Phoneman Benn planned to transfer some of the Antwerp business to his Spanish manufacturing plant, which he will expand. On export sales, Franco might be induced to let I. T. & T. keep part of its foreign exchange, show Spanish profits again for U. S. stockholders. For Spain, weak on exportable products such as Behn's plant can give ner, needs foreign credits to buy the goods she lacks. Token of her need, reputedly desperate, arrived in New York last week: first Spanish gold ($1,500,000 worth) to be shipped to the New World in 19 years.

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