The government of Colombia is hindering Telefonica SA (TEF) from pursuing expansion in the country said the company's Latin American executive. The Republic of Colombia is a co-investor of Telefonica.

With plans to increase their processes in the Andes, Telefonica requires additional funds to purchase licenses for radio-frequencies to be developed for long-distance communication services. The company also needs the money to shed off some of its liabilities, said Santiago Fernandez Valbuena, Chairman and Chief Executive Officer of Telefonica.

The plan of Telefonica to raise funds through offering rights of the local unit is being kept at bay by the local government. Colombia refuses to dilute 30 percent of the stake it owns, Valbuena said.

During an interview in Sao Paolo, Valbuena said that "more capital is something that this (Telefonica) company needs or else it won't be able to compete. We have not even decided which way to go. It depends crucially on what the government wants to accept as a process, and that's difficult."

Telefonica's biggest competitor is America Movil SAB, owned by billionaire Carlos Slim.