Analysts/ Vesper mobile telephony debut good move
November 6, 2002 12:00am
Business News Americas
BNamericas.com via NewsEdge Corporation : Brazilian fixed line operator Vesper's announcement on October 30 that it plans to enter the mobile telephony business is welcome news as the company has performed poorly in its core business and can leverage its existing Wireless Local Loop (WLL) network, local analysts told BNamericas.
Vesper CEO Luiz Kaufmann was quoted as saying last week that his company would bid for Band-D and -E PCS licenses in a government-sponsored auction on November 19. Vesper has yet to decide whether to buy the licenses alone or in a consortium.
Vesper and fellow new entrant Global Village Telecom (GVT) have been unable to boost market share in the respective operating areas above 5% since they were licensed in 1999 to compete with incumbent fixed line operators Telemar, Telesp, and Brasil Telecom.
Mobile telephony would give Vesper a new revenue stream, although the US$330mn the company plans to invest in its network is high, Bear Stearns analyst Alex Constantini told BNamericas.
A mobile license would also allow Vesper to offer its cordless phone product without restraints, and put an end to accusations by competitors that its fixed wireless service allows clients to use their cordless phones beyond the 4km range of a cellular tower.
Telecoms regulator Anatel allowed Vesper to launch the service on the understanding the handsets would operate only within a single cell site. Following competitor complaints, Anatel forced Vesper to take the product off the market. Vesper has since relaunched the product with a more limited radius, but says sales are low.
Vesper could also benefit from a new cutting edge image by being Brazil's first 3G services provider, using the CDMA 2000 1xEV-DO technology of controlling shareholder and mobile solutions provider Qualcomm (Nasdaq: QCOM), according to Constantini.
Qualcomm boosted its stake in the company to 74% last year after fellow shareholders VeloCom and Bell Canada International backed out.
However, according to BES Securities analyst Carolina Gava, cellular operator Telesp Celular's 2.5G services more than meet existing demand for advanced mobile services. Telesp Celular is Brazil's only mobile operator to offer 2.5G services to date.
Vesper could be positioning itself as an acquisition target, Constantini said, with the joint venture involving the Brazilian mobile assets of Spain's Telefonica Moviles (NYSE: TEM) and Portugal Telecom (NYSE: PT) in mind.
"Qualcomm has been looking for a strategic partner for Vesper, and will sell a stake if given the chance," he said.
Gava disagrees, saying the Telefonica/PT venture would benefit more from snapping up mobile operator Telemig Celular in Minas Gerais state, which would fill a major gap in their current footprint. Vesper would serve a similar purpose, but Telemig is already fully operational, she said.
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