Wednesday July 2 2:52 PM EDT
Brazil telecom selloff begins with cellular deal
By William Schomberg
BRASILIA, July 2 (Reuter) - Brazil's plan to privatize its huge telecommunications industry effectively began Wednesday when a Brazilian-Canadian consortium signed a first regional contract to provide cellular services.
Officials from the Americel group, including BCE Inc's (BCE.TO) Bell Canada and Telesystem International Wireless Inc (TIW.M), said they expected to begin services in a big area of Brazil's centerwest, including capital Brasilia, by November.
``The reason we're here is because Brazil has great potential. It is seen as the largest market available for competition in the telecommunications market,'' said Telesystem vice president Robert Menard.
Americel, which also includes several Brazilian pension funds and Citicorp (CCI), was the sole bidder for the B Band concession in the huge but largey uninhabited region stretching from the Amazon to the central state of Goias.
The group paid $330 million for the 20-year concession. The government's asking fee was $262 million.
Americel officials said they expected to break even on their investment within four or five years.
Americel plans to undercut tariffs charged by subsidiaries of federally owned monopoly Telebras (TEL_P.SA) (TEL.SA)(TBR - news) subsidiaries by about 25 percent. Already Telebras has said it will review its tariffs to compete with its new rivals.
The Communications Ministry is currently judging bids from a host of international and Brazilian groups seeking to provide cellular services on a private sector-only B Band frequency in nine other regions of the country.
Communications Minister Sergio Motta said he expected to open next week bids from companies seeking to win concessions in the lucrative Sao Paulo city area, Brazil's biggest market, and another region encompassing the states of Bahia and Sergipe.
``I think the proposals will be indecent in their value,'' Motta told official gathered at Wednesday's signing ceremony.
The process may yet be held up, however, because several groups have appealed against their disqualification on technical grounds from the bidding procedure.
Brazil expects to raise at least $5.0 billion by selling B Band concessions and a further $10 billion is likely to be invested in equipment by the concession-holders. The government also plans to sell Telebras' A Band cellular operations.
Other concessions to run paging, trunking and satellite services are in the pipeline and the privatization of the Telebras system itself is scheduled to begin next year. Total receipts from Brazil's telecommunications selloff should reach about $40 billion within three years, officials say.
A bill which would provide the legal framework for privatization of the Telebras system is currently in Brazil's Senate. It is likely to be approved later this month.
The bill would not restrict the participation of foreign capital in the sale of Telebras but would allow Brazil's president to set limits on a case-by-case basis. |
