Portugal Telecom To Sell Assets To Pay For Big Brazilian Purchases
Dow Jones Online News, Tuesday, August 04, 1998 at 11:38
LISBON -(Dow Jones)- Portugal Telecom SA, considered one of the big
winners in last week's auction of Brazil's state-owned
telecommunications company, said it will have to accelerate the sale of
some assets to raise cash to support its Brazilian investments.
Chief Executive Francisco Murteira Nabo Tuesday said the company is
preparing to sell some 25% to 30% of PT's (PT) television operator TV
Cabo later this year or in early 1999. The company also is considering,
along with its partner Telefonica SA (TEF) of Spain, selling part of its
stake in Cia. Riograndense Telecomunicacoes, another Brazilian company
purchased in June.
PT last month successfully bid $3.1 billion for Brazilian cellular
operator Telesp Cellular. Analysts said PT's involvement in the massive
privatization of Telecomunicacoes Brasileiras, or Telebras, of which
Telesp was a part, gives it a solid platform for future growth in Latin
America. PT also has partnered with Telefonica, which won the fixed-line
Telesp unit of Telebras, and with MCI Communications Corp., which took
long-distance operator Embratel.
But Nabo stressed the company isn't planning to change its dividend
payout policy or raise capital through a rights issue to help pay for
the purchase of Telesp Cellular.
"We are a company with low debt in comparison with other
telecommunications companies," Nabo said. "We are seeking sustainable
financial solutions to financing the Telesp purchase and our other
acquisitions in Brazil."
However, he said, acquisitions would cause a short-term drag on PT's
profitability, but stressed the Portuguese company had "bought its
future" by investing so heavily in Brazil. Indeed, PT coughed up a hefty
226% premium for one of the biggest prizes of the auction.
The company said it hopes to spread the charges of the acquisition
out over 30 years.
Nabo said the goal is to "rapidly transform Telesp," improving
service and reducing the long waiting list for cellular phones.
Brazilians wanting a phone now wait an average of a year and a half.
Nabo said PT plans to invest $1.2 billion over the next two years to
achieve its targets.
Brazil has enormous potential. Just one in 10 Brazilians has a phone
line, compared with over six in 10 in the U.S. Demand is so pent-up that
some 4.5 million people are waiting for a cellular phone in the state of
Sao Paulo alone. Those who have them spend twice as much yakking away
each month as Americans.
"This is a challenge that will completely change PT," Nabo said. "We
have a new focus, even though our priority remains domestic, because our
international operations will have enormous weight."
At the same time, PT's CEO said the company would curb its
investments in other markets. Its recent joint venture with Telefonica
to operate in markets outside the Spanish- and Portuguese-speaking
regions would now focus mainly on management, adding combined know-how
to the Brazilian and other Latin American operations.
PT will take over active management of Telesp Cellular as of Aug. 10
under the direction of newly appointed CEO Romao Mateus, Nabo said.
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