Dow Jones Newswires
One Mth After Telebras Exit, Still No Brazil Benchmark
By MARGARITA PALATNIK
SAO PAULO -- One month after receipts representing former telecommunications monopoly Telebras were dropped from Brazil's leading stock index, no clear benchmark has emerged to take its place.
One early volume leader, Telecomunicacoes de Sao Paulo SA (TSP) or Telesp, will soon be swallowed up and delisted by Spanish giant Telefonica (TEF). Other local heavyweights, meanwhile, have had the look of pretenders.
"A substitute still hasn't emerged," said BBA Icatu capital markets director Persio de Souza. "Our research staff has been working on it and they don't see a clear leader. It looks like it will be a case of diversification."
For years, Telebras represented between 20% and 30% of the daily volume traded on the Sao Paulo Stock Exchange, Latin America's largest. Privatized in July 1998, Telebras was also consistently among the three most traded American Depositary Receipts on the New York Stock Exchange.
Receipts representing the 12 units it was spun off into continued to trade heavily until early May, when they were dropped from the Bovespa, as Brazil's main index is called.
Several different companies have taken turns attracting the most volume in recent weeks, but none has yet to demonstrate any staying power.
Underscoring the uncertainty, few market participants are hazarding a guess on which one - if any - will win out in the coming months.
Telesp Delisting Complicates Search, Hurts Volume
Telesp, a fixed wireline carrier in Sao Paulo state that posted BRR7.05 billion in revenue last year, would normally be a strong benchmark candidate.
But Telefonica is expected to soon complete its tender offer for all shares in Telesp that it doesn't already own and delist the Brazilian unit, snuffing out that possibility.
Although Telesp has become the de facto benchmark in the past few weeks, its volume has already started to decline as the tender offer progresses.
The Spanish telephone giant is planning to list Telefonica Brazilian Depositary Receipts, but market observers question how popular they'll prove.
A current liquidity constraint on the receipts is their tax status for pension funds willing to hold them in their portfolios. BDRs would be considered a foreign stock, and thus not qualify for a tax exemption granted to local securities.
Telefonica Internacional president Antonio Viana-Baptista said on Monday that the issue ultimately lies in the hands of the government, but that the company is intent on doing everything possible to make the BDRs non-taxable for pension funds.
Telefonica has a current market capitalization of $60 billion and hopes to become the world's fifth-largest telecom stock with a market cap of $92 billion after several transactions are completed.
That should guarantee liquidity and arbitrage opportunities, but it's also far from being a pure Brazilian play. Globe-trotting Telefonica is traded in Madrid, New York, London, Tokyo. It will trade in Sao Paulo, Lima and Buenos Aires after its swaps for Telefonica de Argentina SA (TAR), Telefonica del Peru (TDP) and Telesp are completed.
Globo Cabo, Petrobras Unsuitable; Some Telecoms Eyed
Other Bovespa benchmark aspirants are also far from being a sure thing.
Just before the Bovespa was reconfiguration a month ago, it looked like cable and Internet access provider Globo Cabo SA (GLCBY) was poised to take the lead, coinciding with its debut on the index.
Globo Cabo did clock several sessions as the most-traded stock in the days leading to the new Bovespa line-up. But volume has fallen off since then. Analysts say the company, which has incurred multi-million-dollar losses for several quarters in a row, is an unlikely choice, with net losses expected for several more quarters.
Another initial hopeful was federally-owned oil giant Petrobras (E.PTB). But it also has its own downside, with liquidity restricted by a high share price. Petrobras preferred shares were up 3.2% at BRR480 late Tuesday. Without a share split, its volume leader prospects are limited.
This week's top flavors seem to be two fixed-line carriers and the national long-distance incumbent.
Tele Norte Leste Participacoes SA (TNE), known as Telemar, offers wireline service in 16 states. Tele Centro Sul Participacoes SA (TCS), known as Brasil Telecom, covers the rest of the country excluding Sao Paulo state. Embratel Participacoes SA (EMT) is the country's leading long-distance and corporate data services company.
Although all have increased in volume traded in the past few weeks, none is expected to dominate like the old Telebras.
"It hasn't happened yet, b become the leader, although never with the weight of Telebras," predicted a broker at Sao Paulo-based Fator Doria Aterino.
-By Margarita Palatnik; Dow Jones Newswires; (5511)813-1988;
mpalatnik@aol.com |
