re: CDMA in Brazil
>> Portugal Telecom Goes Global In Brazil
Mark Holmes
LONDON
CT Wireless
Portugal Telecom's Brazilian mobile subsidiary, Telesp Celular Participacoes, hasconsolidated its position in the Brazilian cellular market by acquiring a 49 percent stake in Brazilian competitor Global Telecom in a cash and debt deal worth more than $1.2 billion.
The deal enhances Portugal Telecom's position in the high-growth Brazilian market by extending Telesp Celular's network from the Sao Paulo area to neighboring states of Parana and Santa Catarina. Telesp Celular will have close to 5 million subscribers on a CDMA network reaching 51 million POPs.
Portugal Telecom has acquired 100 percent of holding shares, as well as 49 percent of the voting rights. The operator also has an agreement to secure majority voting rights in the near future.
"We have always said that we want to increase our footprint further in Brazil, so this was a very good opportunity for us to do so," Pedro Dias, head of investor relations at Portugal Telecom, told Wireless Today. "We thought it was a very good fit with our existing operations in Sao Paulo."
It's a great deal for Portugal Telecom, said Luis Prota, a telecom equity analyst at Morgan Stanley Dean Witter. "[Telesp Celular and Global Telecom] use the same frequency, the same technology, so they can leverage their marketing expertise as well as new services and products," Prota said.
"It was made at quite a decent price," he added. "If the company is right with its forecasts for subscribers in 2001, the valuation could be $1,300 per subscriber, which is very close to the price Vodafone [VOD] (more) paid for Iusacell last week. I think, from a strategic point of view, it makes a lot of sense."
Not only is acquiring Global Telecom a key step in Portugal Telecom's plan to put together a nationwide wireless footprint in Brazil, the move should impress investors, Prota said.
"Telesp Celular and Portugal Telecom ... are becoming consolidators in the Brazilian cellular sector," he said. "Right now, they have about 45 percent coverage of the national [population] with the coverage in Sao Paulo and the Global Telecom region. I think gaining coverage of 70 to 80 percent coverage of the national [population] could be a good target for them."
Global Telecom had more than 460,000 subscribers for about 25 percent market share in Parana and Santa Catarina, which include 15 million POPs and are among the wealthiest markets in Brazil. Overall wireless penetration in the two states is only 13 percent.
Portugal Telecom has focused its international strategy on Brazil, long seen as one of the most attractive markets in Latin America due to huge pent-up demand for telecom services. Portugal Telecom owns Brazilian assets that include the Zip.net Web portals, and it recently acquired the data networks of Banco Bradesco and Unibanco.
"In terms of international expansion, we are very focused on Brazil because it is such a huge country and there is a lot of potential there," Dias said. "The challenges are now to integrate all the operations. There are a number of synergies between TCP and Global. We are going to explore them together in terms of revenues and how to gain a high market share in these states. We are also going to look at other acquisition opportunities."
Telesp Celular, one of the largest mobile players in Latin America with plans to gain Brazilian PCS licenses when the country auctions those properties this year, is beginning to see its subscriber base move from contract to prepaid. It has launched wireless application protocol services in Sao Paulo and has sold more than 300,000 WAP-enabled phones.
The Bottom Line
If Brazil has so much pent-up demand for telecom services, why is wireless penetration only 13 percent in the two states in which Telesp Celular plans to expand? A larger footprint is key to growing networks, but Telesp also needs to look at offering services or features that will attract more customers. <<
- Eric - |
