I was going to paraphrase this but the hell with it. Apparently TBR has been under pressure because lot of customers have been selling. The customers had the shares to sell because of a strange system whereby when someone ordered a phone, they got a phone and shares of stock. I keep learning stuff about this weird duck. From today's WSJ:
Brazil Telecom Shares Battered, But Selling May Be Over
By GERALDO SAMOR
AP-Dow Jones News Service
RIO DE JANEIRO -- Brazilian telecommunications issues are looking
attractive after a massive selloff by small investors in recent days, analysts say.
And even after recovering some ground earlier this week, the shares still hold a strong upside potential, those analysts add.
The recent selloff started when the subsidiaries of federal
telecommunications holding Telecomunicacoes Brasileiras SA, or Telebras (TBR), delivered new shares to buyers of telephone lines - a system known in Brazil as 'auto financing.
Many of those individuals and companies then rushed to accredited retail banks to sell their shares at market price, which ended up depressing prices.
'We don't know how many of the shares went to individuals and how many
of them will want to sell them, but it's certainly time to be doing something about it,' said Alexandre Gartner, sector analyst with Banco Bozano, Simonsen SA, who's been reiterating his 'buy' recommendation to investors.
Under a system the government is now phasing out, telephones in Brazil are an investment rather than a service. Up until last year, people buying telephone lines in effect became shareholders of the state operators because they received shares in those companies.
Shares corresponding to phone lines acquired last year were sent to
investors just last week. The selloff started last Wednesday.
In two days, preferred shares of Sao Paulo state operator
Telecomunicacoes de Sao Paulo SA, or Telesp (E.TSP), plunged 21%, followed by Telecomunicacoes do Rio de Janeiro SA, or Telerj, which lost 20%. Parana state's Telepar and Minas Gerais' Telemig also slid
considerably, but their trading volumes aren't significant.
Average daily trading in Telesp and Telerj was 50% higher in the past nine sessions than in the previous quarter, according to figures provided by Banco Patrimonio de Investimentos SA.
In the past two sessions, both shares rebounded strongly, in tandem with the broad market, with Telesp gaining 13% in the period.
'These shares had room for gains before the selloff, so even after the
recovery of the past two sessions, they still have room to grow,' said
Gartner, who calculates fair prices for Telesp and Telerj to be 367 reals per thousand shares and 150 reals per thousand shares, respectively. Shares of Telesp closed Tuesday at 282 reals per thousand, and Telerj at 101.43 reals per thousand.
'I think that that selling pressure, that madness of the first days is over,' said Sergio Oliveira, director of Bradesco brokerage, one of the accredited institutions selling the shares.
Take preferred shares of Telesp, for example. The company says 3.1 billion shares were given to customers this year.
Without knowing the official figures, Oliveira estimates that about half of the shares were sold between Wednesday and Monday.
'The remaining shares are with people who will probably wait longer before they sell them, people who are not hung up on debt,' Oliveira said.
'There's still some selling ahead, though not in the volumes we've seen, maybe half that,' said the director of another brokerage handling small-investor orders. 'There was a peak, and now (the sale volume) is decreasing, but it's still going to take some time before we go back to the previous levels.'
In previous years, small-investors' sales didn't have much of an impact on the market, but two things have changed since.
First, operators never sold so many telephone lines. Last year alone, Telerj sold 446,000 lines in the so-called 'expansion programs,' compared to 90,995 lines in 1995. Second, the price of telecommunications issues is sharply higher than in previous years.
While investors can surely find bargains now, they should consider swapping shares of state operators for shares of Telebras in the medium- and long-term, said Oliver Mizne, sector analyst with Banco de Investimentos Garantia SA, one of Brazil's leading investment banks.
Within the next six months, the government is expected to create an
access-charge system that will reduce the profit of the state operators while boosting the bottom line of Embratel, the federal long-distance company that is wholly-owned by Telebras, Mizne said.
Under the system now in place, when a Sao Paulo caller dials a Rio de
Janeiro phone number, two-thirds of the revenue generated by that call go to Telesp and one-third goes to Embratel, while Telerj isn't paid for the use of its local network.
The effect of the new system on the individual state operators will depend on their individual traffic volumes and usage pattern, but it's likely to increase Embratel's share of the pie, Mizne said. |
