FOCUS-Brazil lands hefty sum in 8th cellular bid
Reuters Story - April 07, 1998 13:19
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By James Craig
SAO PAULO, April 7 (Reuters) - Brazil raked in a hefty 929
million reais ($822 million) Tuesday, selling its eighth B Band
cellular license in 10 months to a group including Japan's DDI
Corp. and U.S.-based Motorola Inc. .
"It was definitely surprising. We didn't expect the price
would be that high," said Marcelo Mollica, a telecom analyst
for local bank Banco Icatu.
Global Telecom, which also includes Brazil's Suzano
and Inepar and Japan's Nissho Iwai Corp.
, bid 773.9 million reais, 135 percent more than the
330 million-real minimum price and well above market estimates
of a 40 percent premium. But the offer must be increased
automatically by 20 percent to account for inflation under
tender rules drafted when the B Band sale process began more
than a year ago.
The group's purchase of the Area No. 5 license for Parana
and Santa Catarina states boosts to more than 8.0 billion reais
the amount the government has raised in its B Band selloff and
leaves Brasilia with just two concessions to grant.
The B Band selloff is part of Brazil's ambitious program to
privatize its massive telecommunications sector, including
federal giant Telebras .
Heitor Vita, head of Global Telecom partner Inepar, said
the group plans to invest an additional $500 million in the
next five years to install a new digital cellular network in
the prosperous southern states.
"Consortium technicians have estimated 550,000 lines will
be needed to satisfy the market," he said. "In the first year
we should have installed 180,000 lines."
The number of lines installed should jump to 300,000 in the
second year, officials said. The group should be up and running
in 11 months.
Analysts said Global Telecom's offer, which topped bids by
the Telet, GFTT and Brascom consortia, was strong when compared
with winning bids for recent B Band licenses.
"The price was $49 per person (in the concession area)
versus $27 per person in Minas," said one analyst, referring to
last Friday's opening of bids for area No 4, covering Minas
Gerais state.
Global Telecom bid aggressively because Parana and Santa
Catarina are two of the wealthiest states in Brazil, making
them attractive areas in which to operate cellular services,
analysts added.
The group's win Tuesday also leaves little doubt who will
walk away next Tuesday with the Area No. 6 license covering
Brazil's southern-most state of Rio Grande do Sul.
Global Telecom and the Telet group, including BCE Inc's
Bell Canada, were the only consortia that renewed bids
for the concession. But according to tender rules Global
Telecom's offer must be tossed out because it has won area 5.
"Area 6 also was decided today and it looks like it will go
to Telet," said Icatu's Mollica.
Telet also includes pension funds owned by Banco do Brasil
and Brazilian bank Opportunity.
It operates in area No. 7 under the name Americel. Under B
Band rules, a group cannot operate more than one concession in
wealthy areas 1-6. Areas 7-10 are considered poor, rural
concessions.
Meanwhile, the government is preparing a new set of bid
specifications for area No. 8, covering Brazil's vast Amazon
region.
Area 8 failed to draw bids in two previous tenders and
officials are now considering incentives a a possible lowering
of the 200 million-real minimum price.
In its statement, Global Telecom partner Nissho Iwai's
Naoyoshi Abe said a total 1.5 billion reais will be invested to
pay for the license as well as to pay for radio base stations,
communications centrals, training and other costs.
Analysts said the group is like to use in area 5 code
division multiple access (CDMA) cellular technology supplied by
partner Motorola, one of the world's largest telecoms equipment
makers. |
