RESEARCH ALERT - Three Brazilian telecoms started
SAO PAULO, May 11 (Reuters) - Merrill Lynch & Co said on Monday it began coverage of Brazilian telecommunications firms Telerj <TER.SA> and Cia Riograndense de Telecomunicacoes (CRT) <1CRT.SO> with buy ratings.
The brokerage also said in a report that it started coverage of Brazil's Telemig <TMG.SA> with a neutral rating.
Analyst Ricardo Gurman said CRT is Brazil's fastest growing telecom and Telerj, a unit of the federal Telebras <TBR.N> <TEL-p.SA>, stands to benefit most from the federal holding's privatization.
"We believe that Telerj will benefit more than any other company from privatization," he wrote. Telebras is slated to be broken up and sold off starting July 15.
Gurman also said Telemig was Telebras' best-run subsidiary and, thus, offered little room for efficiency improvement.
"Despite smaller waiting lists compared to other Brazilian telcoms, phone penetration is still low and there is lots of room for expansion," he added.
The analyst said CRT's shares are to be split 2-for-1 ahead of the company's upcoming privatization, representing CRT Wireline and CRT Cellular.
"We estimate a post spin-off public market value of the combined entities at 132 reais per preferred share, or a 21 percent upside," he wrote.
Telerj offers "excellent" turnaround opportunities due to the size and wealth of its market, which encompasses Rio de Janeiro state, he said. The stock offers "substantial room for quality and penetration improvements. Competition is the biggest risk," he said.
Meanwhile, Telemig's shares also are to be split 2-for-1 in mid-May and the post-split combined market value should reach 195 reais per preferred share, or a 12 percent potential upside, Gurman said.
13:04 05-11-98
Telemig preferred B share was off 2.36 percent at 165 reais, Telerj preferred was down 4.79 percent at 188.51 reais in Sao Paulo and CRT preferred A <1CRT-pa.SO> was off 0.95 reais at 149 reais.
13:28 05-11-98
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