Telephone Suppliers See Bounty in Brazil After Sale
totaltele.com
By Christian Plumb at Bloomberg News
31-JUL-98
Telephone-equipment makers such as Ericsson AB,
Nokia Oyj, and Lucent Technologies Inc. are likely to be among the first to benefit from Brazil's $19 billion sale
this week of its telephone network.
While telephone companies such as Spain's Telefonica
SA paid two-thirds more than the government's asking
price, <b?they'll have to spend another $52 billion in the next
seven years to build and expand phone networks.
That means big business for the world's
telephone-equipment suppliers.
"This market is going to explode," said Verner Dittmar,
general director of telecommunications at Siemens AG's
Brazil unit.
The results of the auction could be a boon to Ericsson.
"The Europeans got a lot of (Telebras)," said David
Wheeler, an analyst with Bear Stearns & Co. in Sao
Paulo. "Those are all big clients of Ericsson." Telefonica,
Telecom Italia and Portugal Telecom SA were the
biggest bidders in the auction.
Though increasing competition from the likes of Northern
Telecom Ltd. could shrink Ericsson's market share in the
area of cellular phones, the increase in investment will
end up benefiting the company, he said.
Smaller companies could benefit too.
Miami-based Mastec Inc., which makes infrastructure for
telecommunications and has a joint venture with one of
the Brazilian
"Total telecom capex in Brazil could potentially double
within a one-year time frame from $6 billion per year to
$12 billion per year," said Morgan Stanley Dean Witter
analyst Chris Gutek.
"Mastec's joint venture is well positioned to get some of
this pending flood of construction spending." Mastec has
been best-known for its ties to its former chairman, the
late Jorge Mas Canosa, who was the leading anti-Castro
activist in the US. His son, Jorge Mas Santos, is the
company's president and chief executive officer.
Mastec's Brazilian joint venture partner Inepar SA was
part of the bidding group that acquired control of the huge
Telebras unit spanning from the beaches of Rio de
Janeiro to the rain forests of the Amazon.
The Telebras auction winners have so far given mixed
signals on their intentions on who will get their equipment
contracts. Telefonica said the same day as the Telebras
auction that it planned to use France's Alcatel SA, the
world's No. 4 telecommunications equipment maker as
its wireless equipment provider worldwide. It's unclear
who Telefonica will use to upgrade conventional phone
networks.
Telefonica bought parts of three wireless networks,
including a piece of the biggest, in Sao Paulo. Portugal
Telecom director Luis Avelar said the company's main
goal in upgrading the cellular network for Sao Paulo
state, which it acquired for $3.1 billion, will be to cut
down on the number of providers the state-controlled
Telesp Celular SA used.
"Nec will be well placed, but I cannot tell you how we will
pursue it in the future," he said.
Canada's Telesystem International Wireless Inc., which
bought control of two cellular companies, will decide
suppliers based on competitive bidding, said its
spokesman. In the past in Brazil, the company has used
Canada's Northern Telecom, but it's used a variety of
suppliers in the rest of the world.
Manufacturers of telephones and related equipment
expect sales to surge about 30% next year to about 13
billion reais, or almost double sales in 1997. The industry
also is likely to generate about 100,000 new jobs in the
next decade. Equipment makers already are scrambling
for financing and talking with the companies that bid for
Telebras, said Roberto Isnar, vice president of Abinee, an
association of electrical and telecommunications
equipment makers.
The growth should continue to fuel an already
fast-growing industry.
Over the past five years, the telecommunications
industry has grown faster than Brazil's economy.
Between 1991 and 1996, the industry grew an average
14% a year, while the economy growth averaged 2.9%.
With only 11 telephones for every 100 inhabitants, the
nation's telephone system has always hampered
companies and elevated costs. For example, companies
still pay more than 1,000 reais to buy a telephone line in
Sao Paulo, Brazil's industrial heartland.
c Total Telecom 1998. All Rights Reserved. info@totaltele.com
Paris Data Limited, a
UK-based consultancy
and software
development
organisation, offer
good practices for
defining telecoms
service level
agreements.
Telecom Italia Mobile
Names Libonati as
New Chairman
AT&T Stops Ciena
WDM Tests
Hermes Provides
Carrier 1 with Interim
Network
Telephone Suppliers
See Bounty in Brazil
After Sale
|
