Fortune. Telebras Pieces Fetch High Prices [$154 Merrill target]
pathfinder.com
Update
Edward A. Robinson
The Brazilian government was the big winner
when Telebras, the country's telephone company,
was privatized and split into 12 new companies at
the end of July. Bidders like MCI and Spain's
Telefonica paid $19 billion for the "Baby Bras"--an
enormous 64% premium over the government's
asking price. "It was a tremendous success,"
says William Beavington, an analyst with Paribas.
(The Telebras ADR, TBR, which trades on the
NYSE, will be retired after the Baby Bras' own
ADRs are listed this month.)
Yet, given the recent whipsawing in the world's
equity markets, investors appear to be in for some
uneasy moments before they reap returns from the
split. TBR rose $11, to close at $124 the day after
the auction. But in the wake of the recent selloff
on Wall Street, it plummeted to $96 as fortune
went to press. "All the Latin telcos are getting
beat up," says Ray Liguori, an analyst at Merrill
Lynch. He expects the aggregate stock price of
the Telebras pieces to rise to $154 in 12 months.
Still, analysts remain bullish in the long term
because of tremendous pent-up demand for phone
service. Spain's Telefonica, which snatched up the
most promising piece, Telesp Participacoes, the
local phone company in Sao Paulo, stands to
profit most. It already owns a string of telcos in
Chile and Argentina. And in conjunction with
foreign partners, it's expected to offer voice and
data-service bundles to multinational business
customers.
Issue date: September 7, 1998 |
