Brazil Telebras Spinoff ADRs To List On NYSE On Nov. 16
Dow Jones Newswires
NEW YORK -- American depositary receipts of companies spun off from
Brazil's Telecomunicacoes Brasileiras SA (TBR, TBH), or Telebras, will start
trading on the New York Stock Exchange on Nov. 16, the company said
Thursday.
The date of record for the distribution of spinoff ADRs to holders of Telebras
ADRs will be Nov. 13.
The company didn't provide the price at which fractional holdings - above or
below the multiple of 300 - will be cashed out by the Bank of New York, the
depositary agent of Telebras.
Following are the names of the companies, their ticker symbols and number of
new ADRs per 300 of Telebras:
Embratel Participacoes SA (EMT), 300 new ADRs
Telesp Participacoes SA (TSP), 300 new ADRs
Telesp Celular Participacoes SA (TCP), 120 new ADRs
Telemig Celular Participacoes SA (TBM), 15 new ADRs
Tele Leste Celular Participacoes SA (TBE), 60 new ADRs
Tele Norte Leste Participacoes SA (TNE), 300 new ADRs
Tele Centro Sul Participacoes SA (TCS), 60 new ADRs
Tele Celular Sul Participacoes SA (TSU), 30 new ADRs
Tele Sudeste Celular Participacoes SA (TSD), 300 new ADRs
Tele Centro Oeste Celular Participacoes SA (TRO),
100 new ADRs
Tele Nordeste Celular Participacoes SA (TNT), 15 new ADRs
Tele Norte Celular Participacoes SA (TCN), 6 new ADRs
Telesp Participacoes, Tele Norte Leste Participacoes and Tele Centro Sul
Participacoes are fixed-wireline companies.
Embratel is the national long-distance carrier.
The remaining eight firms are cellular providers.
Although the ADRs haven't yet traded in New York, analysts have followed
the performance of the underlying companies, listed in Sao Paulo on Sept. 21.
Two stocks jump out as analysts' darlings: Telesp Participacoes SA, from Sao
Paulo state, and Tele Norte Leste Participacoes SA., both local carriers.
Tele Norte Leste covers the northeastern states, with a population of 85.8
million and a gross domestic product of $322 billion, according to Robert
Flemings Securities.
Telesp serves 34.8 million people, with a GDP of $290 billion. As Santander
Investment analyst Patrick Jurczak said in a report, the firm "has the highest
liquidity of all the post-privatization entities, has no merger risk, operates in the
economic center of Brazil, has huge pent up demand, and high barriers to
competition. In addition, it benefits from high cash flow to fund capital
expenditures."
Also, Telesp is controlled by a group of Spanish companies led by Telefonica
SA (TEF), which is well-versed in operating Latin American post-privatization
telecoms.
Observers say that a negative for Telesp could be a lower upside than a riskier
and less liquid proposition like Tele Norte Leste, which isn't controlled by an
experienced operator.
For example, Paribas analyst Carlos Constantini believes that Telesp has a
26% upside, while Tele Norte Leste could rise 62% over a 12-month period.
Analysts favor local carriers over cellular firms because they "are less affected
by competition than cellular, their growth potential is high, and their profitability
in terms of margins will be sustained in the medium term, unlike cellular
companies, whose margins will be cut in the next one or two years," said
Deutsche Bank Securities' Regio Martins.
However, some cellular firms have caught the experts' eyes.
Sao Paulo state once again leads the pack, with Telesp Celular as the most
recommended in an informal Dow Jones survey, followed by Telemig Celular,
of Minas Gerais state.
Telesp Celular is managed by Portugal Telecom (PT) while Telemig is
controlled by Canada's Telesystem International Wireless Inc. (T.TIW)
As for investors who don't want the trouble of so much choice, Telebras
HOLDRs and RTBs - two basket securities - will continue to replicate the
pre-spinoff Telebras. While HOLDRs will represent 12 ADRs, the RTBs will
represent RTCB40s, the most liquid Telebras security traded in Sao Paulo.
Telebras ADRs (TBR) will continue to trade in New York until further notice.
At the end of October, of the 128 million Telebras ADRs outstanding, 48
million were in the form of HOLDRs, according to depositary agent, The Bank
of New York.
Telebras ADRs - as befits the proxy for Latin America - have had a bumpy
year.
The share reached a high of $134 on April 1, when most investment firms had
target prices between $150 and $180 for the end of 1998. It then crumbled
under the general emerging market malaise - with a brief respite after the
privatization in July - reaching a low of $51 5/16 on Sept. 10.
Since that date, Telebras ADRs have rallied 70%, to close at $88 on
Thursday.
Analysts will now have about a week to study financial statements from the
companies, and figure out recommendations and price-targets.
It should be noted that since the individual ADRs have different ratios to the
underlying shares, current price-targets in reals for the underlying companies
don't always translate one to one.
-By Margarita Palatnik; 201-938-2226; margarita.palatnik@cor.dowjones.com |
