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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Doug Chin who wrote (1254)	3/19/1998 9:42:00 PM
From: Mayer Tchelebon	Read Replies (1) \| Respond to of 22640

The main difference between the common and the preferred shares of TBR is that the common is voting and the preferred is non-voting. But they each represent the same size of the pie. There are 124.3M Common shares, of which the Brazilian Gov't owns 50.03%. There are 196.3M Preferred shares, of which the Gov't owns 3.12%. In total, the gov't owns 21.32% of the combined total of Common and Preferred (320.7M shares). 96.2M of the Preferred shares (49.02% of Preferred and 30.01% of the combined total shares) are represented by ADRs. If the gov't gets 20B Reais for its 21.32% it translates to R292 per share or about US$250, using the exchange rate of July-August. Bear in mind that the Real automatically depreciates by 9% against the US$ each year.

To: Doug Chin who wrote (1254)	3/20/1998 12:27:00 AM
From: Michael Burry	Read Replies (2) \| Respond to of 22640

Does anyone know if a preffered share = a common share for economic purposes? Both preferred and common trade- there is a ~10% premium for the common/voting shares. The idea is 20B for a controlling interest in Telebras, so you roughly say 20B for 51% control at a 10% premium to preferred or roughly $38 billion/320M shares ~$120. Now the last I heard was 25 billion, which gives say 47.5B/320M shares = $148, which explains today's valuation, adjusted for uncertainty of time and forex fluctuation. Brazil's privatizations have been generally going off at a premium ranging up to 80%, so there is significant upside. I'll give it 27.5 billion or a 10% premium, or $52B/320M shares ~$160. No where near $300 - you can also use the current market price as a guide. The only reason it went to 90-100 is devaluation fears and delays. Now we are getting pretty certain the country is stable and that the privatization will go through as planned, and this is being reflected in the market price. Salomon is hoping for future privatization business and is doing this at a discount. Valuing the post-split companies on cash flows is pretty impossible now. The whole system should be at $150-$170/ADR based on neighboring telecoms. In general, all we can get are rough estimates, but it's not $300 anytime soon. Mike