To: JMD who wrote (9738 ) 4/8/1998 8:05:00 AM From: qdog Read Replies (1) | Respond to of 152472
FOCUS-Brazil lands hefty sum in 8th cellular bid Reuters Story - April 07, 1998 13:19 ------------------------------------------------------------------------ Copyright 1998 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. By James Craig SAO PAULO, April 7 (Reuters) - Brazil raked in a hefty 929 million reais ($822 million) Tuesday, selling its eighth B Band cellular license in 10 months to a group including Japan's DDI Corp. and U.S.-based Motorola Inc. . "It was definitely surprising. We didn't expect the price would be that high," said Marcelo Mollica, a telecom analyst for local bank Banco Icatu. Global Telecom, which also includes Brazil's Suzano and Inepar and Japan's Nissho Iwai Corp. , bid 773.9 million reais, 135 percent more than the 330 million-real minimum price and well above market estimates of a 40 percent premium. But the offer must be increased automatically by 20 percent to account for inflation under tender rules drafted when the B Band sale process began more than a year ago. The group's purchase of the Area No. 5 license for Parana and Santa Catarina states boosts to more than 8.0 billion reais the amount the government has raised in its B Band selloff and leaves Brasilia with just two concessions to grant. The B Band selloff is part of Brazil's ambitious program to privatize its massive telecommunications sector, including federal giant Telebras . Heitor Vita, head of Global Telecom partner Inepar, said the group plans to invest an additional $500 million in the next five years to install a new digital cellular network in the prosperous southern states. "Consortium technicians have estimated 550,000 lines will be needed to satisfy the market," he said. "In the first year we should have installed 180,000 lines." The number of lines installed should jump to 300,000 in the second year, officials said. The group should be up and running in 11 months. Analysts said Global Telecom's offer, which topped bids by the Telet, GFTT and Brascom consortia, was strong when compared with winning bids for recent B Band licenses. "The price was $49 per person (in the concession area) versus $27 per person in Minas," said one analyst, referring to last Friday's opening of bids for area No 4, covering Minas Gerais state. Global Telecom bid aggressively because Parana and Santa Catarina are two of the wealthiest states in Brazil, making them attractive areas in which to operate cellular services, analysts added. The group's win Tuesday also leaves little doubt who will walk away next Tuesday with the Area No. 6 license covering Brazil's southern-most state of Rio Grande do Sul. Global Telecom and the Telet group, including BCE Inc's Bell Canada, were the only consortia that renewed bids for the concession. But according to tender rules Global Telecom's offer must be tossed out because it has won area 5. "Area 6 also was decided today and it looks like it will go to Telet," said Icatu's Mollica. Telet also includes pension funds owned by Banco do Brasil and Brazilian bank Opportunity. It operates in area No. 7 under the name Americel. Under B Band rules, a group cannot operate more than one concession in wealthy areas 1-6. Areas 7-10 are considered poor, rural concessions. Meanwhile, the government is preparing a new set of bid specifications for area No. 8, covering Brazil's vast Amazon region. Area 8 failed to draw bids in two previous tenders and officials are now considering incentives a a possible lowering of the 200 million-real minimum price. In its statement, Global Telecom partner Nissho Iwai's Naoyoshi Abe said a total 1.5 billion reais will be invested to pay for the license as well as to pay for radio base stations, communications centrals, training and other costs. Analysts said the group is like to use in area 5 code division multiple access (CDMA) cellular technology supplied by partner Motorola, one of the world's largest telecoms equipment makers.