Portugal Telecom Strengthens Fundamentals
With Profitable Growth In Sao Paulo, Brazil
September 2, 1998
LISBON, Portugal--(BUSINESS WIRE) via NewsEdge Corporation -- Following the press
release, issued in Rio de Janeiro, Brazil, July 29, 1998, and the Winning Statement on
Telebras Privatization of Mr. Francisco Murteira Nabo, Chairman and CEO of Portugal
Telecom (NYSE: PT; BVL: PTCO.IN) in Lisbon, Portugal, August 3, 1998, the Portuguese
telecommunications company, today stressed: "PT's management believes that the
outcome of the Telebras Privatization auction was favorable for the company and its
shareholders. In this process, PT acquired the best assets in Brazil and Latin America.
The acquisition of a controlling stake in "Telesp Celular" and of a minority stake in
"Telesp (Fixa) Participacoes" perfectly matches Portugal Telecom's predefined and
publicly announced strategy on profitable growth and shareholders' value creation".
Once PT has reduced its interest to 64.2% of the bid company that has acquired 51.8% of
the voting shares (19.26% of total capital) of "Telesp Celular Participacoes", the holding
company which in turn possesses 71.4% of the operating company's capital, PT has an
equivalent economic interest in this company of 8.83%. Although PT has the intention,
and is already in advanced negotiations, to reduce its participation to 51%, it is
premature to disclose the potential partners and the timing.
PT owns 23% of the Consortia which acquired control of "Telesp (Fixa) Participacoes"
(51.8% of the voting shares corresponding to 19.26% of total capital) and thus owns an
economic interest in this company equivalent to 4.43%.
On the topics of the accounting treatment of these acquisitions and goodwill: "Telesp
Celular" will be consolidated in proportion to the economic interest PT owns, and
goodwill arising from this acquisition will be amortized over 30 years. "Telesp (Fixa)
Participacoes" will be accounted for on an equity basis, and goodwill arising from this
acquisition will be amortized over 20 years. In both acquisitions, goodwill amortization
will be progressive and according to subscriber and line growth.
As far as the payments of the acquisitions and liabilities on the balance sheet are
concerned:
-- 64.2% of the winning bid of R$ 3,588 million (US$ 3.09
billion) for "Telesp Celular" amounted to R$ 2.3 billion, or
approximately PTE 361 billion. The first 40% installment of this
amount corresponding to PTE 144.8 billion (US$ 795 million) was
paid in the first week of August and PT has taken up the
financing, in "Reais" (R$), offered by BNDES (Banco Nacional de
Desenvolvimento Economico e Social) for the remaining 60% of its
portion on the bid, which will be payable in two equal
installments, in "Reais", the first in 1999 and the latter in
2000.
-- TBS (TeleBrasil Sul), in which PT holds a stake of 23%, the
consortia that acquired control of "Telesp (Fixa) Participacoes",
has funded the majority of the acquisition with debt. In the
first week of August, this bid company paid the first 40%
installment on the acquisition of "Telesp (Fixa) Participacoes",
having PT just paid 23% of US$ 500 million, this means, US$ 115
million, or approximately PTE 21 billion.
-- So, as a result of these stakes in "Telesp Celular" and
"Telesp (Fixa) Participacoes", total indebtedness on PT's
consolidated balance sheet has increased by PTE 382 billion (US$
2.1 billion), of which PTE 166 billion (US$ 910 million) was paid
in the first week of August. PT will pay the remainder, R$ 1,382
million (approximately PTE 216 billion, or US$ 1.2 billion) to
BNDES in two equal installments, the first in 1999 and the second
in 2000.
PT has funded the PTE 166 billion (US$ 910 million) with a bridge loan from some
Portuguese and Foreign Banks. It is expected that PT will refinance this indebtedness in
debt markets later this year.
The premium PT paid for " Telesp Celular" and the difference from the second bid to the
winning bid are well in line with the premiums and differences paid in winning bids in
other "rich" A- band assets, as follows:
A Band Areas Premium Difference from
the
second bid
Telesp Celular 226% 25%
TeleSudeste 139% 19%
Celular
Telemig Celular 229% 37%
TeleCelular Sul 204% 22%
"Our bid with a 25% difference from the second bid for the most attractive cellular asset
in Brazil and Latin America, and in a competitive process, is quite reasonable," stated
PT's management.
Concerning "Telesp (Fixa) Participacoes" bid, again the high quality of the asset in
question, and in a competitive process, the premium paid (64%) was quite "reasonable."
Finally, "we would like to point out that there are obvious synergies between fixed and
cellular and so we are uniquely placed to take advantage of this and create value for our
shareholders."
At present, PT is focusing on enhancing the management of its investment. Mr. Romao
Mateus has been appointed as CEO of "Telesp Celular", reporting directly to Mr.
Murteira Nabo, Chairman of PT, who will be personally involved in the management of
PT's assets and interests in Brazil. Mateus, formerly CEO of TMN, PT's cellular company
in Portugal, has a very successful track record of building a market leading position in a
competitive market and quickly increasing mobile penetration to levels higher than in
most of the leading European countries, such as the UK, France and Germany.
In pursuing select international roots, PT's management has been focused on profitable
geographic areas where its cultural, historical and linguistic ties create a competitive
edge for PT. "We believe that the Brazilian market has the high growth prospects we
want, and the Telebras Privatization was the thrust. Moreover, the Sao Paulo area
represents a unique opportunity, as it will constitute a powerful growth engine that in
the mid-term will boost the company's revenues and results to levels that would not be
achievable in a mature and fully liberalized European market like Portugal."
The business environment in Sao Paulo is more favorable than in other regions. We are
forecasting for "Telesp Celular" an ARPU of US$ 80 and an EBITDA margin of 60% for
the full year 1998, and we are targeting US$ 50 and 53% for the year 2002, with the
number of subscribers totaling 2.1 million and 5.2 million, respectively". Dilution of
stated earnings may be 5.8% in 1998, 6.2% in 1999 and 2.5% in 2000, and a positive
impact on PT's bottom line is expected from year 2002, or even 2001.
Before making these acquisitions, PT had access within Portugal to 4 million fixed lines
and 1 million cellular subscribers. By year-end, PT in Brazil will have access to over 6
million fixed lines and 2 million cellular customers. In total, PT will then have access to
over 10 million fixed lines and 3 million cellular customers.
PT's management is confident that these acquisitions will enhance shareholder value
and contribute towards future profitability and growth of the Company's earnings. "We
will be essentially focusing on reinforcing our strong leading position in all
telecommunications and multimedia services in Portugal, and on building a powerful field
for future growth on revenue and results in the Sao Paulo market, the most attractive in
all Latin America with a unique potential for growth and value creation." To conclude,
"We are on track. We are doing what we said we would do and we are pleased to be
repaying the confidence of our shareholders".
On September 17, 1998, Portugal Telecom will release its First Half Results, 1998.
PT will organize a conference call for the financial community and will release additional
information regarding Portugal and Brazil operations.
Portugal Telecom, privatized in 1995, is the principal telecommunications provider
offering local, domestic long distance and international telephone service throughout
Portugal. Additionally, PT and its subsidiaries, the Group, offer domestic mobile
services, data communications, Internet access and related services, cable television,
transmission of broadcasting signals, telex and a variety of other telecommunication
services. A secondary offering occurred in June 1996, and a third offering took place in
October 1997. Portugal Telecom's common shares trade on the Lisbon Stock Exchange,
and its ADSs, each equal to one ordinary share, trade on the New York Stock Exchange,
as well as on London SEAQ International, both ordinary shares and ADSs. Information
may be accessed on Bloomberg under the symbol PT, on the Reuters 2000 Service under
the symbol PT.N and on Quotron under the symbol PT.
The company has planned Investor Relations events as follows to discuss the Half Year
Results and the recent developments in Brazil:
AGENDA ANNOUNCEMENT
SEPTEMBER 17th (Lisbon)
CONFERENCE CALL & ANALYST CONFERENCE
08:00am - Press Release
10:30am - Press Conference (at PT's building at
EXPO'98)
12:00pm - Analyst Conference - International and
Portuguese (at PT's building at EXPO'98)
16:30pm - Conference Call (with audio link to
international participants)
The above events will address two issues:
- 1998 Half Year Result
- Brazilian acquisitions ("Telesp Celular" and "Telesp
Fixa")
SEPTEMBER 28 - OCTOBER 2, 1998 ROADSHOW with PT senior management.
FROM OCTOBER TO DECEMBER, 1998 Additional follow-up meetings with PT's IR
Director, Jorge Castela.
Please contact Taylor Rafferty Associates at 212-889-4350 or 44-171-606-1149 for further
information.
PT's customary quiet period prior to release of the results, starts today.
CONTACT: Jorge Castela | Portugal Telecom | 011-35-1-1-500-17-01 | - or - | James P. Prout
| Taylor Rafferty Associates | 212-889-4350
[Copyright 1998, Business Wire]
newspage.com |
