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

To: lizard lick who wrote (12287)	1/23/1999 3:02:00 PM
From: Steve Fancy	Respond to of 22640

Lizard, the cellulars are much more speculative than the wirelines due to unrestricted management fees, fierce existing competition and probability of resulting rate wars. I would guess some of these companies will be real winners when it's all done and over, but others could go by the wayside. If I understand, the existing cellulars (TBR companies) were not very popular due to poor service and questionable ethics. This gave the new startups an advantage IMO. Consolidation is quite possible at some point but you have to remember that currently they're trading at a fraction of what the new owners paid for them. Seems unlikely to me they would be willing to sell at much of a loss unless they're throwing in the towel, and considering the current circumstances, also seems unlikely anyone would be willing to forkover the kind of cash required to sell at breakeven. On the other hand, the wirelines (TNE, TSP, TCS, EMT) have no competition. Mirror licenses (one per region) allowing wireline competition were just sold in the last couple weeks in the TNE region and EMT (long distance). My understanding wirelines from scratch are a slow proposition. TSP and TCS still maintain a monopoly. My understanding is they could have commanded almost twice the premium at auction if they had been sold as monopolies. They are going to attempt to sell the mirror licenses again in these regions in March, but current conditions in Brazil have cut expected bids to a fraction of what they would have received if sold last November as originally planned. Sooo, IMO, the wirelines are practically a no lose long term investment. Seems that Brazilians may scrap extra's such as cellular phones till conditions improve, but I wouldn't expect much of a drop in wireline demand. If you're going to invest in Brazilian telco's, choosing the right cellulars could be very profitable, but riskier than investing in the wirelines, all of who seem almost guaranteed to be profitable, even if it takes some time for economic growth to recover. That said, I still own small amounts of all the cellulars and am waiting for more reasonable prices to unload. As time drags on it should become more clear who the winners will be, and I may change my opinion. sf