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

To: wl9839 who wrote (15398)	5/19/1999 12:36:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil Fipe shaves '99 inflation forecast to 6 pct Reuters, Wednesday, May 19, 1999 at 12:19 SAO PAULO, May 19 (Reuters) - The Univerity of Sao Paulo's Economic Research Institute (Fipe) on Wednesday revised the forecast for its closely-watched inflation index down to 6 percent from 7 percent for 1999 as food prices fall. "Food continues to decline and, as a result, the index will probably show deflation this month," said Fipe consumer price index coordinator Heron do Carmo. Fipe's forecast is now more than 10 percentage points below the official government forecast for inflation of 16.8 percent, agreed with the International Monetary Fund (IMF) in early March. After Brazil's sharp currency devaluation in January, Fipe forecast inflation as high as 12 percent for 1999 after deflation of 1.8 percent in 1998. But the institute has gradually whittled the forecast down to reflect the Brazilian real's recovery against the dollar, to a depreciation of less than 30 percent, and the sluggish economy's weight on price increases. Do Carmo admitted that the inflation forecast for this year may be trimmed even further. Early Wednesday, Fipe reported inflation in the four weeks to May 15 of just 0.12 percent compared to 0.35 percent in the previous four-week period. Copyright 1999, Reuters News Service

To: wl9839 who wrote (15398)	5/19/1999 1:36:00 PM
From: Steve Fancy	Respond to of 22640

DJ Telefonica Brazil Tender Offer, 1st Step To Restructure By MARGARITA PALATNIK Dow Jones Newswires SAO PAULO -- Spain's Telefonica SA (TEF) has taken the first steps toward a restructuring of its Brazilian assets that would lower their acquisition costs and improve their returns. Telefonica launched a tender offer Monday to acquire all outstanding shares in Telerj Celular SA and Telest Celular SA. Together with Spanish power giant Iberdrola SA (E.IBR), Telefonica made a similar offer for Telebahia Celular SA and Telergipe Celular SA. In a letter to the Brazilian securities commission, known as CVM, Telefonica has pledged that for a full year it won't delist or change the corporate structure of the four cellular carriers from Brazilian stock exchanges where they currently trade. This, despite tenders that, if successful, would give Telefonica and its partner 100% ownership. Telebahia and Telergipe are operating companies held by Tele Leste Celular Participacoes SA (TBE); and Telerj and Telest are holdings of Tele Sudeste Celular Participacoes SA (TSD). A joint venture owned by by Telefonica and Iberdrola acquired a 19.26% stake in both holdings during the July privatization of former monopoly Telecomunicacoes Brasileiras SA (TBR), or Telebras, paying handsome prices. But skeptical observers see the statement to the CVM more as an announcement of when Telefonica will get down to business and start streamlining its fractured holdings in Brazil than as a guarantee that it won't delist and merge the operating companies. "Market speculation is that after the 12 months they will convert the shares in the operating companies into Tele Sudeste and Tele Leste," said a Rio de Janeiro trader. "When they eventually delist, they will save money in administrative costs." Analysts say the transaction is an obvious way for the Spanish firm to average down the price paid for these assets, considering that the highly-illiquid shares in the operating companies trade at considerable discounts to stock in the holding firms. Telefonica and Iberdrola paid $365.8 million - 242% more than the minimum asking price - for the privatization of Tele Leste Celular, which serves an area with a population of some 14 million in the northeastern states of Bahia and Sergipe. The companies also paid a high premium for Tele Sudeste Celular, which they bought for $1.16 billion, 139% above the government's asking price. Tele Sudeste covers the states of Espirito Santo and Rio de Janeiro, with a population of 16 million inhabitants. Dividend Yield Seen Increasing For Telefonica Still, Telefonica and Iberdrola may reap other benefits. With this transaction, "the dividend yield on their investment might increase by 50% or 60%, but if you think that in the future their dividend policy will change, their dividend yield will increase geometrically," said Deutsche Bank analyst Auro Rozenbaum. Rozenbaum noted that the operating companies have "extremely strong cash-flow and an extremely conservative dividend policy" inherited from the Telebras days, when the company paid out around 7% to 10% of earnings. The analyst said that for a while, Telefonica "may be obliged by the cash-flow to increase (dividends) to 70% or 80%." Telefonica spokeswoman Susi Aissa stressed to Dow Jones Newswires that the company just seeks to increase its investment in Brazil, which it believes is on the road to stabilization from the recent crisis. Telefonica also said that the amount to be paid - 550 million reals ($1=BRR1.6585) if all sought shares are tendered - would be "new money for Brazil," as the firms plan to finance the purchase with own funds brought from headquarters. Wednesday Telefonica announced the sale of marine cable unit Telecomunicaciones Marinas SA, or Tamesa, for $280 million. In a press release, the company said "the funds will be employed to strengthen Telefonica's position as the leading international supplier of integrated communications in the Spanish- and Portuguese-speaking world." The success of the tender should be helped by an attractive offer: most brokerages are advising their clients to tender the shares, saying the price is more than right. Telefonica has offered to pay a 50% premium over the closing price of May 14. In the case of Telerj Celular, for example, the offering price is 13% above Deutsche Bank's target price of BRR51.50. However, Telefonica frets that with an extremely wide retail shareholder base, a number of holders will be hard to reach or may have trouble understanding the transaction. "We're trying to compile a list of all shareholders and preparing materials to explain the transaction to them, so we can contact them as soon as the CVM gives its approval," in about one month, Aissa said. Telefonica has a tough task ahead, as once it gets a go-ahead from the regulator, CVM rules say it will have only 15 days to register shareholders willing to tender their stock. -By Margarita Palatnik; 5511-813-1988; mpalatnik@ap.org