Despite uncertainties surrounding the process, the Brazilian government is pushing ahead with plans to sell its stake in telecommunications giant Telebras.
The sell-off, originally slated for July 15, now has been pushed to July 29. Telebras is scheduled to split into 12 regional holding companies prior to the sale, resulting in eight A-band cellular companies, three fixed-line holding companies and a long-distance carrier.
“There are lots of potential land mines,” Bruce Edgerton, Latin American analyst with the Strategis Group in Washington, D.C., said of the privatization time line.
“This is a potentially controversial privatization coupled with the fact that selling a dozen companies at the same time is complex,” said Edward Czarnecki, analyst with BIA International in Chantilly, Va. “This is a large privatization of a large strategic asset in which many parties have a vested interest.”
The upcoming presidential elections also threaten the timeline. The process already has hit some minor bumps. A lawsuit aimed at preventing the split threatened to postpone the auction, but the Brazilian Federal Court rejected the lawsuit last month. More delays could be helpful to the process, however, as many of the significant bidders may not be prepared to bid by the July date, said Czarnecki.
“There are several companies that are just not ready with their basic data and strategies toward Brazil,” he said.
A Sao Paulo newspaper recently indicated that lawyers acting for potential investors in the scheduled July sale said they were not given enough information about the financial and strategic state of the 12 regional holding companies. Potential investors must purchase access to data rooms that contain information about each of the 12 units and are heavily fined if they divulge the information to others.
Six groups so far have purchased access, said Edgerton. Among those are Spain’s Telefonica de Espana, which requested the confidential information on the entire federal Telebras system, say published reports. Telecom Italia and Portugal Telecom also have shown interest in the cellular phone businesses.
Analysts say the sell-off should be attractive for many large telecommunications companies that walked away from Brazil’s B-band cellular phone auctions without a license. Consortia that included AT&T Corp., SBC Communications Inc., Mannesmann AG and France Telecom were among those that failed to secure B-band licenses. Brazil last month removed all limits to foreign control of the 12 holding companies.
“Our own estimations are that the A-band properties are of significant value and likely will be hotly contested for, particularly in the larger markets,” said Czarnecki.
The Brazilian government raked in about $8 billion in total bids from the auction of eight B-band cellular licenses in April. Only the B-band license for region 8, which covers the Amazon area, remains. The government has published its third and final notification for the auction of this region, which has twice failed to receive any bids.
