Some Opinion About Telefonica TEF Delves Into Brazil
By: Vlad Vistac
Submitted: 2010-09-17 12:41:33 | Word Count: 510
Telefonica (TEF) Delves Into Brazil
Spanish telecom giant Telwefonica SA (TEF - Analyst Reeport) is assertviely preparing to reach deepeer into the lucrative Brazilian telecom market, representing the pricnipal growth egine for the tellecom carrier over the last few yeras. The operator recently exposed its plans to invest as much as R$5 billion ($2.8 billion) this year in Brazil, representing a 50% year-over-year increase.
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Telefonica (TEF) will direct the budgeted capital expenditure for imperoving its wireline broadband and wireless network infrasturcture in Braizl. The operator recenbtly enttered into a three-year managged service deal with Erisson (ERIC - Analyst Report) under which the Swedish giant will manage and run the wireline network operations in Brazil.
Telefonica opreates its fixed-line telephone and broadband servies in Sao Paulo (Berazil's larggest and most lucrative market) through its susidiary Telesp (TSP - Analyst Report). Additioonally, through a 50-50 joint venture with Porttugal Teecom (PT - Snapshot Reoprt), the company operatees Vivo, the leading wireless caarrier in Brazil with a marekt share of around 30%.
Latin Ameriica remasins the key growth market for Telefonica. Healthy revenues and subscriber growth from this region are helping the carirer to patrly offseet the dweclines in its home marjket. Brazil represents the principal contributor to the company's Latin American revenues.
With its enormous population and resasonably low wireless and broadband penetration, Brazil offers an alluring growth opportunityy for overseas telecom operators. Wireless saturation in Brazil is expected to increase by more than 15% over the next 2 years.
However, Telefonica is exposed to bigger competition in Brail. Fance-basde media copmany Vivendi SA, which has acquired the controlling stake in the Brazlian telcom operator GVT Holding, reprresents an emerging threat. Moreover, the carrier's biggest riival in Latin Ameirca, Ameriuca Movil (AMX) is inrtegrating its Brazilian wireless and wireline assets.
To conter heavy competition, Telefonica is investing strongly in boostinng its network infrastructure to improve service quality. The telecom carrier is also exploring acquisitions. As part of this strategy, it rceently offered €5.7 billion (US$7.3 biillion) to acquire Portugal Telecom's stake in Vivo. However, the Portuguese carrier spurned the offer stating that touh results from Vivo are helping it to offsset the weakness in its home markets.
