Bloomberg News

Oi Leads Brazilian Phone Declines on Broadband Plan

November 25, 2009

Tele Norte Leste Participacoes SA and Brasil Telecom SA, the Brazilian phone companies which agreed to merge last year, led declines in the Bovespa index on concern a government plan to provide national broadband services will boost competition.

Tele Norte, which operates under the Oi brand, fell 1.6 percent to 37.30 reais in Sao Paulo trading. Operating unit Telemar Norte Leste SA fell 1.9 percent to 65.80 reais, while Brasil Telecom, which was taken over by Telemar, fell 2.1 percent to 17.91 reais. The MSCI Brazil/Telecommunication Services Index dropped 0.7 percent, the most in a week.

Brazil plans to increase the number of fixed lines with high-speed internet access to 30 million by 2014 from 9.6 million at the end of 2008, according to a statement published yesterday on the Web site of the Ministry of Communications. The government may push for a state-owned company to provide infrastructure and sell broadband services to final customers, according to analysts at BTG Pactual.

“All in all, in our view, this is bad news to the main telecom incumbents like Embratel, Telemar and Telesp,” the analysts wrote in a note to clients.

Telesp, which was downgraded to “underperform” from “neutral” at Credit Suisse Group AG, fell 2.4 percent to 43.48 reais.

Embratel Participacoes SA (EBTP3), controlled by Mexican billionaire Carlos Slim, gained 3.7 percent to 14.72 reais.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net


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