Tag Archives: TSP

Emerging ADRs and ETFs to Watch

With earnings season behind us and the fall quarter looming, investors are free to catch up to some emerging markets stories that got lost in the news flow.

BRAZIL: Now that Telefonica’s (TEF, quote) bitter fight with one-time partner Portugal Telecom (PT, quote) over Brazilian wireless network Vivo (VIV, quote) is over, the clear winner is . . . Telesp (TSP, quote).

But if there are winners, there are also losers, and one name stands out in particular. (subscriber content)

INDIA: Vedanta’s troubled $9 billion bid to add Cairn India to its list of subsidiaries has caused unintended consequences to U.S.-traded Sterlite Industries (SLT, quote).

SLT is down 23% so far this year. But analysts say traders are overreacting to news that does not affect this Indian mining company’s fundamentals at all. (subscriber content)

CHINA:: China Life (LFC, quote) is the world’s biggest life insurance company, with $26 trillion in premiums on its books. So why is this giant down 18% so far this year?

LFC blames a sour Shanghai stock market for its disappointing second quarter. However, smaller Chinese insurance companies have not had nearly as much trouble. Perhaps LFC is not too big to fail, or other factors may be involved. (subscriber content)

ETFs in the Spotlight

EEM (quote) is the $40 billion grandfather of all emerging markets portfolios. It will be hard to collect all 668 stocks in this admirably diversified ETF on your own, but how close can you get?


Emerging Markets Insight Stocks

Telesp emerges as a winner after VIV fight

Now that Telefonica’s bitter fight with one-time partner Portugal Telecom over Brazilian wireless network Vivo is over, the clear winner is . . . Telesp.

Since July 29, when Telefonica (TEF, quote) won the right to pay $9.7 billion to add Vivo (VIV, quote) to its empire, Telesp (TSP, quote) — normally considered TEF’s somewhat boring fixed-line subsidiary — shares are up 10%.

The reason? Expectation that TEF will follow through on promises to merge VIV into TSP to create a single strong full-spectrum telecom company.

But more than that, TSP is benefiting from old-fashioned fundamental improvement. The company is finally adding to its subscriber rolls again after four agonizing years of no growth at all.

And as banks like Barclays have started to point out, broadband subscriptions are at an all-time high.

Broadband, wireless and even the conventional wireline business: TSP seems to be a Brazilian telecom ticker to watch.

And as for the losers of the VIV fight, one peripheral name stands out. Tele Norte (TNE, quote), better known as “Oi” in Brazil, is down 3% since the deal, even though spurned VIV co-owner Portugal Telecom (PT, quote) turned around and bought a $4.8 billion stake in the company.

In the strategic war for Brazilian phone subscribers, TEF may have proven that an active general is better than a somewhat silent overseas partner. Clearly, TSP shareholders agree.

Brazil Picks

Telefonica gets surprisingly profitable Vivo

After months of sometimes fractious negotiation, Spain’s Telefonica has acquired full control of Brazilian mobile carrier Vivo. As a bonus, Vivo is more profitable than anyone suspected.

Telefonica (TEF, quote) finally sweetened its offer for Vivo (VIV, quote) to around $10 billion and the Portuguese government, which had been blocking the deal, accepted.

Previously, Portugal Telecom (PT, quote) shareholders had overwhelmingly backed the sale of their joint venture stake in the Brazilian company, one of Latin America’s most vibrant cell phone networks.

Now that the deal has finally been signed, TEF can fold VIV into its land-line subsidiary in Brazil, Telesp (TSP, quote).

And PT has the cash and freedom to pick up a new carrier in Brazil. The company has already announced that it will buy a $4.8 billion stake in Brazil’s leading land-line network, Oi (TNP, quote)

As it happens, Vivo is a richer prize than anyone thought. The company separately reported a $133 million profit in the second quarter, well above both the $102 million it earned a year ago and the $122 million analysts had forecast.

Sales jumped 9.9% as the company added about 11 million subscribers to its network.

Brazil Stocks

Telefonica may get Vivo anyway

The European Court of Justice in Luxembourg has declared the Portuguese veto of a shareholder-approved sale of Brazilian cell carrier Vivo illegal. Still, there may be further wrangling ahead.

Portugal Telecom (PT) and Spain’s Telefonica (TEF) have been fighting over the fate of joint venture Vivo (VIV) for months. Although PT shareholders voted overwhelmingly to approve TEF’s latest $9 billion offer to buy them out, the Portuguese government overruled the sale with its controlling “golden share” of the company.

Now that this move has been declared illegal, Lisbon says it will allow the deal to go through — but only if it is renegotiated to get the best results for all parties.

Even if TEF is willing to make new concessions to get full control of Vivo, which is Brazil’s biggest carrier, the haggling could take months.

The possibilities

When and if Telefonica finally buys out Portugual Telecom, it will be a positive for several stocks. First, PT will get a huge cash windfall; according to one gauge, the stock would become fairly valued at around 10.

Right now, investors are unwilling to pile into the stock because they do not want to be trapped in Portugal as long as the local fiscal situation looks risky. But when that risk is resolved, PT now represents almost sure upside.

Second, Telefonica will probably fold VIV into its Brazilian land-line subsidiary, Telesp (TSP). Both operations would likely derive significant economies of scale as well as cross-marketing opportunities from the combination:

Ultimately, a stronger TSP and a firmer share of the booming Brazilian communications market should translate into strategic advantages for TEF. But it will take awhile for the synergies to move up the corporate food chain, and in the meantime, the company will be out $9 billion or so.


Brazil Stocks

Latin phone deals get serious

M&A activity is heating up across Latin America as telecom carriers try (and sometimes fail) to consolidate their businesses across local and international markets.

On the more basic front, Mexican telecom tycoon Carlos Slim has launched a bid to acquire all outstanding shares of Telmex (TMX) and its immediate corporate parent, Carso Global Telecom (CGTVY.PK). Slim already controls both companies, but is laying the groundwork to fold their corporate structure into his flagship, America Movil (AMX).

At current prices, Slim is offering roughly a 30% premium on TMX and a token 1.7% bounty on CGTVY.PK.

TMX shareholders will get their choice of 0.373 AMX shares or 11.66 pesos ($0.92) per share, which translates into 0.373 ADRs of AMX or $18.40 in cash per ADR.

CGTVY.PK holders will get 1 share of AMX for every 2.0474 shares they tender, or roughly 2 ADR of AMX for every 41 thinly traded ADRs of CGTVY.PK.

Separately, things seem to be getting desperate in Brazil, where Spanish carrier Telefonica (TEF) saw its unsolicited $7.3 billion bid for full control of Vivo (VIV), the biggest local wireless company, rejected by venture partner Portugal Telecom (PT).

The bid valued VIV at roughly 240% its recent market price. If successful, Telefonica would have folded the company into its fixed-line Brazilian subsidiary Telesp (TSP)

VIV and PT are surging today; TEF is under pressure.

Mexico Stocks

Brazil Broadband: NETC May Have Leg Up on Competition

Anatel, Brazil’s telecommunications regulator, has blocked Telecomunicacoes de Sao Paulo (TSP) from selling broadband services until it takes specific measures mandated by the government to fix quality problems it has presented over past few months. Otherwise, it will be fined 15 million Brazilian reals ($7.6 million) and BRL1,000 for every unit sold.

TSP is Net Servicos de Comunicacao’s (NETC) biggest competitor in the Brazil’s biggest broadband market, so this measure may help NETC’s net additions in the next few weeks and/or months.

Buying access to long term growth in the Brazillian broadband market is very interesting and these two companies are core players along with the fixed line and cellular players.