05/28/2007


Is Claro going to buyTelemig Celular?

 

América Móvil was founded in September 2000 as Telmex spin-off, spread in Latin America and reached leadership with 123 million cellulars in the 1st quarter 2007 (1Q07).

 

Looking forward to growing América Móvil is also working in the USA market where it has the bigger MVNO of the country, TracFone, which offers pre-pay with national coverage and finished 1Q07 with 8.2 million cellulars.

 

América Móvil growth was benefited for acquisitions which made the operator present in 15 countries of Latin America (More details).

 

In Brazil, América Móvil, with Claro brand, acquired 6 of 10 Band B operators, including BCP in São Paulo in 2003, the last one acquired. Since then, Claro has been smoothly growing and gotten Bands D and E.

 

In 2005 had the opportunity to buy Telemig and Amazônia Celular, but the process was suspended because of conflicts between Opportunity and Citi/Fundos (more details).

 

In 2006 América Móvil tried to buy Tim in Brazil and was blocked by the entrance of Telefonica in Telecom Italia's group control, in 2007.

 

With the change of direction Telemig and Amazônia Celular in Sept/06, the sale of operators was discussed again. In case Telemig and Amazônia Celular's acquisition, Claro would have national coverage and would lead cellulars market share in Brazil.

 

 

This acquisition would also help to improve Claro's Ebitda margin from 27.4% to 28.6% (1Q07) and would increase its revenue share to 26.8%, behind Vivo and Tim.

 

With Telemig Celular acquisition done, Claro would be obligated to return its authorization of Band E in Minas Gerais, but would keep clients.

 

Vivo must dispute with Claro the control of Telemig Celular. This acquisition would help the attendance sector of Vivo (Minas Gerais) and would guarantee leadership in market share and cellular revenue in Brazil. The entrance of Telefonica in the control group of Telecom Italia, could make the operation quit this acquisition.

 

Finally, an option can't be descarted, would be the joint venture of Oi and BrT, Telemig and Amazônia would be incorporated by this new group, what would take it to 20 million cellulars, consolidating strong position in the market, missing just coverage in São Paulo to reach leadership.

 

Market Value of Telemig Participações in Apr/07 was R$ 2,113 thousands and Tele Norte Celular (Amaz) R$ 222 millions.

 

You could ask:

  • Who's gonna buy Telemig and Amazônia Celular?
  • How the entrance of Telefonica in Telecom Italia would influence this operation?
  • Will Claro fight for cellular leadership in Brazil?
  • How could Unicel license influence the future of the cellular market in SP?
  • When authorized, Who could be interested in 3G national license ?

 

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