teleco.com.br

04/22/2010

What's Vivendi's strategy for Brazil?

After presenting its results in 2009, Vivendi reassured the group's strategy:

High margins for all the business lines.
Focus in investments and innovation to satisfy client demand for broadband, mobility and digital content.
Improve group's performance by the acquisitions done.
Increase in long-term the value for shareholder.
- Acquire minority shareholdings in SFR (Vodafone)
- Invest capital in regions/business of fast-growth in media and telecom

GVT fits perfectly inside Vivendi's strategy about investing capital:

Acquired GVT, which is a fast-growth business in one of the biggest markets of the world, by a multiple of 9 times the EBITDA estimated for 2010. Expenditure estimated in € 3.1 billion to acquire 100% of the shares.
Sold in 2010 its participation of 20% in NBC Universal, a mature asset, for about € 4 billion (multiple of 10-11 times the EBITDA).

GVT has a considerable potential for growth. Vivendi projects for 2010 growth of 26% in net revenue and 30% in adjusted EBITDA. It's also expected growth of 25% in EBITDA in 2011.

Note: Adjusted EBITA of 2009 doesn't consider extraordinary costs of R$ 72.2 million due to the control exchange in 4Q09.

GVT's growth is likely to be encouraged by the geographical roll out, broadband offer in high speeds and the entrance in the Pay TV market.

GVT operates in 84 Brazilian cities, 75 of them are inside region II and e 9 in other regions. Fortaleza, Campina Grande and João Pessoa area the next cities where the company will break into, but São Paulo is the big market to be attacked by GVT.

Broadband was the service that presented the highest growth in net revenue in 2009 (56.7%). GVT launched in August 2009 a new line of broadband services with speeds from 3 to 100 Mbps costing from R$ 49.90 for 3Mbps and R$ 69.90 for 10 Mbps. By the end of 2009, 39% of GVT's clients base already used speed higher or equal to 10Mbps.

In 4Q09, 71% of GVT's broadband sales had speeds higher than 10 Mbps. GVT got this result due to its new generation network, which counts with 6 thousand Km of local net work in optical fiber (25% growth in 2009).

The offer of IPTV using company's high speed broadband network is the next step for GVT, for doing so it will rely on Vivendi's experience, as assured in the annual report. The restrictions existing in the Cable TV Law still prevent GVT's movement, but those restrictions may be withdrawn with the approval of PL 29.

If GVT's future is clear, Vivendi's strategy is still uncertain for the cellular area in Brazil. The group's president declared to Financial Times (Mar/10) that the company will "observe closely what is happening in the mobile scenario in order to find opportunities".

There aren't many opportunities for acquisitions in this Brazilian area. The big opportunity could be Tim, but Vivendi isn't well positioned for this acquisition due to the presence of Telefonica in Telecom Italia. Vivendi also doesn't show interest in participating in the auction for Band H, which may be carried out this year.