Why the V companies?
Orange: Value Or Trap?
http://seekingalpha.com/article/1910821-orang...&ifp=0
Buy Telefonica For 6.5% Yield And Latin America Growth
Telefonica is also one of the largest shareholders of Telecom Italia (TI), and there is speculation the two companies may merge in the future.
http://seekingalpha.com/article/1887191-buy-t...ica-growth
http://seekingalpha.com/symbol/ti
http://seekingalpha.com/symbol/tsu
Brazilian Telecoms: Vivo Is Underpriced Compared To Tim
Vivo Overview:
Telefonica Brasil, better known as "Vivo," is the Brazilian arm of the Spanish Telefonica. In Brazil, the company offers a full range of telecom services to both individuals and businesses, including fixed and mobile phone service, fixed and mobile broadband, and pay TV service.
While the tendency of fixed telephone service in Brazil is downward, Vivo has managed to reduce their disconnections through a stronger sales and marketing push, though it has come with a high cost. Fixed broadband is still a growth area, and Vivo targets the upper income classes by offering FTTH service, which is a new option for Brazilian consumers. In mobile services, growth in users is slow, as total market penetration already exceeds 100% of the population. However, with the increasing availability and affordability of smartphones, data use has been growing strongly across the industry.
As Vivo tends to target a higher income clientele, the company has a much larger market share than its competitors in the postpaid segment. This contributes to the average revenue per mobile user that is significantly above its competitors.
Tim Overview:
Tim, like Vivo, is a Brazilian arm of a foreign telecom company; in this case, it is Telecom Italia. Until recently, Tim existed as a company purely focused on the mobile services segment, offering mobile telephone and mobile broadband service only. However, the company is currently building a FTTC broadband network in select cities in Brazil.
As Tim does not offer fixed telephone service or pay TV service, it remains isolated from the disconnection headwind that affects the telecom industry in Brazil. However, the mobile phone service segment presents its own challenges, especially in prepaid services, which is the primary market of Tim. The FTTC network that Tim is building is their first foray into fixed services, and is showing significant growth, though it is not yet contributing a material amount of income to the company as of the most recent quarter.
Competitive Positions:
In the fixed broadband space, Vivo and Tim are pursuing two different strategies. Vivo is currently expanding its FTTH network offerings, which offer data speed that is well above what has been offered in Brazil in the past. Tim is also building a fiber network, but in the form of FTTC, which offers sufficient speed for the majority of households, but at a lower price.
In the second half of 2012, Anatel leveled a temporary ban of sales to new customers in selected areas against three of the four major operators, with Vivo being the only exception
To reduce the capital expenditures required to meet these goals, Anatel allows the companies to form partnerships for network sharing and construction of the 4G infrastructure. Vivo formed a partnership with Claro for this task, and Tim formed a partnership with Oi. I see particular weakness in this partnership for Tim, as Oi has been a somewhat problematic company, plagued with CEO changes and an ownership structure that has been at conflict with the best interests of the company. Currently Oi has a level of leverage that I consider unsustainable (above 3x EBITDA), and is the worst rated telecom company, by Anatel's official ratings, by a wide margin. In comparison, Claro is wholly owned by America Movel, and boasts the highest market share in the mobile broadband segment, meaning that they have more pressure to maintain a high quality of data service, especially in the metropolitan areas described by Anatel.
One final potential catalyst that could work against Tim in the near term is a piece of legislation that is currently pending which, if allowed to become a permanent part of the regulatory structure, would ban the expiration of prepaid phone credits, which currently expire in no more than 90 days after purchase. This would be extremely detrimental to Tim, and also damaging to a lesser extent to Vivo, because of the aforementioned "caller pays" system that Brazil operates under. Without credit expiration, a phone could theoretically be used to receive calls indefinitely without ever needing to purchase more credit, as long as some credit exists on the account. The only form of revenue from received calls, then, would be from interconnection fees (also called termination fees), or fees paid by other operators to complete calls on a competitor's network. These fees are also under pressure to be reduced, further damaging prepaid operations.
http://seekingalpha.com/article/1687732-brazi...red-to-tim
http://seekingalpha.com/symbol/viv
Telefonica: Happy Times In Spain, But What About The Brazilian Dilemma?
Telefonica's product, "Movistar Fusion," which is a package of landline, mobile telephone, fixed and mobile broadband connection, and TV service on the same bill, received 2.5 million customers in one year, completed in October this year
Movistar Fusion has shown good momentum in its first year. It has been a driving force in Telefonica's 50.2% OIBDA margin. With this upward trend, we can expect this product will continue to experience an increasing adoption rate in the coming quarters.
Vodafone, being the first to launch a 4G network in Spain, received the first mover advantage and has grabbed 86% share of this market.
Brazilian Dilemma: What to choose?
The Brazilian antitrust authority has ruled against Telefonica; it has to choose one of two options-- either it can keep a majority stake in Brazil's largest operator Vivo or reduce its stake in Telco, which is the holding company of Telecom Italia (TI). Telecom Italia owns 67% stake in TIM Brasil, which is the second largest operator in the country. The authority has also imposed a fine of $6.5 million on Telefonica for increasing its stake in Telco from 46% to 66%.
Chances of Telecom Italia selling its TIM Brasil stake
The company can solve this issue through the break-up of TIM Brasil among Telefonica Brasil and the other two rivals, America Movil (AMX) and Oi SA (OIBR). For this, Telefonica has to persuade Telecom Italia, which is reluctant to sell its stake despite its debt of $38 billion.
http://seekingalpha.com/article/1894161-telef...an-dilemma
............Vivo/Claro represent 53.73% of the mkt
