Embratel is investing time and energy in efforts to show investors and equity analysts that the collapse of WorldCom won?t damage its viability, that competition doesn?t represent as big a threat as imagined, and that it has a sound business plan and a strong chance of persuading the regulator to force the LECs to reduce interconnect rates. Its arguments seem to have convinced a substantial number of analysts at least. Although Embratel stock has lost a good deal of terrain lately, falling 22.7% in the last five days, analysts say the decline was due to profit taking after the 66% climb in the last week of August.
At a meeting with analysts on August 28 management presented data that sounded convincing, especially with regard to the competition. Embratel is weak in low-income residential voice, precisely the least profitable segment and the locus of most delinquency. Its greatest strength is in the corporate segment, where it offers more comprehensive services of higher technical quality than the competition. Residential users and small business account for 40% of revenue. Here it?s concentrating on alternative plans, encouraging direct debt and payment via the Internet, blocking calls by delinquent customers, offering prepaid service to low-income users, and entering into co-billing agreements with local carriers. Embratel aims to have some 4 million customers sign up for co-billing or prepaid service.
Embratel hasn?t lost market share in the corporate segment, which accounts for 60% of revenue. Revenue from voice has even increased moderately despite price cuts due to competition. In this segment Embratel is investing heavily in points of presence to reduce its dependency on interconnection, tailoring service plans to customer needs, and placing more emphasis on small and medium business.
The start of local telephone service is scheduled for November 1 in Recife and Fortaleza, with coverage lined up for extension to 27 cities by March 2003. Embratel is targeting firms with more than 15 lines and Internet access, as well as major corporations. It hopes to circumvent the lack of number portability by adding its long-distance code (21) to the last four digits of existing numbers.