In an interview with Reuters Wednesday, September 4, Ana Paula Canais, executive vice president of the holding company for Telesp Celular, promised litigation against Telecom Italia Mobile (TIM). This means more headaches for Anatel and President Fernando Henrique Cardoso, who encouraged the agreement between Opportunity and Telecom Italia enabling the latter to give up part of its stake in Brasil Telecom until the end of next year so that it can start operating PCS. Now Telesp Celular plans to prevent TIM competing in São Paulo State. ?They want to be TIM?s Embratel,? said one analyst, referring to the long-distance carrier?s legal battle against competition from Telefonica. Telesp Celular is a subsidiary of Portugal Telecom. In the Reuter?s interview Ana Paula Canais called Telecom Italia?s deal with Opportunity ?completely irregular? and hinted that Telesp Celular will seek judicial review. The A-band operator for São Paulo has already filed a complaint with Anatel against TIM?s application for a permit to go ahead with PCS operations.
What most riles Telesp Celular is the GSM platform to be used by the new player. A source in the PT subsidiary told an equity analyst that its market research shows consumers will be attracted by the broader service offering and lower prices of GSM handsets. Telesp Celular knows it won?t be able to keep TIM out of the area for ever and aims to attack the technology.
Directors of Anatel decided at a board meeting Wednesday, September 4, to postpone a decision on the Opportunity-Telecom Italia deal until next week, but most punters can?t see how the regulator can fail to approve it. The stock market reflected the pro-Italian view, with Telesp Celular losing 2.61% to close on 3.73 reals while TIM?s existing TDMA/CDMA operators (which will benefit from synergy with PCS) posted strong gains: 3.9% for Tele Celular Sul and 3.63% for Tele Nordeste.
TIM?s entry into the market as a competitor couldn?t have come at a worse time for Portugal Telecom. PT has just completed an equity restructuring that increased its stake in total ownership of Telesp Celular from 14% to 65% and will transparently show investors in Portugal two unpleasant facts. First, in 1998 PT acquired 14% of Telesp Celular for 3 billion US dollars, equivalent to a stock price of 18-19 reals, whereas its current 65% holding is worth only 1bn USD. Second, Telesp Celular owes 2.3bn reals, mostly in dollar debt, and PT?s European revenues are declining.