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 Business News | April 2005 
Telmex Buys US 282M of Embratel Stock Wire Services
 Wire services
Telefonos de Mexico SA, the nation's largest fixed-line telephone company, injected 719 million reais (US282 million) in Brazilian unit Embratel Participacoes SA to help it finance investment and cut debt.
Telmex, controlled by billionaire Carlos Slim, bought 167.1 million Embratel shares for 4.30 reais per 1,000 shares in the second round of an offering to existing shareholders this week, Embratel said in a filing with the U.S. Securities and Exchange Commission today. Embratel said minority shareholders bought 5 million reais of stock in the offering.
Telmex is injecting capital in Embratel, its biggest unit outside of Mexico, in a bid to boost Brazilian profit. Mexico Citybased Telmex had already spent 612 million reais on Embratel stock last week in the first round of the Rio de Janeirobased company's share sale. Embratel, Brazil's largest longdistance carrier, posted its first profit in a year in the first quarter.
"They have the cash and need to put money in Embratel to stop it from losing market share and to clean up its balance sheet," said Xavier Escala, an analyst with a unit of Banif SGPS SA in Mexico City.
The lack of interest in new stock from Embratel's minority shareholders isn't a problem for Telmex because it wants to raise its stake in the Brazilian company as much as possible, Escala said. Telmex owned 34 percent of Embratel prior to this and last week's stock purchases.
Telmex shares have underperformed the Mexican benchmark stock index in the past 12 months, declining 6.1 percent as the Bolsa index rose 14 percent. Telmex shares rose 33 centavos, or 1.8 percent, to 18.62 pesos today. The Brazilian stock market is closed for a national holiday.
Embratel said this week it had its first profit in a year after reducing administrative expenses. First-quarter net income rose more than nine-fold to 43.3 million reais. Revenue, which was little changed from a year earlier, has grown more slowly for the company than for rivals as a lack of cellular and local services forced Embratel to pay competitors to connect its calls.
In the 12 months ending March 30, Embratel's average quarterly revenue was 1.83 billion reais, 1 percent less than the 1.85 billion-real quarterly average for 2001. At Tele Norte Leste, Brazil's largest phone company, which has added longdistance and cellular services in recent years, average quarterly income has jumped by more than half to more than 3.8 billion reais.
Telmex probably will buy the remaining 261 million reais of stock that Embratel plans to offer to existing shareholders next week, Escala said. Embratel has raised 1.56 billion reais since last week, of which 1.33 billion reais came from Telmex, according to the SEC filing. |
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