Tele Norte Leste Participacoes SA (ADR) (TNE)

Schmacko (< 20) Submitted: 6/19/08 11:13 AM : Start Price: $24.68 TNE Score: -3.08

Anatel (Brazilian agency of telecommunications) recently (june 13th) changed brazilian law allowing fixed line telecom companies (82% of TNEs bidness) to operate in more than one region in Brazil. The decescion now has to go "before the Communications Ministry which will allow for 30 days of public consultations on the proposed changes before being presented to President Luiz Inacio Lula da Silva for approval." -from an ap article. Lula, unless he's changed his mind, is for this change. The reason this is important is it allows Oi's aquisition of Brazil Telecom to go through. This better position's TNE to compete with the likes of Telefonica SA out of Spain and Mexicos' American Movil. The combined company would control about 17% of Brazil's cell phone market. Cell phone pentration in Brazil has lagged behind some of its regional neighbors, which just means it has more room to grow, and it is, fast. Tele Norte has also said they plan on becoming a regional South American player by adding 30 million clients outside of Brazil in the next 5 years.

There is a downside to the ruling in that Anatel has said that Oi must split it's broadband services off into a seperate company. Still I expect Lula to rubber stamp this next month and TNE to grow at a nice steady clip after that.

Full disclosure: I am a holder of TNE ADRs.

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