Soros-backed telecom venture to invest over $200 million in Brazil

SAO PAULO Tue Aug 6, 2013 5:03pm EDT

George Soros, Chairman of Soros Fund Management LLC addresses the audience during an economic speech in Frankfurt April 9, 2013, on the topic 'How to save the European Union from the euro crisis.' REUTERS/Ralph Orlowski

George Soros, Chairman of Soros Fund Management LLC addresses the audience during an economic speech in Frankfurt April 9, 2013, on the topic 'How to save the European Union from the euro crisis.'

Credit: Reuters/Ralph Orlowski

SAO PAULO (Reuters) - A new Brazilian telecommunications company backed by billionaire financier George Soros plans to invest at least 500 million reais (US$218 million) over the next three years, executives said on Tuesday, ramping up competition among Internet providers in a cooling market.

A fund run by Soros is set to invest at least $150 million, giving him a majority stake in On Telecom, which offers home and office connections over fourth-generation (4G) cellular networks, Chief Executive Officer Fares Nassar said at a news conference.

The technology is aimed at markets with little or no broadband cable coverage, exploiting a lack of fixed-line investments in many regions. By the same token, Brazil's mobile phone market exploded over the past decade as cellphones became a first telephone line for millions of remote households.

On Telecom is launching in the state of São Paulo, Brazil's most populous, but Nassar said it could soon expand into other regions as the government sells new 4G licenses. He said that would require additional funds from Soros, new investors, or an initial public offering.

"Given that we have aggressive growth plans, an IPO or new partners could be the best way to capitalize and finance those new expansions," Nassar told reporters in São Paulo.

The upstart company is targeting a niche in Brazil's market exploited in recent years by broadband operator GVT SA, which offers specialized broadband services in regions and business segments underserved by bigger companies. GVT has expanded rapidly in markets not dominated by large phone companies, allowing it to charge slightly higher rates for Internet services.

France's Vivendi SA, which bought GVT three years ago, put the sale of the Brazilian company on hold in March after bids fell short of its asking price. One reason Vivendi has considered selling GVT is the cost of investments, which topped $5 billion since the French company took over.

At the same time, phone companies such as Telefonica Brasil SA, TIM Participaçoes SA and Grupo Oi SA are shifting focus to higher-value broadband services amid a sharp slowdown in Brazil's mobile phone market.

Federal officials at On's launch event appeared to be pleased with the promise of a more competitive landscape.

"We're rooting for you to grow a lot and nip at the ankles of the competitors that are standing around out there, waiting to be shaken up," said communications minister Paulo Bernardo.

The head of regulatory agency Anatel urged On Telecom to strike out as soon as possible for other regions.

"I think there's a huge potential market," said Anatel's João Batista de Resende. "We even have more frequencies that we're going to auction, hoping that Soros opens his purse."

Last year Cayman Islands-based Soros Fund Management received regulatory approval to take over Brazil's Sunrise Telecomunicaçoes, the holding company that controls On Telecom.

In September, Sunrise acquired broadcast rights for 4G frequencies covering 133 municipalities around Sao Paulo state.

($1 = 2.30 Brazilian reais)

(Reporting by Brad Haynes; Additional reporting by Luciana Bruno; Editing by Guillermo Parra-Bernal, Toni Reinhold)