Brazil mobile firms seek govt help as credit dries
NEW YORK, Nov 19 (Reuters) - Brazilian mobile phone companies are asking the government to postpone payment on taxes and recently acquired operating licenses in order to meet investment plans despite tighter credit conditions, the CEO of Vivo Participacoes said on Wednesday.
Roberto Oliveira de Lima said Brazilian companies and consumers will likely feel the pinch of tighter credit markets next year, which may result in higher unemployment rates and lower consumer income.
"The same way the government is helping other sectors in Brazil, it should also give our sector some stability to plan ahead," Lima told Reuters in an interview at the New York Stock Exchange.
"That decision has to be made now so our investment can actually happen six months ahead. We cannot allow a circumstantial situation to force us to take a bad decision, which would be halting investments," he added.
Vivo, Brazil's largest mobile carrier, and six other national cell phone companies under the Acel sector association have requested Brazil's Communications minister to postpone to the end of 2009 the payment for third-generation (3G) operating licenses they acquired early this year.
The other six are Brasil Telecom BRTP4.SA, Claro, CTBC, Oi (TNLP4.SA), Sercomtel, and Tim (TCSL4.SA).
They are also asking the government to delay their annual contributions to the Fistel fund for the supervision of the telecommunications sector, due by the end of March.
The measures, if approved by President Luiz Inacio Lula da Silva, would bring Vivo temporary cash relief of 1.64 billion reais ($690 million), 1.1 billion reais of which regards its 3G license payment due in December, the executive said.
The company, jointly owned by Portugal Telecom (PTC.LS) and Spain's Telefonica (TEF.MC), has enough funding to meet its debt obligations for the first quarter of 2009, Lima said, adding that more credit lines from official sources could also help the sector throughout next year.
REDUCING COSTS
Vivo's strategy for 2009 includes cutting costs to maintain a healthy cash-flow position while still reducing prices to help clients cope with tighter credit and possibly higher unemployment rates, Lima said.
Despite tougher credit conditions, Lima does not forecast a sharp slowdown in the Brazilian cell phone market, since companies still have to extend their networks to large uncovered areas in the country and recently offered 3G Internet services are expected to bring new revenue to the sector.
Nevertheless, Vivo's investment plans will depend on how the economy will perform next year, Chief Financial Officer Ernesto Gardelliano said.
"If the (credit) market remains shut down from now on, all our growth forecasts will be impacted," Gardelliano said during the same interview.
"If the growth of our client base is affected, it will make no sense to invest in new capacity." (Editing by Matthew Lewis)
