--Brazilian mobile telephone firm Claro first to deliver investment plan to regulator
--Regulator has banned three firms from selling new lines pending assurances on investments
--Regulator criticized poor quality of service among all four of Brazil's main operators
--Shares in TIM, Telefonica Brasil plunge after Anatel decision
By Matthew Cowley
SAO PAULO--Brazilian mobile phone operator Claro on Thursday said it has delivered an investment plan to the government just one day after being banned from selling new lines in Brazil's wealthiest and most populous state for poor quality of service.
Claro, a unit of Mexico's America Movil SA (AMX, AMOV, AMX.MX), is investing 3.5 billion Brazilian reais this year, the company said in a statement. It didn't provide details for subsequent years.
On Wednesday, Brazil's telecom regulator, Anatel, banned Claro and two other phone companies, Oi SA (OIBR, OIBRC, OIBR4.BR) and TIM Participacoes SA (TIMP3.BR, TSU), a unit of Telecom Italia SpA (TIT.MI, TI, TIA), from selling new mobile phone lines until they get sufficient assurances on investments to improve quality of service.
TIM won't be allowed to sell new mobile phones in 19 states, Oi in five states and Claro in three states, Anatel said. Significantly, Claro won't be allowed to sell phones in Brazil's wealthiest and most populous state, Sao Paulo, while TIM won't be allowed to sell lines in Rio de Janeiro state.
In a statement, TIM said it was "fairly surprised" by the regulator's decision, and the "extreme measure" was "disproportionate" and anti-competitive. It said it has invested close to 3 billion Brazilian reais per year over the last four years to increase capacity and extend its network coverage.
Swiss investment bank Credit Suisse on Thursday cut its recommendation on TIM's shares to underperform from neutral, and suggested switching into the shares of rival operator Telefonica Brasil SA (VIV, VIVT.BR), which wasn't affected by the government ban on sales.
"TIM is the company most directly affected by the ruling," Credit Suisse said in a note. "We downgrade the shares from neutral to underperform and recommend shifting exposure from TIM [Participacoes] to Telefonica Brasil (Vivo). Vivo was the only one of the four major operators not subject to sales bans in any regions."
Shares in some telecoms firms were among the worst performers in Sao Paulo on Thursday. TIM shares traded in Sao Paulo were down 9%, while the Ibovespa index was up 1.3%. Shares in Telefonica--which must also submit an investment plan but didn't face any ban on sales--were down 2%.
Shares in Oi were up 4.5%. Credit Suisse said Wednesday's 4% loss by Oi was "likely overdone, as the impact of Anatel's ruling on Oi is limited to a small portion of its operations."
In a statement late Thursday, Oi said that the data used by Anatel appeared to be out of date, and didn't take into account "the concentration of investments carried out in the last 12 months."
Claro isn't traded locally. New York-traded shares in America Movil were down 1.4%.
Growth rates in Brazilian mobile were already on a declining trend based on market saturation, rejuvenated competition from Oi, lower mobile termination rates, and weak economic growth, Credit Suisse said. "The temporary prohibition on sales of new lines and increased regulatory scrutiny of quality are likely to create more challenges to grow, especially for TIM," it said.
Write to Matthew Cowley at email@example.com
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