Telesp S.A. - ADR (VIV) - Bull of the Day
June 26 2011 - 8:00PM
Zacks
We are upgrading our recommendation to Outperform from Neutral on
Telesp S.A. (VIV) following its merger with the mobile phone
provider Vivo Participacoes. We believe the merger will boost its
existing operations and its competitive position. The combined
entity is now a full-service operator offering competitive bundled
(fixed-line and wireless) services.
Vivo reported a solid first quarter, with net income soaring
270% year over year. The company gained 1.7 million subscribers,
bringing its total customer base to 62.1 million. On the other
hand, Telesp's fixed-line operation is struggling with
disappointing first quarter net income, which was down 13% year
over year. The company lost 38,000 customers bringing the total
subscriber base to 15.06 million.
Thus, we believe the Vivo integration would bring back the
company's profitability through its strong mobile service business.
Hence, we are recommending an Outperform rating with a price target
of $34, based on 12.6x our 2011 EPADS estimate.
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