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Telefonica Brasil SA ADR VIV

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

The Pandemic Weighs on Telefonica Brasil as It Chases Oi

Analyst Note

| Michael Hodel, CFA |

The pandemic hit Telefonica Brasil’s results about as we expected during the second quarter, particularly in the postpaid wireless business, where the firm lost customers for the first time in at least a decade. In addition to earnings, management provided some detail on the joint proposal with TIM and America Movil to acquire Oi. The three firms presented a revised offer earlier this week after Oi announced it had entered exclusive negotiations with an entity backed by U.S. private equity firm Colony Capital. Telefonica management believes working with its two Brazilian rivals will mitigate regulatory concerns, but this remains a key uncertainty. At this point, we don’t plan to materially change our $11 Telefonica Brasil fair value estimate, and we believe the shares are modestly undervalued.

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Company Profile

Business Description

Telefonica Brasil is the largest wireless carrier in Brazil with 75 million customers, equal to about 33% market share. The firm is strongest in the postpaid business, where it has 43 million customers, about 39% share of this market. Telefonica Brasil is the incumbent fixed-line telephone operator in Sao Paulo state and, following the acquisition of GVT, the owner of an extensive fiber network across the country. The firm provides Internet access to 7 million households on this network. Following its parent Telefonica’s footsteps, Telefonica Brasil is cross-selling fixed-line and wireless services as a converged product. The firm is also selling pay-tv services to its fixed-line customers.

Contact
Avenida Engenheiro Luis Carlos Berrini, 1376, 32 andar
Sao Paulo, SP, 04571-936, Brazil
T +55 1134303687
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 32,793