Telefonica Brasil SA (ADR) (NYSE:VIV) Banking On GVT Acquisition To Offset Poor Run


Dallas, Texas 06/26/2015 (Financialstrend) – Spanish telecom giant Telefonica Brasil SA (ADR) (NYSE:VIV) plunge in the market continues as the stock closes in on its 52 week low. The plunge comes on the heels of the company posting dismal first quarter earnings in which net income came in at $203.5 million, a decline of 12.3% from last year’s, same period levels. However, the dismal showing on the financial front has not stopped the company from pursuing other avenues of growth.

GVT Acquisition

The company recently closed the acquisition of GVT as it moves to consolidate its operation in Brazil. As per the deal, Telefonica is to pay Vivendi $6 billion in cash and $578 million as a debt obligation. The company is also to transfer 11.3% non-voting stake in Telefonica Brasil SA (ADR) (NYSE:VIV).

GVT assets should allow Telefonica Brasil SA (ADR) (NYSE:VIV) to extend its broadband network to 10.4 million homes in Brazil. The merger could open up the company’s broadband market share that looks set to jump to 30%.

It is still unclear what impact the acquisition of GVT will have on Telefonica Brasil SA (ADR) (NYSE:VIV) fixed-line voice business. The business has come under immense pressure in terms of stiff competition in the recent years as more service offerings like wireless telephony come to market.

Possible Challenges Going Forward

Telefonica Brasil SA (ADR) (NYSE:VIV) mobile business is also experiencing its worst run in the recent years having been hit hard by competition from Personal Mobile Service and Internet access service providers. Increased wireless penetration and a weak Brazilian currency, as well as regulatory pressure, are some of the other headwinds expected to weigh in on the company’s performance going forward.

The company has been forced to bundle its offerings as a measure of strengthening its competitive advantage. However, underperformance on the fixed voice and access business continue to weigh in on its sentiments in the Street.

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