Morningstar Rating

Stock Research and Analysis

by Imari Love

Bulls Say

The mobile network is the best in the sector with the lowest dropped-call rates and the highest customer service ratings in the country.
The fixed-line network has a dominant market position in Brazil's richest and most densely populated region. Its massive footprint should make it much easier to transition existing customers to the new product offerings.
The merger finally opened the door for the firm to bundle its product with wireless service. This should not only allow it to lower its churn rate, but also could stabilize its margin, which has begun to slide. Read more 

Bears Say

Cable giant Net Servicos (which America Movil now controls) has been aggressively expanding its TV and Internet-access customer base in Sao Paulo. It also offers bundled services that could present stiff competition.
While on the surface it looks as if handset subsidies are falling, it's more of a function of carriers re-allocating the spending toward retention costs.
Termination rates are set to fall both this year and next. Theoretically, price elasticity of demand will drive usage and offset the rate declines, but that is far from a given. Read more 

Management

Telefonica is the biggest shareholder of Telesp, controlling about 86% of the voting shares and 88% of its total capital. Although we value the company's relationship with its influential parent, it also worries us because Telefonica can force Telesp   Read more 

Profile

Telefonica Brasil provides fixed-line services in Sao Paulo and mobile service throughout the entire country. On the fixed-line side, the firm provides international long-distance   Read more 

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