Telefonica SA (NYSE:TEF) - May Get Offered an "Unprecedented Deal"

Forbes’ recently released list of billionaires shows a Latin America telecom owner at the top of the list, and also a Brazilian, Eike Batista, cracking the top 10 at number eight. It gives you the distinct impression that there’s something in those markets worth looking into. One colleague who is intimately familiar with the Spanish-speaking and Brazilian telecommunications market in Latin America is financial editor Jim Nelson of the Lifetime Income Report. Today he issued an urgent announcement on how more Brazilian mobile customers could be falling into Madrid-based Telefonica’s (NYSE:TEF) lap.

From Nelson’s report:

“Telecom Italia, the largest fixed-line and mobile provider in Italy, has been in deep trouble the past few years. After some unfortunate missteps in the past, Telecom Italia was forced to take on new leadership in 2007.

“This arrangement left Spanish telecom, Telefonica (NYSE:TEF), along with a few other investors, in control of the company. Today, we could see an even better deal for the company.

“The recent global recession has had an incredibly large impact on Telecom Italia. Combine slower growth in its mobile business with an absolutely dismal fixed-line performance and you get a company that’s falling apart.

“Telefonica, which has already locked in roughly EUR1.3 billion in cost savings from its work on Telecom Italia, is likely to get offered an unprecedented deal.

“The Spanish giant will potentially get first dibs on any Telecom Italia asset it wants at an extreme discount. This includes a lucrative Brazilian mobile phone business that Telefonica will certainly jump on given the chance.

“The rest of Telecom Italia’s business will most likely be either nationalized by Italy’s Berlusconi administration or sold off to the highest bidder.

“Of course, nothing about this potential deal is set in stone. There is some backlash already about the possibility of selling Italy’s largest telecom to foreign companies.

“The company recently announced its 2009 year-end numbers. Its Spanish business is starting to show signs of a recovery, while its South American and European businesses are taking off.

“In the fourth quarter, revenue grew a solid 6% overall, while net income jumped 29.6%.”

Based on Nelson’s analysis, Telefonica may have some newly-developed and lucrative growth opportunities on the horizon. You can read more of Jim Nelson’s research on the topic, and learn about his Lifetime Income Report, on the Agora Financial research and reports page.


Rocky Vega,
The Daily Reckoning