Oxstones Investment Club™By Rogerio Jelmayer, WSJ Blog,
- George Soros
- Reuters
SAO PAULO–Mega-investor George Soros and a group of international investors are investing in a new telecommunications firm in Brazil, as they seek to tap into pent-up demand for high-speed Internet services.
Soros, via Soros Funds Management LLC, together with businessmen Zaki Rakib and Fares Nasser, are planning to invest as much as 500 million Brazilian real ($218 million) in a start-up telecommunications company firm providing high-speed wireless Internet access.
The firm, operating under the brand name On Telecom, will be going up against Brazil’s telecommunications giants, including Telefônica Brasil SA, Oi SAOIBR4.BR +3.23%, TIM Participações SA and mobile phone firm Claro, of Mexico’s América Móvil SAB.
The newcomer is betting that it can offer a better quality of service than the existing operators. Telecoms firms are often at the top of the list in terms of consumer complaints, and the government has been trying to secure quality improvements from operators.
“A competition shock is fundamental for the industry,” said the country’s Telecommunications Minister, Paulo Bernardo, who attended the On Telecom launch. “The start up of this new company will be very important because it will act an region where major companies have no interest.”
It has avoided the major Brazilian cities, which already fairly competitive markets, and is instead focusing on smaller cities in the state of Sao Paulo, Brazil’s most populous and wealthiest. Eventually, it wants to expand to the rest of Brazil.
The firm owns two licenses to provide so-called 4G wireless services, which are designed to provide Internet access at speeds that are comparable to normal fixed-line services. According to telecom regulator Anatel, the licenses were bought for a total of BRL19 million at a government auction held in June last year.
The licenses cover two area codes in the state of Sao Paulo, largely encompassing the city of Campinas and surrounding towns, covering a total population of an estimated $10 million.
It’s currently testing services in Itatiba, a small city in Sao Paulo state, where it has 3,300 clients.
“We want to fill the gaps left by major players here. At this moment, we are looking for small cities and we want to meet a telecommunications niche, and then we plan to expand,” said Zaki Rakib, the company’s chairman and main shareholder.
The investments will be spent over the next two or three years, said Fares Nasser, the firm’s chief executive. The firm is called Quattro Telecomunicacoes SA, but operate as On Telecom.
Rakib is currently the majority shareholder but, as investments increase, the fund controlled by Soros will see its participation increase, according to Nasser. The company may seek additional partners and may contemplate an initial public offering of shares, in the future, according to the executive.
Rakib said he’s not overly concerned about the recent weakness of the Brazilian economy. Demand for telecom services tends to remain strong, even during downturns, as consumers often treat them as essential. And longer-term, prospects should improve.
“It’s important to note that my focus for investments is 10 years, not the short-term,” Rakib said.
Tags: brazilian telecom industry, expanding data services in brazil, george soros, george soros investing in brazil telecom market, long term telecom opportunities in brazil, Mexico’s América Móvil SAB., mobile phone firm Claro, new brazil telecom start-ups, Oi, On Telecom, Soros Funds Management LLC, Telefônica Brasil SA, TIM Participações SA, Zaki Rakib and Fares Nasser