Investors should take profits out of Vivo… really?

Following the success of my previous post related to vivo, and after our first article publication in SeekingAlpha,  I’d like to share some additional insights related to the latest results published by vivo and their comparison with the rest of the market players. As detailed before, despite the growth achieved on a yearly basis, 1Q09 has not been a completely successful quarter for Vivo. The usual market slowdown of the first quarters has had a particularly high impact in the whole market due to two factors: A) The proximity to saturation of the Brazilian mobile market (136% of penetration over addressable market) and B) The impact of the financial downturn.

This negative scenario, which has caused a decrease in revenues and EBITDA across the market, has harmed Vivo specially in its acquisition rates, causing a steady erosion of Vivo’s market share. A revamping of its sales capacity, starting through tactical initiatives that deliver immediate results, continues being advisable. Due to market seasonality, a recovery in service revenues is expected over the next quarters, although original targets are unlikely to be reached.

Having said this, Bloomberg reports that Brazilian banks have passed a “crucial obstacle” with the reopening of credit markets and investors should increase their holdings in the country’s lenders while selling shares of Vivo Participacoes SA. “Lower interest rates in Brazil, together with lower financing risk, have led to an improved outlook for loan portfolio growth. Therefore investors should be “taking profits,” they wrote. It doesn’t seem that this is happening yet.

Best regards, CVA

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