Latin American firms hold top 4 spots for telecom investment recommendations

Tuesday, January 18, 2011

Of the four companies stock market blog Seeking Alpha selected as top picks for global telecom investment opportunities outside of the US, all were Latin American operators and three were Brazilian.

The four companies highlighted as top telecom investment opportunities were Telecom Argentina (NYSE: TEO), Telesp (NYSE: TSP), TIM Participacoes (NYSE: TSU) and Vivo Participacoes (NYSE: VIV), the latter three being based in Brazil.

All four telcos are profitable and produce significant free cash flow relative to invested capital, with "manageable" debt levels and undervalued share prices when considering EV/Ebitda, according to Seeking Alpha.

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The media outlet highlighted the number of acquisitions, mergers and demerging that occurred around the world in the last year. This type of activity is expected to increase in 2011, as a result of emerging-market companies expanding to developed markets and the increasing availability of private equity to fund these types of deals.

The surge in demand is expected to drive telecoms growth 10-11% this year in Latin America. Additionally, Seeking Alpha reported that Brazil, Russia, India and China (BRIC) are expected to see telecoms spending increase to nearly US$1tn over the next few years.

Globally, telecoms industry association TIA predicts wireless subscribers will increase from 1.4bn-5.5bn over the next four years.

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