Telefonica has suspended the purchase of 20,000 ADSL modems in response to the Brazilian Real?s slide against the US Dollar. The modems were ordered in September from Parks, its main equipment supplier, as part of a plan to expand the telco?s broadband Internet service, Speedy. Management says it hasn?t terminated any contracts and is installing 750 new ADSL lines per day as usual. Parks produces the modems in Brazil but 90% of the cost is in dollars because most of the components are imported. Telefonica pays a dollar price translated into local currency at the exchange rate in force 30 days after delivery. It can?t pass exchange-rate fluctuations along to customers because of tight regulation as an ILEC. In the last set of financial statements published, Telefonica reported installation of 282,000 ADSL lines in the second quarter for an increase of 42% on the previous quarter. ADSL lines then accounted for 2.3% of all lines in operation.
Parks
Telefonica has so far installed 200,000 modems purchased from Parks. The manufacturer is offsetting the suspension of Telefonica?s orders with sales of other models and the supply of ADSL modems to Embratel, GVT and Brasil Telecom. Meanwhile, it?s negotiating with a different supplier of components and ADSL technology with the aim of reducing the cost in dollars and preparing to sell modems to distributors.
