Embratel preferred was the only telecoms stock to post a gain for most of the trading session on Wednesday, December 4. Persistent reports on a takeover seem to have been the main driver. Investor enthusiasm isn?t matched by what has so far transpired of the incoming Administration?s attitude. ?On the contrary, the PT?s telecoms experts couldn?t care less if Embratel is sold,? a well-informed source told TELETIME News, referring to the bid being engineered by Brasil Telecom, Telemar and Telefonica with the support of Bassini, Playfair & Wright. The PT is the Workers Party, to which President-Elect Luís Inácio Lula da Silva belongs.
Bittar skeptical
Another leader of the PT, Congressman Jorge Bittar (widely seen as the next communications minister), is said to be convinced that Embratel can go it alone. His meeting with Purificación Carpinteyro, vice president of Embratel, apparently reinforced this view. Luiz Gushiken, tipped for another top job in Lula?s cabinet, and Congressman Walter Pinheiro (PT, Bahia), also attended the meeting. Anatel will present the same view to the PT at forthcoming meetings.
54% gain in last month
For investors the question is whether Embratel isn?t already overvalued: the stock soared 20% in the last three trading sessions on the São Paulo Stock Exchange (Bovespa) and is up 54% in the last month. A few analysts argue that Embratel is actually undervalued in light of its market leadership, especially in the corporate segment. Highly respected experts have even projected a target price of 10.00 Brazilian Reals. The common stock (EBTP3) closed Tuesday, December 3, on 3.99 BRL per 1,000 shares, the preferred (EBTP4) on 3.37 BRL. Others, however, believe the rally reflects defensive positioning by large investors concerned to avert delisting of Embratel?s ADR by the New York Stock Exchange, which would be a blow to liquidity. The ADR was trading at $0.94 near the end of the session on Wednesday, December 4, for an intraday rise of 1.08%. The NYSE usually delists ADRs that trade below $1 for a long time.
