By Mario Osava
RIO DE JANEIRO, May 7 1998 (IPS)

The most lucrative phase of Brazil’s privatisations process will open in the next few months, as the telephone companies are sold off, starting from July 15, to be followed by the electricity companies and others.

The 26 State telephone companies, reorganised into three fixed telephone groups, eight mobile and the long distance group, should bring in some 18 billion dollars, said the new communications minister, Luiz Carlos Mendoza de Barros.

And the central government already earned a similar sum in the sale of 56 State owned companies since the beginning of the privatisations in 1991, bringing in 17.956 billion dollars, according to the National Economic and Social Development Bank (BNDES), in charge of the programme.

The government will sell its entire 21 percent capital share of the telephone system today controlled by the Telebras holding.

Going on current share prices, the total value of the companies will bea around 50 billion dollars, but overpricing of more than 60 percent is expected, according to previous experience. This explains Mendonza de Barros’s forecast.

The sale of the telephone and electricity generating companies, added to the privatisations of the State governments, should bring in around 50 million dollars this year and next, said Jose Pio Borges, BNDES vice-president.

Thus, in just two years the same amount of income will be made, and debts transferred to the private sector, as in the whole of the first seven years of the privatisations programme in Brazil, said Borges, who is handling the bidding process.

The state privatisations are an important part of the process. Up until now they total nearly 20 billion dollars, mainly a product of the sale of electricity distributing companies over the last two years.

The governments of the 27 Brazilian states own banks, energy and transport companies and they aim to include the basic sanitation concerns, the sale of which could help pay off the suffocating debts accumulated in recent decades.

Furthermore, in one particular case, the state of Rio Grande do Sul owns a telephone company, the Compania Riograndense de Telecomunicaciones, which will be privatised on June 16. In 1996 35 percent of its shares had already been sold to Spain’s Telefonica in association with a Brazilian group. It will now sell off the rest.

The federal government will swell its income with the sale of minority shares held in some companies privatised earlier.

It is hoping, for example, to obtain some two billion dollars for its remaining 25 percent of Vale do Rio Doce company shares – the mining giant taken over by a private national group in May 1997 at a cost of 3.299 billion dollars.

Next year, plans are to sell off 31 percent of Petrobras shares – an oil company which will continue under State control. Market experts estimate the income could top five billion dollars.

But the big star of the programme is the telecommunications sector, both because of the large sums involved and the impeccable planning of its privatisation, carried out by former Communications Minister, Sergio Motta, who died on April 19.

The size of interest in the sector was proven in the licitations opened for new mobile phone companies since last year.

The concessions obtained prices which enormously exceeded all forecasts, reaching 341 percent in Sao Paulo and 201 percent in Rio de Janeiro. The income has already exceeded 7 billion dollars, and the northern region has still to be offered for bidding, although there are no bidders so far.

In all the regions on offer, there will be two companies both for mobile and fixed phones, thus avoiding monopolies and promoting competition.

The acquisition of the state telephone companies include rules and commitments to protect users. The consortiums winning the bidding will have to “universalise” fixed telephones. The aim is to double the number of private phones to 33 million, with 1.25 million public units by the year 2001.

Up until 2005, the concessionaries will have to provide telephones for all settlements with more than 300 people. “There will even be telephones in every village with 100 indigenous people,” said Mendonza de Barrios, Motta’s sucessor.

The new minister is not afraid these rigid demands will scare off interested capital. What is on offer is a greatly expanding market, with “backlogued demand of 20 million telephones,” as well as an organised and experienced operating structure, he added.

Excerpt: