Morgan Stanley: Brazil Vivo Needs $1.25 Billion For GSM Overlay

SAO PAULO -(Dow Jones)- The decision of Brazil's largest mobile telephone operator, Vivo to overlay its existing technology onto a GSM platform will require an additional investment of $1.25 billion for the company in 2007, Morgan Stanley said in a research note Monday.

"We already included in our estimates the additional capex for the GSM overlay. We estimate that overlay will require an additional capex of $1.25 billion in 2007, equivalent to $41.5 per subscriber. We estimate total capex to reach US$1.9 billion in 2007," Morgan Stanley said.

On Friday, a spokesman for Portugal Telecom, one of Vivo's controlling shareholders, confirmed the Brazilian firm will roll out a GSM platform by the end of the year. Vivo, in a statement, confirmed that it is in studies to introduce a GSM platform in its operations.

Vivo, which is jointly owned by Portugal Telecom and Spain's Telefonica, is the only local mobile operator that uses the rival CDMA technology.

"Vivo should achieve certain benefits with a GSM network that we believe the stock market has not priced in yet, namely cheaper handsets, lower maintenance capex and a decline in fraud related charges, among others. Our estimates already account for these benefits," said Morgan Stanley.

The investment house reiterated its equal-weight rating for the company's shares and set a target price of $4.00 per American Depositary Receipts. On Friday, reflecting the GSM announcement, Vivo's ADRs closed down 5% at $2.46.

-By Rogerio Jelmayer, Dow Jones Newswires; 55-11-3145 1480; rogerio.jelmayer@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 3rd July 2006