Telefonica (VIV) Aims To Expand In 20 New Brazilian Cities
Zacks Investment Research | Apr 10, 2018 10:48PM ET
Telefonica (MC:TEF) Brasil S.A. (NYSE:VIV) recently unveiled an ambitious plan to expand its fiber-to-the-home (FTTH) broadband service across 20 new cities in Brazil. With this, the largest telecommunications firm in the country seeks to strengthen its position in the market and increase its coverage to underserved households across the nation.
The company reportedly serves about 7 million households in 87 cities in Brazil. Telefonica Brasil expects to more than double this tally to 15 million households within a span of three years. The company is likely to invest 26.5 billion reais ($7.8 billion) during 2018-2020 as part of its massive expansion strategy, bulk of which would be utilized for FTTH service for improved data speed.
The strategic move to focus on fixed-line broadband technology was largely fuelled by a saturated mobile market. The company expects to capitalize on the improved growth potential of the largest economic powerhouse in Latin America by focusing on healthy organic growth. At the same time, Telefonica Brasil expects to benefit from potential acquisition opportunities.
Telefonica Brasil has an attractive service territory as Sao Paulo is the center of economic activities in Brazil. We believe that the full integration of Vivo has helped the company offer fixed-line services throughout the nation and return to profitability. The company is offering bundled (fixed-line and wireless) services, which are improving its competitive position and expanding opportunities further.
Moreover, Telefonica Brasil is increasingly investing in technology upgrades and broadband network infrastructure expansion to retain competitiveness in a rapidly changing market. The company joined rival Claro for building backhaul infrastructure for 4G and 3G networks under a three-year contract that will fortify its Vivo brand. Telefonica Brasil is also planning to deploy a nationwide 4G network and has signed a deal with Ceragon to install the network across the country. Moreover, Vivo is focusing on higher growth areas like data transmission and video services.
However, the stock has underperformed the Original post
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