Blog > International Investing > Brasil Telecom (BTM): Up 7% or down 4%?
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Brasil Telecom (BTM): Up 7% or down 4%?

Today's Financial News - Posted October 1, 2008

Brasil Telecom (BTM) was the victim of a market dive yesterday, but it’s not a buy signal for the stock. And if Tele Norte Leste Participacoes (TNE) gets regulators on its side, BTM won’t be around much longer.

Stephanie Grimmett

Baltimore — (TFN):  Brasil Telecom (NYSE:BTM) is either up 7% or down 4%, depending on how much you take the volatile market to heart.

Yesterday, BTM was building a healthy one-day gain of 12%… until 4 p.m., when, for 30 minutes, the stock plummeted 8.5% to a close of $21.88.

This morning BTM opened at $24.11, as though nothing happened Tuesday afternoon. I’m inclined to agree with the stock, and ignore yesterday’s close as an absurdity of the market crash, which means you should take any gains, at least those figured by your favorite stock info service (like Google or Yahoo), with a grain of salt.

If you remove yesterday’s freak collapse, you still end up with a stock that’s been leaking value for the last six months.

Brazilian competitor Oi (Tele Norte Leste Participacoes) (NYSE:TNE) made a deal to buyout BTM for 8 billion reais (about $4.1 billion) in late March, which measures the company’s value at about $23 per share. But the merger has yet to go forward because of regulatory issues in Brazil’s telecom industry.

As Brazilian law stands, one fixed-line phone company can’t buy another if the two are in different license areas. I don’t know what the logic is behind that, but keep in mind that Brazil is the country that just opened its oil industry to non-government-owned competitors ten years ago. It’s rather protectionist.

Oi is expecting a legislation change in the next few months. But even if the legislation does change, don’t expect great things from BTM, the buyout was already priced into the stock. And I’d be surprised if it moved above $25 on the news. Of course, in these markets, you can never tell what will send investors into a frenzy.

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Next Article: Xstrata (XTA) and Lonmin (LMI): The buyout isn’t dead

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Posted by Stephanie Grimmett · Filed Under International Investing 

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