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We are keeping our Buy recommendation on Vivo Participacoes SA (VIV). The company has a dominant position and a strong brand in the fast-growing Brazilian wireless business. Third quarter results were encouraging together with positive developments like continued subscriber growth and the leadership in post-paid new additions.
Despite the weak economic conditions throughout the world, the short-term outlook remains encouraging due to positive industry trends in Brazil. Finally, we are optimistic about the acquisition of Telemig Celular Participacoes SA (TMB), the launching of the northeast operation, the coverage leadership in 3G, and the continued expansion in GSM [global system for mobiles] operation.
We think that the company has a strong brand in Brazil and is posting improved operating results every quarter. Additionally, the growth trend for the Brazilian wireless business remains positive in the short term. Thus, VIV has a considerable short-term upside potential in spite of the poor financial condition in the world. We believe in the near future the stock will trade around 3.5x its enterprise value (EV)/2008 estimated EBITDA. Our target price is US$14.50.
Read the full analyst report on VIV
Read the full analyst report on TMB
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