Telecom Provides Opportunity to Benefit From Brazil's Recovery
We think Telefonica Brasil is positioned best for success.
We believe Telefonica Brasil (VIV) is the telecom best positioned for success in Brazil thanks to its narrow economic moat, which is evidenced by its larger market share, particularly with its contract wireless base, higher revenue, better margins, and greater data usage. All of these strengths make the company more immune from the weak Brazilian economy; thus, we believe it can succeed even if Brazil's economy remains stuck in the mud. Any recovery in Brazil's economy would provide an additional boost.
In Brazil, there are four main telephone operators: Telefonica Brasil, TIM Brasil (TSU), Claro (owned by America Movil (AMOV)/(AMX)), and Oi (OIBR). We think Telefonica Brasil is the best positioned for current weak economic conditions as well as an economic recovery. Of the three pure-play Brazilian telephone companies, we credit only Telefonica Brasil with a moat. We also think America Movil has a narrow moat, but this is primarily due to its massive scale advantage in Mexico, where it boasts about 70% wireless market share. Telefonica Brasil's moat is driven by its superior subscriber base, which we believe is indicative of a higher-quality network that provides it with a cost advantage.
Allan C. Nichols does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.