SBC Communications Leads Investment to Acquire Stake in Brazilian Wireless Provider; Brazilian wireless market presents tremendous opportunity - Algar Telecom Leste - Company Business and Marketing

Cambridge Telcom Report, Dec 27, 1999

SBC Communications Inc. Monday announced that it has agreed to acquire a significant stake in Brazilian wireless provider Algar Telecom Leste (ATL) S.A., which serves customers in Brazil's Rio de Janeiro and Espirito Santo states.

Telefonos de Mexico S.A. de C.V. (Telmex) (NYSE:TMX) will join SBC in the investment.

The transaction gives SBC and Telmex access to Rio de Janeiro's dynamic wireless market whose annual growth rate is expected to exceed Brazil's national wireless growth rate.

Under the terms of the agreement, SBC and Telmex will acquire their combined stake from Algar Telecom, a private diversified Brazilian company. As part of the transaction, Williams Communications (NYSE:WCG) will reduce its stake to a 50-percent economic interest in ATL. SBC and Telmex will have the opportunity to subsequently increase their investment to a 50-percent stake in ATL upon regulatory approval. Until then, Algar retains an investment in ATL as well as voting and board control of ATL in accordance with Brazilian regulations.

The companies hope to complete the transaction by year-end, pending Brazilian regulatory approval. Financial terms of the agreement were not released.

While roughly 17 million people live and work in ATL's service area, only about 2 million have wireless service. This relatively low penetration presents a substantial growth opportunity for ATL and its investors.

"SBC has strengthened its global footprint by entering Brazil's booming wireless market," said Edward E. Whitacre Jr., chairman and chief executive officer of SBC Communications. "This transaction is another important step toward reaching our goal of becoming a truly global full-service provider, and we believe that this investment will create long-term shareowner value while further extending SBC's global reach."

"SBC and Telmex have considerable wireless experience and we're looking forward to sharing our best practices with ATL management for the benefit of customers and shareholders," said Jaime Chico Pardo, chief executive officer of Telmex. "We also look forward to working with SBC and ATL to help stimulate additional wireless competition throughout Rio de Janeiro and Espirito Santo while enhancing customers' lives by providing the most advanced wireless communications possible."

ATL's wireless operations use the TDMA standard, the same technology SBC and Telmex use in most of their domestic wireless properties. TDMA also is the predominant wireless technology throughout Brazil, which gives ATL customers even greater roaming options than customers using other wireless standards. SBC and Telmex, which serve 10.3 million and 4.1 million domestic wireless customers, respectively, expect that their TDMA experience will immediately benefit ATL.

"While SBC and Telmex bring a lot to the table, ATL already is a solid operator having added 900,000 wireless subscribers since it began operations in December," said Whitacre. "We're looking to build on ATL's strong start, and create long-term value for investors and customers."

"After just one year in business, ATL already is the fastest- growing wireless provider in these two Brazilian states," said Howard Janzen, president and chief executive officer of Williams Communications. "We're pleased to have SBC and Telmex join us in this investment so that we can continue to develop opportunities that leverage our companies' respective strengths and experiences."

"We are looking forward to having SBC and Telmex as partners in ATL. This partnership will enhance the high quality of service to our cellular customers in Brazil," said Jos Mauro Leal Costa, chief executive officer of the Algar group.

"ATL welcomes SBC and Telmex as they join Williams and Algar in building upon ATL's unprecedented growth, which was recently recognized with the 'Marketing Best' award by Fundacao Getulio Vargas (FVG), the leading business school in Sao Paulo," said Carlos Henrique Moreira, president and CEO of ATL. "This investment will strengthen ATL's competitive position by providing the basis for continued growth and profitability in the new millennium."

SBC Communications Inc. (www.sbc.com) is a global communications leader. Through its trusted brands -- Southwestern Bell, Ameritech, Pacific Bell, SBC Telecom, Nevada Bell, SNET and Cellular One -- and world-class network, SBC provides local and long-distance phone service, wireless and data communications, paging, high-speed Internet access and messaging, cable and satellite television, security services and telecommunications equipment, as well as directory advertising and publishing. In the United States, the company currently has 87.3 million voice grade equivalent lines, 10.3 million wireless customers and is undertaking a national expansion program that will bring SBC service to an additional 30 markets. Internationally, SBC has telecommunications investments in 22 countries. With more than 200,000 employees, SBC is the 14th largest employer in the U.S., with annual revenues that rank it among the largest Fortune 500 companies.