According to Rodrigo de Barros, an analyst with Brazilian investment bank Pactual, Net has a window of approximately 18 months to improve its operating performance. Following the company?s recapitalization and ownership restructuring, the next batch of debt repayments falls due in 2004. However, a recovery will have to be based several points to be convincing to investors. First, growth in the subscriber base and declining delinquency rates depend on incomes and hence a resumption of economic growth in Brazil. This could happen in 2003, but expansion will be limited by the very tight federal budget and the IMF-agreed primary surplus target equivalent to almost 4% of GDP. Second, revenue from use of the network by telcos might not be as generous as initially expected but should still reinforce cashflow.
Third, prices of equipment, especially set-tops, and programming may fall in step with the strong decline in demand in the United States and Europe. More drastic savings in administrative expenses will be required. Lastly, exchange-rate stability in Brazil will be key and is a plausible prospect in the medium term.
Under pressure
