Brazil Gets $1.7 Billion for Mobile Phone Licenses

Brazil on Friday raised $1.74 billion through the sale of mobile telephone licenses, as groups led by Sweden’s Telia International and Atlanta-based BellSouth Corp. bid handsomely for stakes in one of the last big emerging telephone markets on the planet.

“Brazil is the last of the big markets,” said Peter Meurling, Telia’s vice president for Latin America. “It’s obvious that this is a big market with huge demand.”

The winning bids--more than double the government-set floor prices--bring to $4.71 billion the amount Brazil has raised by selling rights to offer cellular service on a new bandwidth to compete with existing service offered by state-controlled phone companies. Half of the 10 concessions, including Rio de Janeiro, are still up for grabs.

The Telia-led group agreed to pay $1.2 billion for the right to set up a second mobile phone system in the state of Sao Paulo, narrowly beating out a $1-billion bid by a group led by San Francisco-based Airtouch Communications Inc.

A BellSouth-led group bid $512 million for a similar concession in six states in Brazil’s northeast. BellSouth shares fell 25 cents to close at $46 on the New York Stock Exchange.

Telia and BellSouth are betting that immense pent-up demand for mobile phones throughout Brazil will justify the prices they paid. Both companies will be competing with regional units of state-controlled Telecomunicacoes Brasileiras, or Telebras.

In June and July, Brazil sold licenses to three major regions to BellSouth, Canada’s Telesystem International Wireless Inc. and Italy’s Stet, respectively, raising an additional $3 billion.

Sweden’s state-owned Telia, which entered Friday’s bidding after receiving a court injunction that overturned an earlier disqualification, won the right to provide mobile service in the interior and coastal regions of prosperous and densely populated Sao Paulo state.

The Telia group, which includes two Brazilian companies--Primav and Eriline Engenharia de Teleinformatica Ltd.--must now await a final ruling from Brazil’s highest appellate court on the legal status of its bid before celebrating victory. The court ruling is expected to be delivered next week.

Telia was disqualified in June because of technical errors in the presentation and translation of its bidding documents.

“Our expectation is that the legal system will be just,” said Jose Henrique Castanheira, president of Telia’s partner Eriline.

Should Telia lose its court battle, runner-up bidder Airtouch would be declared the winner, the communications ministry said. Groups led by SBC Communications Corp., AT&T; Corp. and Japan’s DDI Corp. also bid for the Sao Paulo state concession.

Sao Paulo state has a population of 17 million, excluding its capital city, and there are about 3 million people waiting for telephones, according to figures from Telecomunicacoes de Sao Paulo, the Telebras unit that’s currently the monopoly phone service there.

“The Sao Paulo market has an enormous potential, the demand is probably much higher than [Telecomunicacoes’] official figures,” said Ethevaldo Siqueira, publisher of RNT, a telecommunications trade magazine.

In the Northeast, the nation’s poorest area, BellSouth will have “the opportunity to participate in one of Brazil’s most attractive and fastest-growing regions,” Charles C. Miller, president of BellSouth International, said. The company plans to spend $450 million over the next three years to set up mobile service in the states of Alagoas, Ceara, Pernambuco, Paraiba, Rio Grande do Norte and Piaui.