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'Baby Bras' hit the market
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July 29, 1998: 3:15 p.m. ET
Auction of Brazil's Telebras begins despite violent protests against the sale
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NEW YORK (CNNfn) - Brazil's privatization of telephone company Telebras began Wednesday despite violent protests against the sale of the telephone monopoly.
The sale is expected to raise $14 billion for the Brazilian government. Trade unions and other left-wing groups won injunctions early Wednesday to block the sale of five of the 12 Telebras units. Those injunctions have since been stuck down.
Trading of Telebras American depositary receipts was temporarily halted on the New York Stock Exchange due to the auction, but the ADRs (TBH) reopened up 6-5/16 at 118-15/16 before easing back to 117-5/8.
Individual "Baby Bras" issues will trade in New York after the auction is completed.
Among the early winners was MCI Communications Corp. (MCIC), which won the bidding for Embratel, Telebras' long-distance and international carrier. MCI paid $2.3 billion for Embratel, about 47 percent higher than the asking price.
But the auction did not sit well with thousands of Brazilians. Police fired bullets and tear gas at thousands of demonstrators who set up burning barricades in Rio to protest the auction. (1.7M QuickTime movie)
Witnesses said police fired shots at demonstrators in running street battles; several demonstrators lay injured and bleeding.
The protesters -- including students, union members and people from Brazil's radical landless movement -- vigorously opposed the sale, saying Telebras is the property of the Brazilian people.
There was no immediate word on arrests or injuries.
With Telebras' operating subsidiaries heading to the auction block one by one, an industry analyst said investors would be wise to jump on the bandwagon.
Vincent McBride, portfolio manager at Warburg Pincus, told CNNfn the auction of separate Baby Bras gives investors an opportunity to choose from long-distance and cellular operations.
"Telebras, in whole, is very attractive," McBride said. "Breaking it up initially will give investors a great opportunity to own some good chunks of the Sao Paulo region and the Rio region. It's a very attractively priced unit."
Brazilian President Fernando Henrique Cardoso has made the privatization program a cornerstone of his drive to stabilize Brazil's once-chaotic economy. McBride said he believes Cardoso and his economic-revitalization plan will prevail despite the surrounding controversy.
"As time goes on and as President Cardoso is allowed to campaign in Brazil, I think the momentum will swing with him," he said. "I think both the Brazilian market as well as the presidential campaign will gain a lot of steam as the summer goes on."
McBride also characterized Brazil as the emerging market with the highest return potential, though he said other markets are attractive to U.S. investors, as well. [191K WAV] or [191K AIFF]. 
-- from staff and wire reports
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