October 30, 2018 / 12:45 PM / 2 years ago

UPDATE 4-Brazil telecoms post record gains as govt prepares to loosen regulations

(Updates to focus on regulatory issues)

By Gram Slattery and Paula Laier

SAO PAULO, Oct 30 (Reuters) - Telecom stocks in Brazil posted some of their biggest gains in years on Tuesday amid expectations that a long-stalled reform in the sector may get the nod from lawmakers in the coming months.

Executives at Telefonica Brasil SA told investors on an earnings call that they believed the so-called PL-79 telecom bill updating requirements for public concessions to favor new technologies could be approved by the end of 2018.

In a note to clients following the call, analysts at BTG Pactual added that the science and technology commission of Brazil's Senate is due to vote on the reform on Wednesday. The measure would then go to the full body where the bill - which already received approval from the lower house - would require a simple majority to pass.

The reform would allow five telecommunications companies, including Telefonica Brasil and competitor Oi SA, to redirect billions of reais in capital spending away from outdated technologies such as pay phones, in favor of broadband and fourth-generation (4G) mobile technology.

Claro, the Brazilian mobile unit of Mexico's America Movil SAB de CV, would also benefit to a lesser extent.

"From what we hear, it seems that (Senate President) Eunício Oliveira is convinced of the project's importance and could put it up for approval as early as this year," wrote BTG Pactual's Carlos Sequeira and Bernardo Texeira.

"After many delays, we tend to take any developments on the approval of the telecom bill with a grain of salt," they added. "That said, it seems that this time all relevant players are aligned to move forward."

Shares in the Brazilian unit of Spain's Telefonica SA local unit jumped more than 14 percent, its biggest intraday gain since 1999.

The firm also received a boost from solid third-quarter results and statements by executives that favorable tax rulings by Brazil's Supreme Court would likely lead to increased dividends in coming years.

Oi shares also rose about 13 percent. Shares in America Movil and TIM Participacoes SA, the local unit of Telecom Italia SpA, rose 2.2 percent and 8.5 percent, respectively.

Overall, Brazil's benchmark Bovespa index gained 3.75 percent as right-wing President-elect Jair Bolsonaro and his advisers signaled they would make a priority of economic reforms after winning Sunday election.

Mexico's IPC index was down 0.72 percent. (Reporting by Gram Slattery and Paula Laier Editing by Frances Kerry and James Dalgleish)

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