PT Multimedia Buys Into UOL

In a move that may very well signal the beginning of consolidation in the Latin American Internet industry, PT Multimedia and PT have formed a strategic alliance with Folhapar, the controlling shareholders of leading Brazilian Internet service provider UOL.

Under terms of the transaction, Folhapar will invest $100 million in cash in UOL. In addition, PT will contribute its portal to UOL in exchange for shares in the company. As a result, PT will own roughly 18% of the combined company, and Folhapar will own 40%. PT Multimedia is controlled by Portugal Telecom.

Whitney Johnson, a vice president with Merrill Lynch, said the transaction indicates “the smaller players in the region are starting to realize that in order to survive they?ll need to align themselves with the leaders.” She added that Merrill Lynch believes “the majority of Internet companies [in Latin America] will disappear,” and consolidation will take place over a one-to-two-year period.

“There are too many portals and too many ISPs,” said Johnson.

UOL, on the other hand, is benefiting from the transaction in that it is set to receive $200 million in cash, which the firm anticipates will carry it through breakeven this year.

In other Latin American Internet news, personal finance site Zonafinanciera is closing its offices in Colombia, Venezuela and Peru and cutting back staff in Brazil, Mexico and Argentina to a maximum of three employees per office, Santiago Frias, a director with the company. Its investors and partners include Microsoft, UOL International, Bank Boston, American International Group and Thomson Financial Services.

Moreover, El Sitio?s net loss for 2000 totaled $93.3 million, compared with a net loss of $36.3 million in 1999. Net losses for the fourth quarter of 2000 were $29 million, compared with $22.4 million in 1999.

The company announced in October 2000 that it agreed to merge with Ibero American Media Partners, a joint venture between the Cisneros Group of Companies and Hicks, Muse, Tate & Furst. The transaction should result in the creation of Claxson Interactive Group, pending completion of the merger, which is expected to close in April.

Meanwhile, New York-based recruitment firm TMP Worldwide announced its intention to launch online job site in Latin America this year, beginning in Brazil, then expanding into Argentina, Mexico and Chile. Monster already posts 70-to-100 jobs in the region on average, as well as thousands of résumés from Latin American applicants, according to the company.

H.M. Werner can be contacted at Story Feedback.