Wireless Winners? Some Analysts Say Look South of the Border

U.S. and European wireless service providers have watched debt woes, an industry spending slowdown and profit shortfalls batter their stock prices in the last few months, and to an extent, their Latin American counterparts have been caught in the downdraft.

But some observers believe the stronger plays in the sector may lie south of the border. Analysts see growth opportunities, especially in Brazil and Mexico, where high demand, lower valuations and relatively low debt levels could put Latin American wireless service providers in a position to avoid the broader industry fallout. The number of cellular customers in Mexico, Latin America's second biggest cellular market, nearly doubled last year to 14.2 million, according to estimates by Lehman Brothers. And the firm expects total subscribers in Mexico to grow 40% to about 19.9 million by the end of this year.

According to Edward Bozaan, head of Waterford Partners, a hedge fund that searches for the best values in high-risk emerging markets, people in many Latin American countries have an easier time getting a prepaid cell phone plan than getting a land line installed. "It was revolutionary in Brazil," he says, estimating that 40,000 people stood in line during the first few days when providers started offering prepaid cell phones in Rio de Janeiro. ...