Brazil to funnel $6.1 bln into broadband plan

Wed May 5, 2010 5:33pm BST

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* Brazil to launch massive broadband access plan

* Government expects backbone network operating this year

* To inject 3.22 bln reais into Telebras through 2014

* Shares of Telebras surge 39 pct

BRASILIA, May 5 (Reuters) - The Brazilian government said it would funnel 11 billion reais ($6.1 billion) into a plan to boost access to broadband Internet services among low-income households in the Latin America's biggest nation.

The so-called National Broadband Plan includes reviving the former state telecom monopoly with a four-year capitalization plan worth 3.22 billion reais, the office of President Luiz Inacio Lula da Silva's chief of staff said in a statement.

The company, known as Telebras (TELB3.SA), will be tasked with operating a backbone network of 23,000 kilometers of fiber optic cable. Shares of Telebras surged 39 percent to 0.26 reais at noon on Wednesday.

The state development bank BNDES will also provide Telebras and operators loans worth 7.5 billion reais, the statement said.

A national fund for telecommunications investments, known as Funntel, will finance 1.75 billion reais in research and development expenditures needed to kick off the program.

Private telecom carriers, many of which paid for the right to operate in the industry in the late 1990s, allege the broadband plan could hurt them by creating a sub-market inside the market where they operate.

Parts of the Telebras system, as the former monopoly is known in Brazil, still exist to honor millions of dollars in labor-related liabilities. But the company has no actual day-to-day operations. Recent glitches in the broadband network of Telefonica (TEF.MC) in Sao Paulo state have revived discussions about resuscitating Telebras.

Private carriers operate about 200,000 kilometers of fiber optic cable, about 10 times the size of the government's backbone network. (Reporting by Isabel Versiani; Writing by Guillermo Parra-Bernal; editing by John Wallace)

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