Only recently did we publish a special report on the
increasingly competitive card acquiring market in Brazil. Yet, a
lot has changed since then. So today, Duygu Tavan looks at the
latest updates on the card acquiring market of Brazil.
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Three major events have happened in the card
acquiring industry in Brazil recently: Itau Unibanco has announced
that it will buy up all the shares it does not already known in
Redecard on the day it published its full-year results. Redecard
had announced its full-year results a week earlier. Now Cielo has
published its own full-year earnings and, in between all that,
share prices have soared.
The market changes, as discussed in
Card acquiring in Latin America: Competition starts to
Bite, have led to the delisting of Redecard, one of the
top two card acquirers in the country.
Itau Unibanco, which already owns half of
Redecard shares, is going to buy out the outstanding shares
Redecard to make it a privately-owned company.
Itau Unibanco is going to acquire the
remaining 49.99% of Redecard shares, equal to 336.4m individual
shares with a maximum purchase price of BRL35.00 ($20.3) per
share.
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By GlobalDataRedecard’s delisting follows on from the
government-initiated liberation of the Brazilian card acquiring
market in July 2010. Until then, Redecard had exclusive rights to
MasterCard acquiring, while its competitor Cielo had those
exclusive rights for Visa. Since the end of exclusivity, the two –
alongside other acquirers – have been competing aggressively to
acquire merchants.
This has led to a decline in merchant discount
rates. Although Cielo and Redecard still, jointly, hold a 90%
market share in card acquiring, big foreign rivals such as First
Data, Global Payments and Elavon have announced plans to enter the
Brazilian cards acquiring market in 2012.
In an official statement, Itau Unibanco said a
Redecard’s board of directors will “deliberate over the choice of
the specialised service provider retained to produce the appraisal
report on the Redecard shares, within the list of three
pre-selected companies to be presented by the Board of
Directors”.
The financials
Redecard’s pre-tax income and net income remained unchanged from
a year ago at BRL2.08bn and BRL1.4bn respectively. Operating income
stagnated at BRL2.08bn, while operating expenses increased by 6% on
the year ago to BRL545.82m.
Operating revenues from equipment rental fell by 6.1% on the
year ago to BRL744.33m
On a positive note, operating revenues from its credit card
business rose by 5.5% in the twelve months to the end of December
to BRL1.73bn. The card acquirer made particularly impressive
operating revenues from its debit card business, which rose by
28.3% from a year ago to BRL576.34m.
The acquirer scaled back its marketing spend, which decreased by
43.1% compared to the previous fiscal to BRL46.81m.
But rising administrative costs, up by 18.9% year-on-year to
BRL158.81m, and personnel costs, up by 16.4% to BRL217.21m, and
other operating expenditure led to a year-on-year rise in operating
expenses of 9.8% to BRL561.2m.
Cielo generated an operating income of BRL2.7bn, down by 1.5% on
the year ago fiscal. Net income also fell marginally, by 1.8%
year-on-year to BRL1.82bn. Revenues from credit cards rose by 1.6%
to BRL3.67bn, while debit card-related revenues increased by 16.4%
on the year ago to BRL913.9m.
Cielo increased its marketing and sales spend by almost 50%
compared to the previous year to BRL184.89m.
