Cellular conquests.

When Portugal Telecom entered Brazil's cellular telephone market, industry observers thought the company had paid too much for incumbent Telesp Celular. More than three years later, Telesp rules the Brazilian market - and CEO Carlos Vasconcellos Cruz intends to keep it that way.

IT HAS BEEN MORE THAN 500 YEARS since Pedro Alvarez Cabral first landed in Brazil, claiming the region as Portugal's first colony in the Americas. Five centuries later, Portuguese businesses have rediscovered Brazil and are investing heavily here, particularly in its telecommunications sector.

Leading the modern conquistadors is Portugal Telecom (PT), and the crown jewel among its conquests is Telesp Celular Particapacoes. Acquired for around US$2 billion in 1998, Telesp Celular is Brazil's largest cellular telephone company; as of third-quarter 2001, it held more than 63 percent market share in Sao Paulo, its primary customer base. At the time of purchase PT was criticized for paying too much for the creaky former monopoly, but the chance for growth was apparent from the start. "Today, Telesp Celular has over 7 million clients, whereas PT Telecom's mobile phone company in Europe has only 3 million," says Telesp's Brazilian CEO, Carlos Vasconcellos Cruz. That jump has catapulted PT onto the global cell phone stage.

At the time of the acquisition, cell phones in Brazil were expensive to obtain - averaging US$1,000 in a nation where the minimum monthly wage is less than US$100. Today such phones are ubiquitous, thanks to a combination of savvy marketing and reduced costs. Indeed, Brazil's cell phone penetration has more than quadrupled since Telesp Celular was privatized in July 1998, when there were fewer than 7 million subscribers could exceed 40 million by 2004, lifting Brazil from No. 10 to No. 4 among wireless telephony markets. "Only China's mobile telephone market has greater potential than Brazil," Vasconcellos gushes.

The Rule of 'Baby'

The 44-year-old Vasconcellos took the helm of Telesp Celular last February after former CEO. Abilio Anca Henriques resigned to …