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What do foreign investors and analysts think of conference calls with simultaneous translation?
By Suelen Miura - Analyst at MZ Group

Publicly-held companies normally hold quarterly conference calls after disclosing their results within 45 days after the close of the first, second and third quarters, and ninety days after the end of the fourth quarter. In addition to these regular events, it is also normal to hold calls related to specific material facts (mergers, acquisitions, joint ventures, new projects, etc.). Although conference calls are not mandatory, they have become a common procedure, given that they embody good corporate governance practices by giving the market an opportunity to question management directly.

Some calls use simultaneous translation, whereby the management presentation is given in Portuguese (or English in certain cases) and translated by an interpreter in real time. Given the increasing use of this model - the number grew by 90% last year alone - MZ Group decided to conduct a market opinion study. Among MZ Group’s own clients, 29% have already adopted this format.

The study took place in April 2013 and consisted of an analysis of the opinion of foreign investors and analysts who took part in conference calls with simultaneous translation in the previous four quarters. Among the interviewees, 59.38% were analysts and 31.25% were investors.

The study showed that most foreign participants in conference calls (68.75%) prefer to listen to management without an interpreter, maintaining that simultaneously translated calls require a good deal more attention because the translators speak in a mechanical manner, without emotion, making understanding difficult.

More than half the interviewees (53.13%) thought that calls with simultaneous translation were not useful. Some stopped listening after five minutes and those with some knowledge of Portuguese said they even preferred the Q&A live in order to avoid errors of understanding caused by the simultaneous translation. In fact, they said they didn’t have words to express just how bad translated calls were.

Even in the case of calls in English with simultaneous translation into Portuguese, the study showed a similar tendency, with 48.39% rejecting the format.

Brazilian investors and analysts, on the other hand, tend to view the format with indifference or even positively since they do not need to worry about attending a call in English in order absorb all the information disclosed to the market. Nevertheless, the general view among the foreigners is negative - they believe the technical quality of the transmissions to be poor, thereby jeopardizing their access to the information.
The interviewees were also unhappy with the fact that many Brazilian companies do not have an executive who speaks good English. They also maintained that companies often opted for calls with simultaneous translation even when management does speak good English purely as a time-saver, underlining that they did not welcome this practice. As an example of the ideal model, they cited European companies, who hold calls in their local language, followed by a call for sell-side analysts in English, a procedure which has already been adopted by many Brazilian firms.

Another target of criticism was the poor sound quality of the translation. Participants also said they could often hear the translator talking over the top of the Portuguese audio, making understanding even more difficult. One of the interviewees, extremely uncomfortable with the format, declared that companies should not be thinking about savings when providing their shareholders with vital information, adding that the problems caused by a poor understanding of what is said could jeopardize the company’s coverage by investors and analysts.

From the companies’ point of view, in addition to permitting the simultaneous disclosure of information in both languages, the procedure facilitates the organization of management’s agenda, especially when most of the company’s executives are taking part in the call.

In conclusion, the study highlights various negative points related to the simultaneous translation model, including poor sound quality, "indirect" communication with management and the lack of feeling in the speech, which make the call both tiring and difficult to understand and may jeopardize the company’s coverage by foreign analysts. Consequently, the choice of this format is something that Brazilian companies’ IR areas have to look at very carefully, especially when one remembers that foreign investors accounted for no less than 44.87% of the volume of the BM&FBOVESPA’s stock market segment in April 2013, according to the BM&FBOVESPA itself, far too big a number for their interests to be ignored.

Suelen Miura
Analyst at MZ Group
+55 11 3529-3636

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