2011 Brazil - Telecoms, Mobile, Broadband and Forecasts

The outlook is bright for Brazil’s telecom market

With about one third of the region’s population, Brazil is Latin America’s largest telecom market and the region’s leading investment destination for international operators and suppliers.

With the spending power of Brazilian consumers on the rise as well as the upcoming 2014 FIFA World Cup and 2016 Olympics, both being hosted in Brazil, we can expect strong demand for fixed and mobile broadband, mobile telephony, and other wireless products such as smart phones and mobile applications.

Brazil’s mobile market is the fifth largest in the world. Though penetration has passed the 100% mark, the number of subscribers continues to grow, with many Brazilians having more than one SIM card. On the other hand, the widespread ownership of multiple SIM cards pushes up penetration figures and hides the fact that many Brazilians – more than one out of four – have no mobile phone at all.

Due to robust competition, multiple accounts, and a high proportion of prepaid customers, mobile ARPU in Brazil is behind the world average. It may decrease further with the advent of mobile virtual network operators, since regulations approved in November 2010 allow companies such as banks and retailers to offer mobile virtual network operator services.

Mobile operators are looking to shore up their ARPU rates by boosting mobile data revenues. The growth of 3G in Brazil has been nothing but spectacular. The number of WCDMA subscriptions (including both 3G handsets and mobile broadband) soared from less than 2,000 in 2008 to 24.4 million in March 2011.

It should be noted that mobile broadband does not necessarily replace fixed broadband; many Brazilians use the first with their laptop and the second with their PC. However, there are parts of Brazil where fixed broadband does not reach, and where mobile broadband is the only option.

In terms of fixed broadband subscribers, Brazil is the regional leader and one of the top countries in the world, ranking ninth globally. In terms of fixed broadband penetration, however, Brazil is only slightly above the Latin American average, trailing behind neighbouring Chile, Argentina, and Uruguay.

With a promising economic outlook and rising prosperity, demand for broadband in Brazil is expected to soar. Fixed broadband plans on offer have improved significantly in recent times, so much so that broadband prices in Brazil are lower than in most other Latin American countries.

However, they are still high compared with developed markets, and they remain expensive for the Brazilian socio-economic environment. Likewise, in terms of broadband speeds, Brazil performs well compared with Latin America, but poorly compared with the rest of the world.

While Brazil’s mobile and broadband subscribers continue to increase, the fixed-line sector has been stagnating since 2002. Fixed-line rentals are expensive compared with other countries, and a large percentage of Brazilians cannot afford a fixed telephone. Brazil’s teledensity is only 21% – and yet, in a region where fixed lines are scarce, it is about 23% higher than the Latin American average.

The Brazilian telecom sector is fully open to competition. But while the number of licensed companies increases, the bulk of the market is divided between three groups: (1) Spain’s Telefónica, which owns Telesp (fixed line) and Vivo (mobile); (2) Mexico’s América Móvil, which owns Embratel (fixed line) and Claro (mobile); and (3) Oi (fixed line and mobile), which is controlled by Brazilian investors and Portugal Telecom.

The fixed-line market leaders are the two regional incumbents Oi and Telesp, with 48% and 27% respectively of the country’s fixed lines in service, but they mostly keep to their own regions of operations despite the lifting of geographical restrictions.

However, while their basic telephony service stagnates or dwindles, two other companies – long-distance incumbent Embratel and Vivendi’s GVT – have gained a rapidly increasing market share of 18% and 5% respectively.

Four companies dominate Brazil’s mobile telecom market: Vivo, Claro, Oi, and Telecom Italia’s TIM Brasil. Together, these four operators control 98% of the country’s mobile subscriber base. Vivo is the leader, with about 29% of the market; Claro and TIM Brasil vie for second and third place, with 25% each; Oi is fourth, with 19%. The remaining 2% of the market is shared between CTBC Telecom, Sercomtel, and Nextel Brasil.

The principal operators in Brazil’s pay TV market are Net Serviços, Sky Brasil, Embratel, Telesp, and Oi TV. Net Serviços, the largest multi-service cable provider in Latin America, is controlled by local media group Globo, although Embratel owns a majority of the company’s stock.

Sky Brasil, the largest High Definition satellite TV operator in Latin America, is controlled by DirecTV and has Globo as a minority shareholder. Independently of Net Serviços, Embratel provides satellite TV services branded Via Embratel. Besides Embratel, another two fixed-line incumbents compete with Sky Brasil in the satellite TV market – Telesp and Oi.

Because of remoteness problems, Brazil is very active in the satellite sector. Three companies operate national satellites: Embratel’s Star One, Telesat Brasil, and Hispamar. Star One was the first operator to provide satellite services in Brazil, and remains the market leader.

Market highlights:

The government has developed a National Broadband Plan, aimed at providing broadband access for low-income households and in areas where private operators have no commercial interest.

• The new concession contracts for incumbent operators, effective from 2011 to 2015, contain an important change: the elimination of a clause that prohibits fixed-line telephone operators from offering pay TV services on their networks.
• The government is keen to see the deployment of 4G/LTE before the 2014 FIFA World Cup. Spectrum is being reallocated for this purpose, and an auction is scheduled for 2012.
• Driven by the popularity of social networks, smart phone sales tripled in 2010, but penetration is still low compared with the rest of the world.
• Having won 3G licences for almost all of the national territory, iDEN operator Nextel Brasil has contracted Huawei to roll out a UMTS network customised for PTT services.
• Operators are consolidating their fixed-line, mobile, broadband, and pay TV operations. Having bought out Vivo’s co-shareholder Portugal Telecom, Telefónica intends to merge Telesp with Vivo, while Carlos Slim’s América Móvil has taken control of Embratel with a view to integrating it with Claro.
• After selling its stake in Vivo to Telefónica, Portugal Telecom became a majority shareholder of Oi in March 2011, when it bought about 25% interest in the company.
• The launch of Telstar 14R (known as Estrela do Sul 2 in Brazil), scheduled for the second half of 2011, was brought forward to May 2011. The satellite covers 100% of Brazilian territory and can deliver services to the whole of the Americas.
• Star One C3, scheduled for launch in 2012, will cover all of South America including Brazilian territorial waters.

Brazil fixed-line, broadband, and mobile statistics – 2009 - 2011

(Source: BuddeComm based on industry data)

For those needing an objective and high-level strategic analysis on Brazil, this report is essential reading and gives further information on:

• The development of Brazil’s fixed-line, mobile, broadband, and pay TV sectors together with industry outlook and forecasts.
• Anatel’s General Plan for Updating Telecom Regulations, known as PGR, which includes lists of actions to be carried out in the short term, medium term, or long term.
• Company performance and ARPU.
• An analysis of Brazil’s broadband sector.
• How different scenarios are likely to affect the fixed-line, mobile, and broadband markets in the ten years to 2020.

Data in this report is the latest available at the time of preparation and may not be for the current year.