IHS Global Insight Perspective | |
Significance | Vivendi has entered the Brazilian market with a US$4.18-billion offer for GVT, in the process frustrating Telefónica’s immediate expansion plans in the country. |
Implications | The regulator has expressed its satisfaction at the entry of a new player, which will now compete with regional incumbents Oi, Telesp and Embratel. |
Outlook | Telefónica has confirmed it is already looking for new opportunities in the country. |
After a long battle with Telefónica for control of Brazilian operator GVT, France-based entertainment group Vivendi defeated its Spanish contender on Friday (13 November) with a US$4.18-billion offer (56 reais per share). In an unexpected move, Vivendi agreed a deal with GVT’s major shareholders, Global Village Telecom (Holland) BV and Swarth Group, for the acquisition of a 37.9% stake in the operator and the right to buy 19.6% more through call options, giving it almost 58% of GVT (see Brazil: 16 November 2009: Vivendi Launches New Offer for GVT and Frustrates Telefónica’s Expansion Plans in Brazil and 13 November 2009: Brazilian Regulator Gives Green Light to GVT’s Acquisition).
With this deal, Vivendi enters the fast-growing Brazilian telecoms market through an already established company, which had 2.6 million subscribers at the end of September 2009. GVT, currently Brazil’s fourth-largest broadband and fixed-voice service provider, offers traditional telephony, corporate data, broadband/internet and VoIP services under the "GVT", "POP" and "VONO" brands to high-margin, high-usage customers in the residential and corporate segments. Its high-speed broadband connection, commercialised under the "Turbonet MEGA MAXX" brand, was first launched in April 2008 and is now available in 48 cities in the states of Rio Grande do Sul, Paraná, Santa Catarina, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Bahia, Espírito Santo and the Distrito Federal. GVT is currently focusing on the expansion of its geographical coverage outside Region II, including the populated cities of São Paulo, Rio de Janeiro and Belo Horizonte, where it has already captured important corporate customers from incumbents Telesp and Oi. As part of its expansion strategy, the company launched operations in the cities of Recife and Jaboatão dos Guararapes, both in the state of Pernambuco, and Serra in the Spírito Santo state, in September 2009 (see Brazil: 3 November 2009: GVT Confirms New Service Launches in Brazil). For this development the operator has allocated 65 million reais and plans to cover 30% of the population in each city by end-November.
The president of Brazilian telecoms regulator Anatel, Ronaldo Sardenberg, expressed satisfaction yesterday (16 November) at the arrival of a new player, which will now compete with regional incumbents Oi, with a 53.5% share of the fixed-line market, Telefonica’s Telesp (28.4%) and América Móvil's Embratel (12.3%). Sardenberg also expects that the entry of a new operator will bring fresh investment funds and will force already established operators, such as Telefónica, to be more competitive and increase investment in infrastructure.
Outlook and Implications
Telefónica has already confirmed that it is now looking for new opportunities in Brazil, its most important market in terms of revenues after Spain. GVT was an ideal expansion opportunity for Telefónica, but there is still room in the Brazilian market for further consolidation, particularly in the mobile phone sector. Of the possible candidates, Algar Telecom (formerly know as CTBC) could be an interesting match for Telefónica. The operator provides fixed (voice and broadband) and mobile phone services in the states of Minas Gerais, Sao Paulo, Mato Grosso do Sul and Goiás. At the end of September 2009, Algar had 1.4 million subscribers, of which 679,000 were fixed-line (voice), 228,000 broadband and 491 mobile. Algar also has 3G frequencies in the country—a very important asset given the increasing demand for 3G services in Brazil. The number of 3G accesses has been growing rapidly over the last year, reaching 4 million subscribers by the end of June 2009. Improved network coverage and the availability of smartphones at more accessible prices have boosted the demand for mobile data services. Amid this intense growth, the government has urged Anatel to accelerate the public consultation on the reassignment of frequencies in the 2,170-2,182 MHz and 2,500-2,690 MHz spectrum bands to provide internet and data services.
Brazil's booming internet market is attracting a number of investments in telecoms infrastructure. The combination of an expanding broadband subscriber base and a low internet penetration rate means the Brazilian broadband market has great growth potential. In addition, the government is implementing a number of initiatives to achieve universal broadband coverage by 2010. As part of this plan, São Paulo launched last week a programme to boost broadband service adoption among residents with lower incomes. Telesp and mobile operator Vivo have already announced their adhesion to the plan (see Brazil: 19 October 2009: São Paulo State Launches Initiative to Boost Broadband Access in Low-Income Households and 21 October 2009: Vivo Adheres to Low-Cost Broadband Initiative in São Paulo). The state of São Paulo currently has the highest number of connections in Brazil with an 11% share. At the end of 2008, there were 11 million internet subscribers in the country, an increase of 29.9% year-on-year. This made for an internet subscriber penetration rate of 5.9%.