Global Insight Perspective | |
Significance | Two of Brazil's regional incumbents have signed multibillion-dollar infrastructure contracts ahead of a possible merger, which will see the creation of a regional super-carrier. |
Implications | The new mega-deals will replace previous small-size contracts and are considered crucial in the companies' technological advancement. |
Outlook | The consolidation of contracts will result in improved operational simplicity and lower costs, and prepare the operators for the launch of 3G services in line with the concessions' contractual obligations set by Anatel. |
Region I operator Tele Norte Leste Participações, commonly known under the Oi brand, has signed contracts with Nokia Siemens and China's Huawei Technology for the installation of 3G wireless infrastructure across 18 states for a total estimated value of 1 billion reais. Oi is currently present in 17 states and is planning the quick deployment of 2G and 3G services in São Paulo state, Brazil's business hub, as a result of a licence it won in last September's auction of 2G spectrum organised by the telecoms regulator, Anatel. Oi's investment plan will allow the provision of 3G services in 53 municipalities within the first year after launch, whereas launch of services in São Paulo is expected in July 2008, local daily Valor Econômico reports. Nokia Siemens will provide the base stations and other transmission equipment, while Huawei will supply the remaining infrastructure. Nokia Siemens confirmed the deal but avoided disclosing its cost.
Other regional carrier Brasil Telecom Participações, active in Region II, which includes the capital city of Brasilia and nine states in the central region and south of the country, signed a contract with Alcatel-Lucent worth nearly 2 billion reais for the administration and maintenance of the operator's fixed and mobile telephony infrastructure and data-transmission network. The deal will run for two years and will be extendable thereafter; it is the biggest deal closed by the company in recent years. "The relationship that we will have will be one of marriage, not just a supplier-client relationship," Francisco Santiago, Brasil Telecom's vice-president of operations, was cited as saying by Dow Jones International News. Other companies that bid for the contract were Swedish Ericsson and Finnish Nokia Siemens Networks.
Outlook and Implications
Brasil Telecom's partnership with Alcatel-Lucent is not a new one. In December 2007, Brasil Telecom selected Alcatel-Lucent's IP/MPLS solution for the deployment of the country's first nationwide IP network to be used for the convergence of internet, video-on-demand, and mobile backhaul traffic (see Brazil: 4 December 2007: Brasil Telecom Selects Alcatel-Lucent's IP/MPLS Solution). The new network will also support triple-play services and allow Brasil Telecom to upgrade to the next level of advanced services with minimal further investment. Earlier, in October 2007, Alcatel-Lucent was selected by Brasil Telecom to deploy the country's first Rev-E Network using the 802.16E-2005 standard in the cities of São Paulo, Curitiba, and Porto Alegre (see Brazil: 5 October 2007: Alcatel-Lucent to Deploy Brazil's First WiMAX Rev-E Network). This new mega-deal, which came to substitute deals with some seven different companies, strengthens the partnership between the two companies. In addition, the consolidation of contracts will result in improved operational simplicity, flexibility, and lower costs.
With regard to the Nokia Siemens agreement, Oi's main objective is the quick deployment of 3G services in its service area, given the strict contractual obligations set by Anatel, which require all cities with a total population of more than 500,000 inhabitants to have total coverage after the second year of service. By total coverage, Anatel means a minimum of 80% coverage of the relevant region's urban areas. Besides that, Oi is extremely interested in a fast launch of services in São Paulo, which is the only Brazilian state with three, instead of four, big mobile players. According to company data, up to 25% of Oi's customers require roaming in that particular state. The abolition of interstate roaming charges from rival operator TIM has also been an additional competitive advantage for the latter and has been the cause of increased migration patterns between the two players. Finally, a possible merger of Brazil's two regional players, Oi and Brasil Telecom, that is currently being examined by the involved parties would provide coverage in all federal states and reinforce their position with a combined market share of approximately 17%.