Global Insight Perspective | |
Significance | Vivo has successfully bid for spectrum lots in the north of Brazil, where it had been lacking operations. |
Implications | As a result of this recent auction, Vivo and Claro have achieved nationwide coverage and can effectively compete with other operator TIM in all federal states. |
Outlook | The steady growth of the Brazilian mobile market is not going to be gravely affected by the expansion of coverage of the country's top three players. However, this could ignite an aggressive marketing campaign mainly based on abolition of long-distance, national surcharges, and interstate roaming fees. |
Vivo, which is jointly owned by Spanish Telefónica and Portuguese incumbent Portugal Telecom, won licences in six states of the north-east, where it was lacking operations; a licence in the Pelotas area in Rio Grande do Sul; and additional spectrum in a small region in Minas Gerais state. Meanwhile, telecoms regulatory authority Anatel is in the process of analysing the recently announced buy-out deal of Telemig Celular and Amazônia Celular by Vivo, which—once approved—will provide Vivo coverage in the access to the south-eastern state of Minas Gerais, the second-most populous state in Brazil, where it lacks operations, and will reinforce the operator's position in the states of Amapá, Amazonas, Maranhão, Pará, and Roraima in the north, where Amazônia Celular is present (see Brazil: 25 September 2007: Anatel to Analyse Vivo-Telemig Deal in Brazil and Brazil: 3 August 2007: Vivo to Acquire Telemig Celular and Amazônia Celular). Because of limitations presented in the Brazilian telecoms law that prohibit cross-ownership status of more than one company in the same state, Vivo has requested separate investigations of the acquisition deals of the two entities. A possible non-favourable decision from Anatel regarding Vivo's double-presence in the northern region would require the return of spectrum of one of the two players it owns in the region.
Market View
According to the latest market data released by Anatel and referring to the end of August, Brazil recorded 2.22% month-on-month growth and reached 110.93 million mobile accesses. The majority of lines belong to the prepaid segment, with a limited 19.7% falling under a monthly subscription plan. As a result of 2.41 million net additions during the last month, mobile-line penetration rate reached 58.6%, an increase of 15.3 percentage points year-on-year. Vivo remains the market leader with 28.05% market share, followed by TIM (25.71%), Claro (24.76%), and Oi (13.12%). GSM technology has further expanded with 78.8% of the total subscriber base under a GSM-backed network. The CDMA protocol claimed 21.05% whereas TDMA system fell further to 6.10%.
Outlook and Implications
Vivo's main rival, TIM Brasil, was the only mobile player with presence in all Brazilian federal states. Following yesterday's auction, Vivo and Claro have also achieved nationwide coverage. Also as a result of the auction, Anatel's objective of having four large operators in each mobile service region has been met. In particular, Claro paid 5.8 million Brazilian reais (US$3.11 million) for a licence in the Londrina and Tamarana regions of Paraná and successfully bid for the lot covering the north of Brazil, where it was lacking operations. Oi's big success was the successful bid for a licence in Brazil's business hub, the southern hemisphere's most populous city of São Paulo, for 80.556 million reais. This is considered to be a strategic move in the company's revenue-generating plans as 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; it was the cause of increased migration patterns between the two players. In addition, a possible merger of Brazil's two regional players Oi and Brasil Telecom, which is currently being examined by the involved parties and the regulatory authorities, would provide coverage in all federal states and reinforce their position with a combined market share of 16.68%. The Brazilian regulator is also planning the auction of spectrum for the deployment of third-generation (3G) services later in the year. More specifically, Anatel will auction four frequency bands as part of a long-term strategy that includes provision of 3G services in all Brazilian municipalities by 2010, with special attention paid to those with a population under 30,000, areas that are often ruled out as financially non-viable for operators.