What Danes should know about the Brazilian Telecom Industry?

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Introduction

With more than 267 million mobile devices in Brazil connected Brazil is the fourth largest mobile market in the world. Mobile penetration has reached 130%, while land lines have been decreasing nearly 1 % per year and currently penetrates in roughly 22% of the population according to Anatel, a Brazilian regulatory agency. Differently from broadband coverage, mobile operators according to Teleco and Anatel are covering 99,9% of the population and 99,9% of the municipalities

As the Brazilian middle class expanded more people started to have greater purchasing power, and alongside with buying power walks wishes and needs. Mobility, therefore, is becoming more important than ever and conversely of how it used to be thought of, mobility is no longer a luxury, but a competitive advantage and in many cases a real need. Digital inclusion is the watch word of the hour as the Brazilian government has been creating plans to bring internet access to all families in Brazil.

The mobile broadband connections have exceded fixed broadband connections in Brazil. This means that more people are using more internet connection in their mobiles than at their homes. In July of 2012 the mobile broadband totaled over 75 million connections while fixed broadband connections totaled 17 million in the same period, according to a study done by ANATEL.

Taxation is still very high both for end users and operators. In fact, mobile taxation in Brazil is among one of the highest taxations of the world. The tax pressure limits the expansion of the telecommunications sector. Additionally, the high taxation work as a break for service development. Companies and the Minister of Communications in Brazil are struggling to lower the taxes. The executives claim that the tax burden within the telecom sector is very high and is a barrier for expanding telecom services for the rest of the country.

The Telecom sector in Brazil is strictly regulated. The sector was opened for competition in 1995 and in 1997 the general law of telecom (LGT) was introduced in the country, drawning a framework for the sector. Parallely to this law was created ANATEL that is the regulatory agency for telecom services.

Watch our Interview with Antonio Pimentel. Antonio works for a major consultancy group in Brazil and his specialty is in Telecom, Media and Technology sectors. Here he shares a few numbers, opportunities and challenges and a few trends coming into the Brazilian market for the next few years.

The National Broadband Plan, the PNBL

This program was created by the federal government and seeks to encourage digital inclusion for all municipalities of Brazil until 2014.The Company responsible for this massive project is Telecomunicações Brasileiras S.A – TELEBRAS-. Additionally through the program the government seeks to democratize the use and the supply of IT.

The Aice Decree

In April of 2012 a presidential decree seeking to universalize and democratize progressively the individualized telephony access under specific conditions and monthly payment ranging from R$ 12,62 till R$ 14,80 ( Something between 6 and 8 USD). This decree is known as Aice ( Acesso individual classe especial) and it is valid for all families registered in the Cadastro Único dos Programas Sociais do Governo Federal, which is a Special Registration for the welfare programs from the federal Government. This decree is relevant mentioning because by the end of 2012 there were roughly 12 million families registered in this program with earnings of up to one minimum salary (R$ 678 or 280 USD). By the end of 2012 53, 6 thousand families already had access to the program. Aice seeks to have all families that are members of the Cadastro Único with mobile acess by the end of 2014.  This will open massive opportunities for all those part of the mobile chain all over the world.

Who are the main players within the Telecom Sector in Brazil?

In Brazil there are 7 Network operators making the telecommunications sector in Brazil extremely competitive. These networks are who support the mobile ecosystem in Brazil such as handset manufacturers, providers of network, support services and local content providers.

The players detaining the market are:

telecom operators share

Source: TELECO

VIVO IS THE MARKET LEADER DETAINING 29%

TIM OCCUPIES THE 2ND POSITION DETAINING 26, 01%

CLARO OCUPIES THE 3RD POSITION DETAINING 24, 51%

OI OCUPPIES THE 4TH POSITION DETAINING 18, 56%

NEXTEL, ALGAR AND SERCOMTEL HAVE A JOINT VENTURE AND TOGETHER THEY DETAIN 2%

What Danes should expect for the near future within the Telecom industry in Brazil. An overview on the Telecom Ecosystem in Brazil…

On the supply side of the economy mobile telephony has been impacting consumers incredibly. The mobile communication in Brazil has generated revenues for the mobile operators totaling 80 Billion BRL, or 47.7 Billion USD.

International equipment providers as Apple, Ericsson, LG, Motorola, Nokia Siemens Networks Huawei, Samsung, Sony and ZTE have offices in Brazil. Ericsson and Nokia Siemens assemble their products in Brazil.

Below follows a figure of a study done by Deloitte showing the Brazilian Mobile communications ecosystem.

telecom ecosystem brazil

The services and opportunities for Danish SME´s within the Telecom sector in Brazil

The mobile services are becoming more than ever strategic as a social drive and motor for digital inclusion in Brazil. According to Anatel it is expected that data consumption grow on average 83 % per year between 2013 and 2020, with over 75 million smartphones thrown in the country by 2020. As a result of this growth, mobile broadband access it is expected to follow the growth or become a massive bottleneck. Opportunities in this segment are diverse, and some are being tested in the market, but there is still a lot of space for growth. Below there is a compiled list of some of the opportunities within the M-sector in Brazil.

apps e opportunities in Brazil

Source: Adapted from GSMA-Deloitte Study

Challenges and Trends to overcome within the Telecom Sector in Brazil

RCR Wirelless has interviewed Maria Luiza Knuert,  a Brazilian Telecom Executive who has worked for Ericsson and NEC and currently is working as regulation advisor for Anatel, the Brazilian regulatory agency. According to Maria Luiza´s opinion the main challenges and trends within the Brazilian Telecom environment are the following:

  • Mobile Payments and Near Field Communication (NFC)

Mobile payments hasn´t happened in Brazil so far, but it is a trend and it will happen. Credit card operators,Banks,Telecom companies and others have recently been closing deals that can soon very likely contribute to mobile payments start happening for real.

  • Mobile Virtual Network Operators

MVNO´s have recently started operating in Brazil. Porto Seguro and Virgin Mobile/Vodafone are the first two companies to operate MVNO´s in Brazil. The operation started in 2012.

According to Teleco the mobile thinktank the next candidates willing to offer MVNO are

  • Correios,Carrefour,Pao de Acucar, Estacio
  • Banco do Brasil, Caixa Economica, Bradesco and Itau
  • Sercomtel, CTC e GVT   

Converged Services aren´t fully working yet

In Brazil if you want to buy a 4 in one solution, you will have to sign 4 different contratcts.This still represents a challenge, since  customers would love to have the possibility to call to one call center and register a complaint instead of 4 different call centers.

Wi-fi Hotspots

Wi-fi hotspots are a growing trend in Brazil. Recently Oi has acquired VEX. When the acquisition happened VEX was operating nearly 40.000 hotspots. NET, the paid TV giant, has recently announced that they will also be installing Wi-fi hotspots and all over the country.

Optical Fibre

Brazil is in the run with its mobile infrastructure. Optical fibre is a real need for the World Cup, Olympics and for the coming future of Brazil. Carriers such as Vivo, Oi, TIM and Claro are running to prevent a crash with the amount of data that will be transferred during the World Cup.

Cloud Services

The large telecom companies have started investing in cloud computing services, therefore starting a competition with some of the established IT companies in Brazil that already offered storage services. There is a huge gap in this segment in Brazil, mainly due the low quality of the services provided by large local IT corporations.

Conclusion

Telecom in Brazil is a reality. Besides needing know-how, which exists in vast amounts in Denmark, Brazil also needs qualified labor force and Danish technology.  There are several opportunities within the sector, but it is necessary serious preparation before establishing an IT/Telecom/Digital Business in Brazil.

The Brazilian government and private companies are employing a huge effort in expanding the broadband network as well as bringing more mobility to the population that earns until 280 USD. It is expected that 12 million families to be part of this program. This means opportunity for the Telecom operators and all the Telecom Ecosystem in Brazil.

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Carlos Monteiro is a Brazilian citizen, graduated in Business Administration by the Catholic University of São Paulo. He lives in Odense, Denmark with his Danish Wife, Cathrine, and their half Danish /Brazilian daughter Ines Marie. You are very welcome to be in contact him at any time.

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