Brazil Communication Profile 2012

Brazil’s telecom market sprints forward in anticipation of the World Cup and Olympic games

Brazil’s telecom revenues are expected to reach US$120 billion in 2012. With the spending power of Brazilian consumers on the rise and the upcoming 2014 World Cup and 2016 Olympic Games (both being held in Brazil), we can expect strong request for fixed and mobile broadband, mobile telephony, and other wireless products such as smart phones and mobile applications.

The Brazilian government has been taking steps to reduce mobile, broadband, and pay TV tariffs in order to increase penetration. It has as well issued a law offering tax breaks for new telecom investments. The regulator Anatel has approved the country’s third universal service plan, which requires fixed-line operators to install some 108,000 public phones in rural areas including amount schools and hospitals. In Brazil, outdoor pay phones are sheltered by a dome-shaped hood known as orelhão, or large ear. With its simple, unobtrusive lines in fiberglass and its efficient acoustic insulation, the orelhão is considered of the best examples of modern Brazilian design.

The Brazilian telecom sector is fully open to competition and continues to attract operators. The bulk of the market, however, remains divided between three groups: Spain’s Telefónica, Mexico’s América Móvil, and Oi, controlled by Brazilian investors and Portugal Telecom. Telefónica operates through Telefônica Brasil, which offers both fixed-line and mobile services (the latter branded Vivo); América Móvil operates through Embratel (fixed line) and through Claro (mobile); and Oi offers fixed line and mobile services under the Oi brand name.

Telefônica Brasil’s previous corporate name, Telecomunicaçoes de São Paulo (Telesp), was changed to Telefônica Brasil in October 2011, when the operator completed a restructuring process after buying out Portugal Telecom's half of mobile operator Vivo Participações and incorporating it into Telesp. The name Vivo was retained as a trademark for mobile business and would be adopted by the company’s fixed-line operations in March 2012.

The fixed-line market leaders are the regional incumbents Oi and Telefônica Brasil, with 45% and 26% respectively of the country’s fixed lines in service, but while their basic telephony service stagnates or dwindles, long-distance incumbent Embratel and Vivendi’s GVT have been steadily increasing their local market share (respectively to 19% and 6%).

companies dominate Brazil’s mobile telecom market: Vivo, Claro, Oi, and Telecom Italia’s TIM Brasil. Together, these operators control 98% of the country’s mobile subscriber base. Vivo is the leader, with about 29% of the market. TIM Brasil and Claro account for 26% and 25% respectively; the companies have been vying for second and third place since 2004. Oi is fourth, with 18%. The remaining 2% of the market is shared between CTBC Telecom, Sercomtel, and Nextel Brasil.

Fixed-line teledensity in Brazil is about percentage points higher than average for South America. But while the number of fixed lines continues to increase by about 1.5% a year, annual increase has been insufficient to raise teledensity, which has been stagnating at about 21% since 2002. Mobile penetration, on the other hand, looks set to reach approximately 145% by end-2012, with the number of subscribers increasing by 19% annually. Nevertheless, mobile subscribers owning multiple SIM cards are pushing up penetration figures, hiding the fact that a lot of Brazilians have no mobile phone at amount.

After lagging behind the rest of the region, Brazil’s SMS market took off in 2011, when text messaging rose by almost 69%. The increase was mainly due to the new competitive pricing models and packages offered by operators. Meanwhile, the increase of 3G in Brazil has been nothing but spectacular. The number of WCDMA subscriptions (including both mobile phones and modems) has soared from less than 2,000 in June 2008 to additional than 33 million in 2012.

The number of fixed broadband subscribers continues to show solid increase rates despite the mobile broadband boom. However, there are parts of Brazil where fixed broadband does not reach, and where mobile broadband is the only option.

Fixed broadband plans on offer in Brazil have improved significantly since 2008. In fact, broadband prices in Brazil are lower than in most other Latin American nations. In terms of broadband speeds, Brazil performs well compared with Latin America, but poorly compared with the rest of the world.

Although the government’s National Broadband Plan is proceeding additional slowly than originally hoped, it should significantly improve broadband access in Brazil. While the aim of the plan is to bridge the digital divide, it as well creates investment opportunities for operators – especially small companies and start-ups – to provide services over the national-owned broadband network. In fact, the plan envisages wholesale rather than retail service, typically in areas with low competition.

Brazil’s pay TV market has experienced sustained increase, not even slowing down during the world credit crunch. The principal operators in Brazil’s pay TV market are Net Serviços, Sky Brasil, Embratel, Telefônica Brasil, and Oi TV. Several operators offer pay TV services as part of triple play packages including voice and broadband.

A new pay TV law was passed in September 2011, aimed at promoting competition and expanding services. This law removed limits on foreign ownership in the cable TV sector. It as well gave the green light to amount telcos to provide pay TV anywhere in Brazil. Thanks to the change in legislation, fixed-line incumbent Embratel has been able to take control of its subsidiary Net Serviços, the major multi-service cable provider in Latin America.

Market highlights:

• Former national-owned incumbent Telebrás, which has been reactivated to implement the government’s National Broadband Plan, has been deploying fibre-optic backbone networks in Brazil’s major cities.
• A new broadcasting law has opened the cable TV market to fixed-line telcos and foreign investors.
• The first MVNO authorisations have been issued to Sermatel, Porto Seguro, and Sisteer of France
• Sky Brasil has launched 4G services in Brasilia using TD-LTE technology
• Fixed-line operator GVT has launched a hybrid DTH/IPTV pay-TV service
• Anatel is holding a 4G/LTE auction in the first half of 2012 and a 3.5GHz spectrum auction in the second half of 2012
• The government wants amount major cities to have 4G services before the 2014 FIFA World Cup.
• The Brazilian government has said it intends to ensure 100% telephony coverage in rural areas by 2014
• Despite delays in the deployment of DTTV, Brazil intends to complete the switchover from analogue to digital TV broadcasting in 2016.
• Brazil has become the world’s second-major consumer of Twitter
• Brazil’s Facebook users tripled in 2011, overtaking Orkut.
• Folhapar has increased its interest in UOL and delisted the company
• Telefônica Brasil has acquired a 49% stake in Brazilian cable TV operator TVA from Lemontree
• Embratel has taken control of cable TV operator Net Serviços de Comunicação.
• Start-up mobile operator Unicel, trading as Aeiou, has disappeared from the market leaving around R$100 million in debts
• Nextel is rolling out 3G services in the second half of 2012.
• Vivo is shutting down its CDMA network by mid-2012

Brazil fixed-line, broadband, and mobile statistics – 2010 - 2012

(Source: BuddeComm based on industry data)

Convergence and Pay TV Market

Convergence is popular in Brazil, with numerous operators advertising triple play solutions that include broadband, telephony, and pay TV. Brazilian companies have generally approached triple play by adding VoIP to pay TV and broadband. Several operators as well offer services based on fixed-mobile convergence of the consequences of convergence is the start of competition between pay TV and telecom operators. In Brazil, delays in legislating on this matter have led to confusion and conflict, involving pay TV companies, telecom operators, and regulatory authorities. A draft bill is in the pipeline to allow IPTV services, which are prohibited by Brazilian telecom regulations.

Fixed-Line Operators

The Brazilian telecom sector is fully open to competition and continues to attract operators. The bulk of the market, however, remains divided between three groups: Spain’s Telefónica, Mexico’s América Móvil, and Oi, controlled by Brazilian investors and Portugal Telecom. Telefónica operates through Telefônica Brasil, which offers both fixed-line and mobile services (the latter branded Vivo); América Móvil operates through Embratel (fixed line) and through Claro (mobile); and Oi offers fixed line and mobile services under the Oi brand name.

The fixed-line market leaders are the regional incumbents Oi and Telefônica Brasil, with 45% and 26% 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. Nevertheless, while their basic telephony service stagnates or dwindles, long-distance incumbent Embratel and Vivendi’s GVT have been steadily increasing their local market share (respectively to 19% and 6%).

Telefônica Brasil’s previous corporate name, Telecomunicaçoes de São Paulo (Telesp), was changed to Telefônica Brasil in October 2011, when the operator completed a restructuring process after buying out Portugal Telecom’s half of mobile operator Vivo Participações and incorporating it into Telesp. The name Vivo was retained as a trademark for mobile business and would be adopted by the company’s fixed-line operations in March 2012.

This statement profiles amount major and some minor fixed-line operators, providing relevant statistics and analyses.

Oi and Telefônica Brasil see their fixed lines in service shrink by 6.5% and 1.9% respectively while Embratel’s increase by an estimated 21% and GVT’s shoot up by 34%; Telefônica Brasil has been undergoing a company restructure to consolidate fixed and mobile services under the Vivo brand name; Embratel has taken control of cable TV operator Net Serviços de Comunicação.

Fixed-Line Infrastructure

Brazil’s fixed-line teledensity is about percentage points higher than average for South America. Although the number of fixed lines continues to increase by about 1.5% a year, annual increase has been insufficient to raise teledensity, which has been stagnating at about 21% since 2002.

The country is very active in satellite networks. Because of remoteness problems, satellite communications have retained an significant role in Brazil. The Amazon jungles of the north make satellites the major communication facility, as it is almost impossible to lay fibre optic cable in the thick vegetation.

The regulator Anatel has approved the country’s third universal service plan, which requires fixed-line operators to install some 108,000 public phones in rural areas including amount schools and hospitals. In Brazil, outdoor pay phones are sheltered by a dome-shaped hood known as orelhão, or large ear. With its simple, unobtrusive lines in fiberglass and its efficient acoustic insulation, the orelhão is considered of the best examples of modern Brazilian design.

This statement provides an overview of Brazil’s telecom infrastructure, accompanied by relevant statistics, analyses, and fixed-line scenario forecasts for the years 2015 and 2020.

The Brazilian government has said it intends to ensure 100% telephony coverage in rural areas by 2014; former national-owned incumbent Telebrás, which has been reactivated to implement the government’s National Broadband Plan, has been deploying fibre-optic backbone networks in Brazil’s major cities.

Internet and Broadband Market

Broadband plans on offer in Brazil have improved significantly since 2008. In fact, broadband prices in Brazil are lower than in most other Latin American nations. In terms of broadband speeds, Brazil performs well compared with Latin America, but poorly compared with the rest of the world.

The number of fixed broadband subscribers continues to show solid increase rates despite the mobile broadband boom. However, there are parts of Brazil where fixed broadband does not reach, and where mobile broadband is the only option.

Although the government’s National Broadband Plan is proceeding additional slowly than originally hoped, it should significantly improve broadband access in Brazil. While the aim of the plan is to bridge the digital divide, it as well creates investment opportunities for operators – especially small companies and start-ups – to provide services over the national-owned broadband network. In fact, the plan envisages wholesale rather than retail service, typically in areas with low competition.

Brazil’s National Broadband Plan covered 692 municipalities in early 2012; Folhapar has increased its interest in UOL and delisted the company; the pay TV market has been opened to fixed-line telcos; Oi and Telefônica Brasil are launching IPTV in 2012; Brazil has become the world’s second-major consumer of Twitter; Facebook users tripled in 2011, overtaking Orkut.

Mobile Market

Brazil’s mobile market is the sixth major in the world, the country being home to additional than third of amount mobile users in Latin America and the Caribbean. Thanks to the rules attached to the 3G licences auctioned in December 2007, almost amount of Brazil’s municipalities receive mobile services.

Mobile penetration looks set to reach approximately 145% by end-2012, with the number of subscribers increasing by 19% annually. Nevertheless, mobile subscribers owning multiple SIM cards are pushing up penetration figures, hiding the fact that a lot of Brazilians have no mobile phone at amount.

After lagging behind the rest of the region, Brazil’s SMS market took off in 2011, when text messaging rose by almost 69%. The increase was mainly due to the new competitive pricing models and packages offered by operators.

Mobile broadband has become a major option for internet access in Brazil, as it is available in a lot of areas that have no fixed broadband coverage.

Accompanied by key market statistics and analyses, this statement provides an overview of the mobile voice and data market. It as well contains scenario forecasts for the years 2015 and 2020.

Vivo is shutting down its CDMA network by mid-2012; the first MVNO authorisations have been issued to Sermatel, Porto Seguro, and Sisteer of France; Sky Brasil has launched 4G services in Brasilia using TD-LTE technology; Anatel is holding a 4G/LTE auction in the first half of 2012 and a 3.5GHz spectrum auction in the second half of 2012; the government wants amount major cities to have 4G services before the 2014 FIFA World Cup.

Mobile Operators

companies dominate Brazil’s mobile telecom market: Spanish Telefónica’s Vivo, Mexican América Móvil’s Claro, Telecom Italia’s TIM Brasil, and Oi, controlled by Portugal Telecom and by the Brazilian Andrade Gutierrez group. Together, these operators control 98% of the country’s mobile subscriber base. Vivo is the leader, with about 29% of the market. TIM Brasil and Claro account for 26% and 25% respectively; the companies have been vying for second and third place since 2004. Oi is fourth, with 18%. The remaining 2% of the market is shared between CTBC Telecom, Sercomtel, and Nextel Brasil.

Having bought out Portugal Telecom’s half of mobile operator Vivo, Telefónica has undertaken a corporate restructure in Brazil. Vivo Participações has been incorporated into the group’s Brazilian fixed-line incumbent Telesp, and the merged company has been renamed Telefônica Brasil. The name Vivo has been retained as a trademark for mobile business.

This statement profiles amount of Brazil’s mobile operators, together with relevant statistical data and analyses.

TIM Brasil has overtaken Claro to become Brazil’s number mobile operator; start-up mobile operator Unicel, trading as Aeiou, has disappeared from the market leaving around R$100 million in debts; Nextel is rolling out 3G services in the second half of 2012.

Broadcasting

Brazil’s pay TV market has experienced sustained increase, not even slowing down during the world credit crunch. The principal operators in Brazil’s pay TV market are Net Serviços, Sky Brasil, Embratel, Telefônica Brasil, and Oi TV. Several operators offer pay TV services as part of triple play packages including voice and broadband.

A new pay TV law was passed in September 2011, aimed at promoting competition and expanding services. This law removed limits on foreign ownership in the cable TV sector. It as well gave the green light to amount telcos to provide pay TV anywhere in Brazil.

Thanks to the change in legislation, fixed-line incumbent Embratel has been able to take control of its subsidiary Net Serviços, the major multi-service cable provider in Latin America.This statement provides an overview of Brazil’s pay TV market, accompanied by statistical data.

Telefônica Brasil has acquired a 49% stake in Brazilian cable TV operator TVA from Lemontree; fixed-line operator GVT has launched a hybrid DTH/IPTV pay-TV service; despite delays in the deployment of DTTV, Brazil intends to complete the switchover from analogue to digital TV broadcasting in 2016.