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Brazil Preps for Mobile Upheaval

Light Reading
LR Mobile News Analysis
Light Reading
3/17/2010
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New spectrum and licensing rules could lead to a dramatic upheaval of the mobile market in Brazil, ushering in not only a new converged fixed and mobile player, but opening the door for mobile virtual network operators (MVNOs) that don't need a spectrum license or a network to offer mobile services.

Mobile network operators now see MVNOs as a good thing, as they provide a useful wholesale business opportunity and a way to segment service offerings. This could also eventually be the case in Brazil, where MVNOs could help boost uptake in regional markets where average revenues per user (ARPUs) and mobile penetration levels are still low: Brazil currently has a wide range of mobile penetration levels, from 159.2 percent in Distrito Federal (where capital Brasilia is located) to 44.3 percent in the state of Maranhao, according to figures from Brazil's regulatory agency, Anatel.

But Brazilian operators are already grappling with network capacity issues due to the unexpected success of 3G/HSPA mobile broadband services. Brazil accounts for half of the total 15 million 3G/HSPA subscribers in the Latin America region, according to 3G Americas LLC . That, and the fact that the market is already pretty competitive, with four evenly-balanced players, could make MVNOs a less attractive proposition until new spectrum is allocated.

Currently, the Brazilian market of about 175 million users is split among Vivo Participacoes SA , the Telefónica SA (NYSE: TEF)/Portugal Telecom SGPS SA (NYSE: PT) joint venture that has a 29.75 percent market share (of the total 175 million subscriptions); América Móvil S.A. de C.V. , with 25.52 percent; Telecom Italia (TIM) 's TIM Participacoes S.A. , with a 23.63 percent share; and Tele Norte Leste Participacoes S.A., better kown as Oi, which has a 20.73 percent share.

Anatel has also hinted that a fifth 3G license may be granted this year, and could be given to a fixed player interested in becoming a converged operator, similar to Oi. Some market watchers have cited Vivendi -owned fixed provider GVT as a likely candidate, though existing mobile services operator Nextel Brazil, which has just 2.5 million customers currently, is another. (See Vivendi Floors Telefónica and Vivendi Reports 2009 Results.)

Early indications are that MVNOs, which are currently prohibited in Brazil, will be given the green light later this year. Anatel held the last of three public hearings on the subject in Brasilia on March 11.

The existing mobile network operators, meanwhile, are pushing heavily for new spectrum to be released in the 2.5GHz band so they can boost network capacity for their data services. They have an excellent opportunity in the broadband access market, with penetration at just 6 to 7 percent in Brazil, says Erasmo Rojas, director, Latin America and Caribbean, at 3G Americas.

The Brazilian government is involved in an ongoing debate about the allocation of new spectrum for mobile services. The biggest argument surrounds the allocation of 2.5GHz spectrum, some of which is currently in the hands of MMDS (multichannel multipoint distribution service) operators. MMDS operators want to use it for mobile WiMax, but the cellular operators want it for Long Term Evolution (LTE). The government has issued a public inquiry over the possible release of 140MHz of the 2.5GHz band for mobile operators, and is expected to make a decision this year.

— Anne Morris, freelance editor, special to Light Reading

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