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4G in Brazil: Too much too soon?

  • December 2014
  • -
  • MarketLine
  • -
  • 26 pages

Introduction

The Brazilian mobile telecom market has long been thought of as a major growth opportunity, and the market is dominated by multinational telcos looking to leverage its potential. However, the outcome of a September 2014 spectrum auction, the second of its kind for 4G LTE allocation, was disappointing for the Brazilian government and one major market player, Oi S.A. (Oi), did not even participate.

Features and benefits

* Outlines the history of 4G mobile services in Brazil.
* Assesses the process and results of the disappointing 700 MHz spectrum auction in Brazil.
* Analyzes competitive aspects of the Brazilian telecoms industry.
* Examines Oi's position in the industry and explores the factors behind its decision to opt out of the 700 MHz auction.

Highlights

The way for telcos to offer 4G services in Brazil was paved in July 2012, when the country's telecoms regulator, Anatel, held a successful auction for the 2.5 GHz spectrum band – a frequency intended for the transmission of 4G LTE signal. The four major mobile network operators (MNOs) all made successful bids during the auction.
Although 4G subscribers are growing in Brazil, significant opportunity remains in the 3G segment, which is still growing strongly and is set to become the dominant technology in the Brazilian telecom market, lessening the importance of 4G in the near term.
Oi's official reasons for not participating in the 700 MHz auction include its intention to continue to invest in its existing mobile and fixed line infrastructure to improve coverage and customer satisfaction, as well as concentrate on its role as a leading multi-play telecom company.

Your key questions answered

* How has the Brazilian 4G market and infrastructure developed since licenses were first granted in 2012?
* Why did the September 2014 700 MHz spectrum auction fall short of expectations?
* In which sectors do the leading Brazilian telcos hold the strongest competitive position?
* How might a trend towards consolidation in the industry have influenced Oi's decision to not take part in the 700 MHz spectrum auction?

Table Of Contents

4G in Brazil: Too much too soon?
OVERVIEW
Catalyst
Summary
THE BRAZILIAN 4G MARKET: A SHORT HISTORY
4G in Brazil enabled through 2.5GHz auction in July 2012
Soccer events kicked off urban 4G rollout in Brazil
Brazilian 700 MHz 4G spectrum auction disappoints
WHY DID THE 700 MHZ AUCTION FALL FLAT?
3G remains the most important technology in Brazil
The 700 MHz auction brought extra high up-front costs
High costs compounded by unfavourable macroeconomics and industry movements
WHY DID OI OPT OUT OF THE 700 MHZ AUCTION?
Focus on multiple-play services to converge and retain customers
Oi's merger with Portugal Telecom worsens financial position
Potential consolidation could have negated Oi's need to bid
CONCLUSIONS
External and internal factors contributed to a disappointing spectrum auction
A number of factors influenced Oi's decision to opt out of the 700 MHz auction
APPENDIX
Definitions
Sources
Further Reading
Ask the analyst
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