Home Latin America III 1998 Wireless Communications in Brazil and Argentina

Wireless Communications in Brazil and Argentina

by david.nunes
Manuel MolinaIssue:Latin America III 1998
Article no.:11
Topic:Wireless Communications in Brazil and Argentina
Author:Manuel Molina
Title:Not available
Organisation:Kabelwerk Eupen AG, Brazil
PDF size:20KB

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Article abstract

Latin America is becoming an explosive market for wireless communication, in particular, Brazil and Argentina. The privatisation of Telebras signals the Brazilian government’s serious intention to stimulate competition in the telecommunications sector. It should have a favourable impact on the Latin America stock exchange and thus reduce the damage caused by the crises in South-East Asia and Russia. For Kabelwerk Eupen, these two countries represent an interesting .sales opportunity for the coaxial cable industry.

Full Article

Wireless communication encompasses a widening range of different technologies, ranging from conventional paging, mobile radio and cellular, to Personal Communications Services (PCS). It is more and more obvious that wireless communication is expected to be the most important ‘mode of communication in the next century. As users demand more and more functionality from their wireless networks, these should be offering more services besides just voice, but also access to internet, multimedia capabilities, videoconferencing, etc. Consequently, it is estimated that the number of users worldwide will reach one billion by 2008. Latin America is becoming an explosive market, and in particular, Brazil and Argentina. The privatisation of the giant Telebras of Brazil is considered as one of the largest transfers of state telecommunications assets to private companies. Favourable Impact of Privatisation It is clear that the Brazilian government wants to stimulate serious competition in the telecommunications field. This is the main reason for the Telebras privatisation. No state-owned company would ever be able to compete on an equal basis with private companies. In most cases, such competition invariably leads to the destruction of the state company’s assets, which is unable to invest the large sums required to maintain an efficient infrastructure. Only competition can provide the best services at the lowest prices and thus accelerate the great Brazilian social project and guarantee economic stability. This privatisation should have a favourable impact on the Latin America stock exchange and thus reduce the damage caused by the crises in South-East Asia and Russia. Brazil In order to facilitate the sale, Telebras was divided into 12 units: eight cellular companies, three fixed-line companies and one long distance carrier. These companies were sold for a total of US$19 billion, a sum that exceeded the expectations of the Brazilian government. The eight cellular companies reached US$6.99 billion, almost three times the minimum price (see Figure 2). The main winner of the auction was Telefonica de Espana. Telefonica, who bought the fixed-line operator of Sao Paulo and will control, together with Portugal Telecom, the cellular operator for the same territory. Sao Paulo, the world’s third largest city, has a crucial role in Brazil. With the largest industrial concentration, a high population density, and high levels of as yet unsatisfied demand, Sao Paulo presents a hugely attractive market. At present, 5 million of Telesp’s clients are waiting for a telephone line; a fact that gives a clear indication of the potential of the region. Telefonica will offer wireless services in Rio de Janeiro and Espirito Santo. The success of Telefonica de Espana in the Telebras privatisation has been strengthened by the victory of its international allies: MCI and Telecom Portugal (representing the Pan-American Alliance since March 1998), as well as the electricity company Iberdrola. MCI has bought Sao Paulo’s cellular company, and Iberdrola controls the cellular of the state of Bahia. These acquisitions are making Telefonica the main telecommunications operator in Latin America, managing more than 11.6 million fixed line customers and more than 2 million cellular customers. Cellular licenses were already auctioned by the government on the B-band cellular frequency. It is only the license for Region Eight (covering the northern states in the Amazon region) that is still open, which is largely due to the region’s vast territory and low population density, which are making it difficult to find a buyer. Each of the three former Telebras fixed-line companies, as well as the long distance carrier Embratel, will compete with a mirror company. Licenses for mirror companies have not yet been auctioned. Regarding the Wireless Local Loop (WLL) in Brazil, Anatel, the regulatory body, allows the new owners of fixed-line companies to use this technology in areas where the population is less than 50,000 and not covered by the mirror companies. Argentina Cellular operators in Argentina have shown a spectacular global growth this year. Currently there are five cellular operators. Each of these is competing with one another in its assigned territory. In the first region, corresponding to the north of the country, CTI Movil (B-band) is competing with Personal (100% participation of Telecom Argentina). CTI Movil and Unifon (100 % participation from Telefonica de Argentina) are offering services in the third region, corresponding to the south of Argentina. Miniphone (50% Telefonica, 50% Telecom Argentina) and Movicom are serving the Buenos Aires metropolitan area. This year, growth ranges from 373% for Personal, 391 % for Unifon, 210% for CTI Movil Sur to 204% for CTI Movil Norte. Each region has more or less the same population size. Currently, the market share is divided as shown in Figure 1. Opportunity for COMA? The Time Division Multiple Access (TDMA) technology is used mostly in Latin America. As Telefonica and Telecom Portugal are working with this standard, the Code Division Multiple Access (CDMA) standard could be suppressed from the Brazilian market. Personal Communications Services In Argentina, as the B-band was auctioned two years before the arrival of competitors, a different outcome may have been expected. According to the new legislation and the deregulation plan, only four cellular companies will remain. Miniphone, which belongs to Telefonica and Telecom Argentina, will most likely be divided in two or sold to one of its shareholders. PCS is not currently available in both Brazil and Argentina. Its introduction will provide voice wireless communication, video and data services, between mobile users anywhere, at any time and with any equipment. In Argentina, the PCS auction was blocked by lawsuit for an indefinite period until April 99. However, three licenses should be auctioned, two across the country and one in the Buenos Aires region. The government expects to make US$300 million from the sale of PCS. Big WLL projects are going to be set up in Argentina. For a lot of rural regions without wireline, it is practically more cost effective to introduce WLL. Conclusion Coaxial corrugated cables are mostly chosen for wireless communications base stations building. In Brazil, Kabelwerk Eupen with a long history in the field of electricity and telecommunications cables, provides the coaxial cables in association with Eriline, which among other things, is participating in the Tess consortium, which earned the B-band license for the state of Sao Paulo. In Argentina, Kabelwerk Eupen is working through two distribution companies: BGH and Buenos Aires Comunicaciones.

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