Transcript Precificação do Unbundling

Competition in Brazilian telecom
market:
an emerging market experience
Paulo Roberto Gião
University of Brasilia
&
José Rogerio Vargens Filho (presenter)
Brasil Telecom
Summary
1.
2.
3.
4.
5.
Brazilian telecom privatization (1996-1998)
The process of consolidation (1998-2004)
Results after privatization: regulator, users
and operators points of view (2004)
The Brazilian regulatory reform (2004-2006)
Conclusions
1. Brazilian Telecom
Privatization
1996 - 1998
Privatization main events
Privatization of the public mobile companies in
1996.
 Creation of the national telecom agency
(ANATEL) in 1997.
 Privatization of the public fixed telephone
company TELEBRAS in 1998.

Brazilian fixed telephone map
by 1998
Region II
Telemar (incumbent)
GVT (newcomer)
Region IV: LD in all
Brazil
Embratel (incumbent)
Region I
Telemar (incumben
Vesper (newcomer)
Region III
Telefonica (incumbent)
Vesper (newcomer)
Brazilian cellular map by 1998
Region 8
Region 10
Region 9
Region 7
Region 4
Region 2
Region
5
Region 6
Region 3
Region 1
2 operators per region.
Telecom policy after privatization
Competition
 Universal service

Asymmetric rules for fixed
telephony
REGULATORY MARKS
Contract
Geografic operation
Universal obligations
Diversification of services
Use of new technologies
INCUMBENTS
Public
Restricted to its area until 2002
Yes
Since 2002
WLL liberalized since 2001
NEWCOMERS
Private
No restriction
No
Since 2001
No restriction
2. The process of market
consolidation
1998 - 2004
Mergers and acquisitions

The Brazilian market did not hold the number of
players that got into by the time of privatization.
 Some players sold their participations and left the
country.
 Others restructured themselves and bought the
participations from the players that left.
 As a result, 5 big telecom groups emerged in
Brazil.
Brazilian fixed map by 2004
Region IV: LD in all Brazil
Embratel/Telmex
(incumbent)
Intelig
Region II
Telemar (incumbent)
GVT
Region I
Telemar (incumbent)
Vesper/Telmex
Region III
Telefonica (incumbent)
Vesper/Telmex
Brazilian cellular map by 2004
Vivo (Telefonica)
44% of subscribers
TIM (Telecom Italia) Brasil Telecom GSM (Opportunity)
18% of subscribers
0% of subscribers
Claro (Telmex)
22% of subscribers
Oi (Telemar)
7% of subscribers
Telemig/Amazônia Celular
(Opportunity)
9% of subscribers
The 5 biggest telecom groups in Brazil
1) TELEFONICA (Spain): the 2nd local telephone incumbent and
the 1st mobile operator VIVO.
2) TELEMAR (Brazilian): the 1st local telephone incumbent with its
mobile operator OI.
3) TELMEX (Mexican), the 1st long distance carrier EMBRATEL;
the 2nd mobile operator CLARO; the fixed local entrant
VESPER; and the 1st Cable TV operator NET.
4) BRASIL TELECOM/OPPORTUNITY (Brazilian): the 2nd local
telephone incumbent that is also launching mobile operation
and TELEMIG/AMAZONIA CELULAR.
5) TELECOM ITALIA (Italian): the 3rd mobile operator that covers
all Brazil, Telecom Italia Mobile or TIM.
3. Results of privatization
2004
Regulator´s point of view
INDICATOR
1997
2003
GROWTH
Population (1000 inhab.)
163.471 176.876
8%
GDP (US$ 1000)
807.745 508.011
-37%
Fixed lines (millions)
18
39
more than 2 times
Mobile lines (millions)
4,55
46,37 more than 10 times
Public phones (millions)
0,52
1,43
almost 3 times
Fixed lines (per 100 inhab)
11
22
about 2 times
Mobile lines (per 100 inhab)
2,8
26,2
almost 10 times
Internet users (% of populations)
1,3
9,5
more than 7 times
Broadband access (per 100 inhab)
0
0,65
-
User benefits
 Availability
of wire and wireless lines
 Decrease of tariffs
 Options among providers
Operator´s point of view
Investors bid on Brazilian privatizing
companies and licenses based on two
premises: the Brazilian economic growth and
the world´s telecom boom.
 The Brazilian economy did not grow and the
telecom boom turned into a crisis in 2000.
 As a result, most companies have not yet
gotten a return above their cost of capital.

4. The Brazilian regulatory
reform
2004 - 2006
Some new rules
Unbundling
 Interconnection (cost-based access prices)
 New universal obligations 2006-2025
 New price cap definitions
 Other competition rules
 Internet access rules

Monopoly and competition policies in
the same reform
Competition policy
Monopoly policy
Unbundling and
cost-based
access price
New universal
obligations
supported by
incumbents
Risks

The introduction of policies like unbundling and
cost based pricing and, at the same time,
universal obligations can harm telecom operators.
 The regulator should measure these policies in a
balanced way to improve the Brazilian telecom
model.
 The costs to implement universal obligations
should be took in account to the definitions of
telephone´s tariffs, interconnection´s fees and
unbunlding´s prices.
5. Conclusions
The privatization in Brazil succeeded
because it improved all telecom indicators
and benefited users in many ways.
 Five big telecom groups emerged in Brazil
after a long process of market consolidation.
 The Brazilian telecom model is being
revised.
 The regulator should issue the new rules
with some cautions to not harm telecom
operators nor treat the successfully telecom
model built in Brazil.

THANK YOU!