08/23/2011


Oi's Challenges

 

In the first quarter of 2009 (1Q09) Oi became the controller of BrT and the biggest Telecom operator in Brazil. However, this acquisition increased its debt. Oi's net debt hit R$ 21,9 billion by the end of 2009, 2.4 times the value of its EBITDA.

 

 

 

 

In face of this picture, in 2010, Oi decided to focus in profitability instead of growth (more details) and reduced its net debt to R$ 18.7 billion by the end of the year (1.8 times the EBITDA).

 

After the capitalization promoted by Portugal Telecom, with its entrance in the group that controls Oi, net debt dropped to R$14.4 billion in 1Q11.

 

These processes of reducing debt and changing the organization board resultant of the entrance of Portugal Telecom at Oi drove to loss of operator's market share in this period.

 

 

 

 

The loss of market share inside fixed telephony market was expected. It also happened with operators all around the world. The challenge is recovering the market share lost in this period in cellular and in broadband sectors.

 

This climate has, as consequence, the drop of Oi's revenue in the first semester of 2011.

 

 

 

 

Once finished this period of reorganization, Oi will have to get back to the growth track and that will require great effort from the carrier.

 

In broadband, Oi faces competition imposed by Net and GVT that have high speed accesses networks based on fiber, while the majority of Oi's accesses are low speed ADSL. In 2T11, Oi's average broadband speed hit 2.13 Mbps (17% of Oi's client base used speed equal or bigger than 5Mbps). At GVT, all the broadband accesses uses speed superior to 5 Mbps.

 

The competition in broadband market will be intensified after the concession of new cable TV licenses, what happens after the approval of PL 116 by the Brazilian congress. The new Anatel's regulation will allow all operators to provide packages with broadband, cable TV and fixed telephone in 2012. This new scenario will require heavy investments from operators. In the first semester, Oi assigned 45% of its investments (Capex) for data segment.

 

In cellular, Oi must to make up for the loss in market share inside Region I, where the carrier was the leader (until 1Q11) but fell to the third position and now is threatened by Claro (company that holds the fourth position).

 

 

 

 

In order to recover market share in the cellular market, Oi will have to increase its investments in network and 3G. Oi holds the fourth position in 3G coverage, reaching 212 cities.

 

Oi has great challenges ahead. Resume growth in number of accesses, market share and revenue, mainly in cellular and broadband sectors. Making the necessary investments isn't enough to surpass these challenges, besides that, Oi must to mobilize all its team in order to find innovative solutions.

 

You could ask:

  • Will Oi gain market share in cellular and broadband segments in 2011?
  • Will Oi's revenue increase in 2011?
  • What can we expect from Oi in 2012?

 

 

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Note: The opinions expressed in the published articles in this section are their authors' responsibility.

 

 

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