20
10/2019

5G, Claro and other 3Q19 results, Oi and more

Eduardo Tude

Bidding of 5G Frequencies

Councilor Vicente Aquino from Anatel presented his bid proposal for the bidding of 5G frequencies with significant changes compared to what had been previously proposed. Proposed changes include:

• The sale of frequencies in blocks smaller than 10 MHz to the frequencies of 2,3 and 3,5 GHz and 700 MHz (5 + 5 MHz);
• Initial round to 50 MHz in the 3.5 GHz band with the participation of new players or small operators only;
• Sale of half of the available band at 26 GHz (1,600 MHz);
• The bidding, in which the current operators could participate, would be made by the CCA (Combinatorial Clock Auction) system that establishes multiple rounds system;
• Frequencies would have a different authorization period (maximum 15 years) and renewals every five years.

5G represents an evolution of the services provided by current mobile operators and the main objective of the bidding should be to provide frequencies so that they can offer this service to the Brazilian population, customer of these operators. Here are some comments regarding the proposed modifications:

• To allow the 5G to offer the intended speed gain (of 10 times or more) it's necessary a band of 80 to 100 MHz of contiguous spectrum. With 10 MHz bands, 5G offers performance similar to 4G;
• The 3.5 GHz band may be the most used worldwide and will therefore have smartphones with more affordable prices for the population;
• I don't think it is feasible for new players or small providers to buy 3.5 GHz frequency bands to offer mobile service. These frequencies may be purchased for speculative reasons, aiming the subsequent resale to other carriers. These companies may have the opportunity to acquire spectrum in other frequency bands;
• The purpose of the bidding should not be collection. The higher the price paid, the fewer resources will be needed for investments. Bidding should not create artificial scarcity to stimulate competition that will increase the amount collected by the Government. This account will end up being paid by users. There is already a high tax burden on the sector;
• Finally, the maximum period of 15 years for frequencies and renewals every 5 years goes against what was approved with bill 79, which extended the term to 20 years. Operators need legal certainty to make investments and provide their customers without risk of service discontinuity;
• In sum, it is necessary to review the new rules proposed for the benefit of the Brazilian population.

 

5G in the MBBF

• I attended this week's Global Mobile Broadband Forum, sponsored by Huawei in Zurich, where I had the opportunity to hear from executives from operators deploying 5G, such as Sunrise (Switzerland), LGU + (Korea), China Mobile, Telefonica, Orange, Elisa (Finland). ), Vodafone (7 countries) and Zain (Africa and the Middle East);
• The initial phase of 5G is consumer oriented and what is observed is a very large growth in data consumption due to applications like VR/AR. Korea is leading this growth so far;
• Eyes are, however, focused on the end of release 16 in the first half of 2020, which should specify, with further details the offer with guaranteed latency (SLA), slicing and other features that will enable the offering for B2B. The corporate market is considered the great opportunity for additional revenues made possible by 5G.

 

Claro

• The growth in Claro's mobile services revenue (11.1%) was bigger than the expected, when we compare 3Q19 with 3Q18, enough to offset the decrease in fixed services revenues (-2.4%). Total revenue grew by 2.0% in this period;
• Fixed services net revenue may be stabilizing. It fell by 0.3% in the 3Q19 when compared with the previous quarter;
• Claro's mobile ARPU grew to R$ 19.1 and EBITDA margin remained stable at 37.3%;
• America Móvil Group's total revenue in the world, in Mexican pesos, grew 0.2% in 3Q19/3Q18. Net profit fell by 5.8% impacted by exchange rate variations.

 

3Q19 Results:

When we compare 3Q19 with 3Q18 revenue increased:

• 31.1% at Netflix. The number of US subscribers increased again compared with the previous quarter (0.9%);
• 6.2% at Ericsson. The company posted a US$ 701 million loss in the quarter, impacted by a fine to be paid in the United States;
• 24.4% at Huawei (year-to-date revenue until 3Q19). The company already has over 60 contracts in 5G.

 

Oi

• Oi has put into operation its FTTH network in four other cities (Feira de Santana, Jequié, Ji-Paraná and Vitória da Conquista), now providing FTTH service to 76 cities;
• Oi confirmed hiring Morgan Stanley and BTG Pactual banks to conduct capital raising operations to reinforce its cash;
• Oi's ON stocks presented 2.1% raise and PN registered loss of 0.7%.

 

SeAC (Pay TV)

• Bill 3832/2019 which deals with changes to the SAC law, removing restrictions on cross-ownership, was sent by the CCT to the Brazilian Senate, following a request from the Senate President. It is expected that the bill will now have a broad discussion;
• 49% of the Brazilian people want operators to act as content aggregators, according to AMDOCS research.

 

Other Highlights

• The term of Anatel's Councilor Aníbal Diniz ends on November 4^th. This week he attended the last meeting of the Anatel's Council;
• Sercomtel launched the real estate sales notice in Londrina. The minimum price of the lot is R$ 29.293 million, of which R$ 21.75 million refers to land. Anatel authorized the sale, as it seems to have become clear that land is not reversible asset;
• Vivo, Oi, Tim, Claro and Telcomp signed a Memorandum of Understanding with Enel Distribuição São Paulo and Procon-SP to order the wiring of poles at locations in the city of São Paulo. Enel will remove cables from those who don't have a contract with the distributor, so that operators have room to adapt their networks;
• Algar Telecom inaugurated an open innovation center at Porto Digital, in Recife (state of Pernambuco), with an initial focus on Industry 4.0, health and smart cities;
• 83% of public health facilities in Brazil have internet access, according to ICT Health 2018. In 2017 they were 77%.

 

Coming Weeks

• Futurecom will happen between October 28 and 31.

13
10/2019

Operators Revenue, Autonomous Car, 5G and other highlights

Eduardo Tude

What will be the growth of operators revenue in 3Q19?

Claro presents the results of 3Q19 this week. Vivo (10/31), TIM (05/11) and Oi (13/11) will release in the coming weeks. There are some estimates below of what may be the revenue growth of these operators in the comparison between 3Q18 and 3Q19, based on the growth of accesses disclosed by Anatel for the first two months of the quarter.

 

Vivo

• Total revenue remains the same, with growth in mobile services (2%) expected to offset losses in fixed services (-3.5%);
• Vivo's performance in the first two months of the quarter was similar to the previous quarters. It grew less in postpaid without M2M (+152 thousand) than Claro and Oi, and net additions of fixed broadband with fiber are not yet offsetting losses with xDSL.

Claro

• Total revenue (+ 1%) and mobile services (4%) growth. Loss of 2.5% in fixed services revenue;
• Claro led postpaid growth without M2M in the first two months of the quarter (+438 thousand), which may guarantee it a growth in mobile revenue over the previous quarter. Fixed services growth is likely to continue to be negative, due to losses in fixed telephony and pay TV.

TIM

• Revenue growth is expected to be close to “zero” in the quarter;
• TIM continues to register low growth in postpaid without M2M, presenting losses in the first two months of the quarter (-238 thousand).

Oi

• Total revenue is expected to fall around 8% compared with 3Q18;
• Oi was ranked 2nd in postpaid net additions without M2M (+316 thousand) in the first two months of the quarter and is expected to show positive growth in mobile compared to the previous quarter. Compared with 3Q18, however, growth may be negative;
• Stabilizing revenue in the fixed is more difficult. Losses in fixed telephony continue and in fixed broadband gains with fiber aren't yet offsetting losses with xDSL.

Oi's ON stocks remained stable in the week. PN stocks had 0.7% loss.

 

Autonomous Car

• The autonomous car is late. Silicon Valley blames the hype and the limits of artificial intelligence. Elon Musk (Tesla) expected to have cars with full autonomy in 2017 and GM to have an autonomous fleet by 2018. This is one of the themes of this week's Economist magazine;
• The delay is due to the difficulties encountered in treating non-ordinary situations;
• Waymo (Google) and GM would be at the cutting edge in this process, but China is taking a different approach that may be successful. The country is making cities better prepared to assist autonomous cars with sensors scattered around where the vehicles would be used.

 

5G

• I will be attending this week's Global Mobile Broadband Forum, hosted by Huawei in Zurich, where I will have the opportunity to check out 5G technology advances in the world;
• Already 10 million users registered to use the 5G network of the three largest Chinese operators. These 5G networks are expected to begin commercial operation by the end of the year.

 

Other Highlights

• Americanet started to operate commercially its FTTH network in Potim and Aparecida (SP)

 

Coming Weeks

• Futurecom will happen between October 28 and 31.

6
10/2019

Mobile Telephony and Pay TV in August, Bill 79, Oi, 5G and more

Eduardo Tude

Mobile Accesses in August

• Claro led cellular growth in August, with net adds of 33 thousand accesses, followed by Nextel (10 thousand). Vivo (-232 thousand), TIM (-181 thousand) and Oi (-28 thousand) presented negative net adds;
• Claro was the postpaid growth leader (338 thousand), followed by Vivo (168 thousand), Oi (167 thousand) and TIM (14 thousand);
• Vivo led M2M (103 thousand), followed by Claro (81 thousand), TIM (68 thousand) and Oi (-4 thousand);
• In prepaid, Vivo (-400 thousand), Claro (-305 thousand), TIM (-195 thousand) and Oi (-195 thousand) presented losses;
• Claro led postpaid net adds (without M2M), in the accumulated of the first eight months of the year, followed by Oi. TIM registered negative net adds.

 

Pay TV in August

• Brazil lost 193 thousand pay TV subscribers in August, 171 thousand DTH and 43 thousand cable, partially offset by growth in IPTV (21 thousand);
• The main operators presented losses: Claro (-89 thousand), SKY (-78 thousand), Vivo (-26 thousand) and Oi (-16 thousand);
• Brazil ended the month counting 16.3 million pay TV subscribers. Netflix has 10 million subscribers in Brazil.

 

Bill 79

• Bill 79 was sanctioned by the President without vetoes. There is much to celebrate, but the time now is to keep moving forward. Migrating from concessionaires to authorized operators will require a lot of effort from all involved. Other issues, such as the use of FUST and zero Fistel for IoT, have to move forward in Congress.

 

Oi

• Rodrigo Abreu, Oi's COO, said the company has no plans to sell its mobile operation in the short term;
• Oi's ON stocks remained stable in the week. PN stocks had loss of 2.7%.

 

5G

• O Conselho Diretor da Anatel adiou por 30 dias a aprovação da consulta pública do leilão de frequências da Anatel, de modo a aguardar uma solução para a interferência nas parabólicas.
• Anatel's Board of Directors has postponed for 30 days the approval of the public consultation of Anatel's frequency auction, pending a solution to the interference in the satellite dishes.

 

Other Highlights

• I participated this week in the Cities, IoT and Connectivity Forum in Belo Horizonte. My lecture dealt with “How Belo Horizonte can come out of the last positions in the Internet Friendly Cities Ranking and become a successful case. The receptivity was very good and there is a good prospect for the city to revise its municipal legislation for authorization of ERBs;
• Vivo stated to commercially operate its FTTH network in more two cities: Jaguariúna (SP) and Mineiros (GO).

 

Coming Weeks

• Futurecom will happen between October 28 and 31.

Eduardo Tude

President and partner at Teleco (consultancy company), works since 2002 as analyst of Telecom market, coordinating consulting projects, publishing weekly articles, preparing sector reports and presenting workshops.

Telecom Engineer (IME 1978) and MSc. in Telecom Engineering (INPE 81), Tude is member in the Mobile World Congress’s judging commission for the Global Mobile Awards, in Barcelona, and was also a visiting specialist professor at Unicamp.

Tude had many positions in the management of Telecommunication companies in areas like Mobile Systems (Ericsson), Optical Networks (Pegasus Telecom) and Satellites (INPE).

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