28
2/2021

5G, Vivo, TIM and more

Eduardo Tude

5G: Schedule

• Anatel's Board approved the draft 5G notice to be forwarded to the Federal Audit Court;
• The notice establishes that, after the Release, cell sites should be implemented in 16 in the Capitals and the Federal District in Jul/22. Density of 1 cell site/100 thousand inhabitants;
• In São Paulo, for example, each operator would have 123 cell sites in Jul/22 with Release 16. This amount would grow to 410 cell sites in 2024 and 820 in 2025. Today, each operator has an average of 1,700 cell sites;
• The Schedule is tight and delays may occur. In this case, the term for implementing the cell sites will be extended to 30 days from the release of the frequency band.

 

5G: Minimum Price and Value of Commitments

• Anatel has released a preliminary estimate of the value of the frequencies to be auctioned. They would have a minimum price between R$ 33 billion to R$ 35 billion;
• The value of the commitments (R$ 23 billion) would be deducted from this total, which would put the minimum price at around R$ 10 billion;
• In the United States, the C band frequency auction (3.7 GHz to 4.2 GHz) raised US$ 81.2 billion from 21 participants. Verizon acquired  most frequencies, spending about US$ 30 billion, more than twice as much as AT&T.

 

 

Results 2020: Vivo

• Vivo's net revenue decreased 2.6% in 2020, with 0.9% for mobile and 5.7% in fixed. The recurring EBITDA margin reached 41.1%, the recurring net profit hit R$ 4.8 billion and Capex R$ 7.8 billion (-11.9%);
• Revenues from mobile services fell 0.1% and handsets by 8.5%;
• In the fixed services, fixed broadband revenue grew 3.0%, pay TV -9.2%, and fixed telephony -18.6%;
• Telefônica Brasil intends to structurally separate a fiber company (FiBrasil) and is in advanced negotiations with a major international financial investor;
• A similar operation was carried out in Chile, where Telefónica sold 60% of its fiber infrastructure unit to the KKR Alameda Aggregator fund, for about US$ 600 million;
• Telefónica group reported net revenue of € 43.1 billion in 2020, 11% smaller than in the previous year. The OIBDA margin reached 31.3% and net debt fell from € 41.1 billion in 2018 to € 35.2 billion in 2020.

 

TIM: Strategic Plan

• TIM presented its strategic plan and Guidance for 2021-2023;
• In 2020, the growth in Service Revenue (0.4%) was less than projections, but the growth in EBITDA (3.2%),% Capex over Net Revenue (22.5%) and% EBITDA - Capex over Revenue Net (25.9%) were within the projections;
• TIM projects Capex of R$ 4.4 billion in 2021. Details of the Plan should be presented at TIM Investor Day this Monday (March 1^st).

 

Oi

• Oi's ON shares decreased 6.4% in the week and PN 9.4%.

 

More Highlights

• Anatel has approved the use of the entire 6 GHz band (5,925 MHz to 7,125 Mhz) for WiFi 6 equipment (IEEE 802.11ax);
• Anatel included the revision of the regulation for the use of FUST among the urgent items of the Regulatory Agenda 2021-2022. The agency is expected to make a public consultation in the second half of 2021 and propose the new regulation for the use of FUST in the first half of 2022 (Tele.síntese). In other words, the use of FUST resources should remain for 2023;
• The Senate approved a bill that foresees the transfer of R$ 3.5 billion from FUST to states and municipalities to guarantee Internet services for students and teachers from the public school system. The text was sent for presidential sanction;
• AT&T sold half of its pay TV division in the United States to the TPG Capital fund. The deal does not include SKY Brasil.

 

Coming Week

• Brazilian GDP in 2020 (March 3^rd)

21
2/2021

Oi, 5G and more

Eduardo Tude

Oi

• In 2020 Oi's Capex (R$ 7.0 billion) was the third largest in the Group, only lower than that of 2019 (R$ 7.8 billion) and 2001 (R$ 13.6 billion);
• Oi announced that it will issue guaranteed debentures in the amount of R$ 2.5 billion to finance the continuity of its investments in fiber in 2021. The guarantee will be given by Infraco, Oi's fiber unit that should be sold this year;
• Oi ended 2020 with R$ 4 billion in cash, after a negative result of R$ 509 million in December;
• Oi's ON shares decreased 1.0% and PN 3.8% in the week.

 

5G

• The proposal for the 5G auction notice will be discussed again by Anatel's board this Thursday (Fev. 25^th);
• The greatest expectation is in relation to the obligation to implement the standalone network. It is expected that the deadline for this requirement will be extended, so that each operator has more time to develop its rollout strategy, starting with non-standalone, as has been done by most operators in the world;
• Ryan Ding, president of Huawei's Carrier Business Group, said the company has built more than half of the 140 commercial 5G networks deployed in 59 countries so far and that more than 68% of smartphones sold in China in 2020 were 5G. 5G devices are now available for just US$ 350. (MWC Shanghai pre-conference).

 

Norte conectado

• The Workshop to discuss the business models of the pilot project of the Norte Conectado program was attended by over 100 people and enriched the RFI debate on how to contract the company or consortium that will commercially explore, operate and maintain the pilot project of the Norte Conectado program, on Infovia 00, which covers the stretch between Macapá (AP) and Santarém (PA). Contributions can be sent until 02/26/2021.
• RFI document can be accessed on: https://norteconectado.rnp.br/sites/default/files/2021-02/RFI_-_ON_-_Norte_Conectado.pdf

 

More highlights

• The Brazilian Supreme Court (10 votes to 1) dismissed the Direct Action of Unconstitutionality, proposed by the Attorney General's Office, which requested the annulment of the Telecommunication General Law article that prevents charging for the installation of telecom networks on public roads. Thus, the exemption from charging for the right of way was ensured;
• The Court also decided that the incidence of ICMS on licensing and assignment of software use, whether standardized or by order, is unconstitutional;
• Telebras renewed the optical fiber and telecommunications infrastructure assignment agreement with Eletrobras companies (Chesf, Eletronorte and Furnas) for another ten years.

 

Coming Weeks

• Vivo's 2020 Results (Feb. 24^th).
• Anatel's Board of Directors Meeting (Feb. 25^th)

14
2/2021

Norte Conectado Program, Claro and TIM Results, 5G and more

Eduardo Tude

Norte conectado

• I would like to invite everyone interested in the Norte Conectado program, which intends to take 13,000 kilometers of subfluvial fiber optic cable to the Northern Region of Brazil, to contribute to the public consultation (RFI) promoted by RNP, with support from MCom;
• The objective is to hear the opinion of representatives of the telecommunications sector to define the form of hiring the company or consortium that will commercially explore, operate and maintain the pilot project of the Norte Conectado program, on Infovia 00, which covers the stretch between Macapá (AP ) and Santarém (PA);
• Teleco was the consultancy hired to provide strategic support for business modeling and the formatting of the neutral operator of this pilot project;
• RFI's document can be accessed on:
• https://norteconectado.rnp.br/sites/default/files/2021-02/RFI_-_ON_-_Norte_Conectado.pdf
• On February 19^th, at 10 hs (Brasília time) a Workshop will take place to present and discuss the project on RFI:
• https://conferenciaweb.rnp.br/webconf/rfi-norte-conectado

 

Results 2020: Claro

• Claro's net revenue grew 1.6% in 2020. Mobile revenue increased 10% and fixed revenue raised 4.5%;
• EBITDA margin reached 39.7%

 

Results 2020: TIM

• TIM Brasil's net revenue had losses of 0.6% in the year. Mobile revenue increasing -1.3% and fixed revenue 11.1%. The fixed represents 6.1% of TIM's revenue;
• EBITDA margin reached 48.5% and net profit hit R$ 1.9 billion;
• TIM announced that ir will supply 4G for Anglo American mining plants.

 

Results 2020: América Móvil

• América Móvil's net revenue grew 3.3% in 2020 (Mexican pesos), EBITDA margin reached 32.4% and net income hit US$ 2.3 billion;
• América Móvil will spin-off all its cellular towers in Latin America, for a new infrastructure company;
• In 2020, América Móvil plans to use US$ 600 million to US$ 700 million to purchase 5G spectrum in the countries where it operates, such as Brazil, Colombia and Mexico.

 

5G

• The Brazilian Mission of MCOM, TCU and other ministries ended with a visit to Huawei in Shenzhen to learn about experiences with 5G in Sweden, Finland, South Korea, Japan and China;
• The minister said in a statement: “Our idea is really to implement 5G standalone, which is the real 5G, so that we can welcome all the technology that it can give us to develop our country.”;
• The minister is right to say that the “5G standalone is the real 5G”, but I understand that it is not necessary to place this obligation in the 5G notice for it to arrive in Brazil;
• It is best to let each operator have the freedom to gradually implement the 5G Standalone, which uses the new 5G core, as has happened with operators in Europe and the United States. Operators would not invest billions to buy spectrum and then miss out on revenue growth opportunities from the new services that 5G offers;
• Brazil first appeared in OpenSignal's “Benchmarking The Global 5G Experience”. The country occupies 7^th place in Upload speed with 20.9 Mbps;
• Anatel's technical area estimated the cost of migrating Band C satellite dishes to Ku R$ 1.6 billion. Conexis, which represents mobile operators, estimates this cost at R$ 3 billion.

 

Oi

• Oi will not participate in the 5G auction. The sale of Oi Mobile includes a commitment not to operate in the mobile market (SMP);
• CADE approved the purchase of Oi's 637 towers and roof tops by Highline;
• Oi's ON shares decreased 3.8% and the PN shares 2.9% in the week.

 

More highlights

• Mob Telecom will invest R$ 78 million to fully cover Fortaleza with its fiber network (FTTH);
• The STF postponed to February 17^th the judgment of the Direct Action of Unconstitutionality proposed by the Attorney General's Office, which wants the annulment of the Brazilian General Telecommunications Law article that prevents charging for the installation of telecom network on public roads;
• The proposal to review the General Telecommunications Services Consumer Rights Regulation (RGC) was discussed at a public hearing held by Anatel this week. Among the main changes proposed is the replacement of service plans by offers and the possibility of contracting 100% digital offers;
• An incident involving the leakage of telephone data from about 100 million operator customers is being investigated by the National Data Protection Authority (ANPD);
• Padtec reported gross revenue of R$ 318 million in 2020, 21.7% more than in the previous year, driven by a 32.1% growth in DWDM sales;
• The TecPar Group expanded its operations outside Rio Grande do Sul with the acquisition of the Neogrid Data Center, in Joinville (SC). The acquired unit will be named Ávato Data Center, the main brand of the Tecpar group;
• The 700 MHz frequency band auction in Chile was won by the operator WOM, formerly Nextel;
• The Disney + streaming service ended 2020 with 95 million subscribers worldwide. Netflix has 204 million.

 

Coming Weeks

• Vivo's results for 2020 (Feb. 24^th).

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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