The uncertainties of the 5G auction: Schedule and price of frequencies
Eduardo Tude
5G Schedule
- The preparation of the frequencies auction for 5G in Brazil is in the final stretch, but there is still no definite date for its realization.
- The notice is being analyzed by the Federal Court of Accounts, which has presented a series of questions to Anatel. In addition to questioning the legality of the commitments related to the government's private network and the Norte Conectado program, the Court found gaps in the frequency value estimates.
- An optimistic scenario would be to consider that the Federal Court of Accounts ends its analysis at the end of June (+1 month). Following the normal deadlines, we would have the auction in September and the start of 5G operation at 3.5 GHz in the Capitals and Brasília in September 2022. It would be possible to bring this date forward to Brasília and some capitals where the cleaning of the spectrum requires less effort.
- On the other hand, it would be possible to start commercial operation of 5G at 2.3 GHz and 26 MHz this year, as these frequency bands are free for use.
Price to be paid for frequencies
The minimum prices to be paid for each frequency band and the associated commitments will only be disclosed in the final version of the notice.
News published by the press indicate that the total value for the set of all frequencies would be around R$ 40 billion and that of the associated commitments, R$ 28 billion. In this case, the minimum price assigned to the set of all lots would be around R$ 12 billion. It should be remembered, however, that there will hardly be buyers for all lots.
A preliminary estimate made by Teleco, based on historical data from other tenders, points to the following values for national lots, without considering commitments:
- 700 MHz (20 MHz): R$ 4.5 billion;
- 3.5 GHz (80 MHz): R$ 6.5 billion;
- 2.3 GHz (50 MHz): R$ 3.2 billion;
- 26GHz (400 MHz): R$ 513 million (reported by the press)
The minimum prices of the notice will be lower, as the values of the commitments will be discounted from them.
The visit of the delegation coordinated by the Ministry of Communications to the US will be between June 6th and 11th to deepen the understanding of 5G private networks and talk to investors.
Oi
- The court of Rio de Janeiro has scheduled Infraco's judicial auction for July 7th.
- Oi completed the subscription and payment of debentures in the amount of R$ 2.5 billion.
- Oi's ON shares showed losses of 1.3% during the week while PN shares appreciated by 1.8%.
Streaming Market is getting concentrated
- Amazon announced the acquisition of MGM paying US$ 8.45 billion for the traditional Hollywood studio. Last week AT&T announced the sale of WarnerMedia to Discovery for US$ 43 billion.
- The streaming market is in the process of concentration due to the need for heavy investments in content production.
More Highlights
- Provisional Measure 1.018/2020, which reduces the value of the Fistel (inspection fee) for satellite internet terrestrial stations (Vsat) had its final text approved by the Chamber of Deputies and proceeded to presidential sanction.
- The Provisional Measure also changes rules for the application of Fust resources and the incidence of taxes on streaming platforms (Condecine). The possibility of reimbursing funds invested in public schools was also maintained.
- 34% of Brazilians with smartphones have already made payments by approach, an increase of 11 percentage points in one year, according to Panorama Mobile Time/Opinion Box – Mobile payments and mobile commerce in Brazil.
- The City Hall and the City Council of São Paulo will draft new legislation for the installation of ERBs in the city. The Brazilian Supreme Court deemed the current legislation illegal and rejected the motion for clarification.
- Anatel's Board of Directors authorized Viasat to operate in Brazil a satellite in an orbital position belonging to another country (Foreign Satellite Exploration Right).
Coming Weeks
Revenue growth, AT&T, 5G, Fiber and Oi
Eduardo Tude
Video: AT&T left the content market
- AT&T entered into an agreement for the sale of WarnerMedia to Discovery reversing the attempt to bring content and distribution together in a vertically integrated business.
- AT&T had to struggle hard in 2018 to buy Time Warner, a US$ 85 billion deal which the U.S. Department of Justice tried to block.
- AT&T will receive US$ 43 billion (subject to adjustment) in a combination of cash, debt securities and retention of certain debts by WarnerMedia.
- A "major course correction by AT&T, leaving the content entirely," said media reporter Sara Fischer on Twitter. The fact that just three years have passed shows the dizzying speed of changes with which streaming services have reached traditional media groups. (Lightreading)
- With the acquisition of Warner Media, Discovery will have a studio with the size and scale available on Netflix and Disney.
- In Brazil, this sale will have to be approved by Anatel and CADE, but it ends up solving a problem. The authorization given to AT&T, controler of SKY, to acquire Warner violates what is established in the SeAC Law.
5G
- It is not yet known when the Federal Court of Accounts will end the analysis of the 5G notice. It has been 60 days since the 5G announcement arrived at Court and the inquirement continues. This week Court started to make questions about the fact that the public notice does not include connectivity goals in schools.
- In view of this situation, it is most likely that the frequency auction for 5G will take place in 4Q21. In addition to the deadline, there is also concern about the value that will be established for the frequencies.
- A delegation with representatives from MCom, Anatel, Senate, Defense, Federal Court of Accounts and Institutional Security Office will go to the United States in June in roder to go deeper into private 5G networks.
- Anatel makes a new effort to receive information from providers about the existence of backhaul in localities that are not municipalities centers and, thus, avoiding the establishment of goals where this infrastructure already exists.
Fiber
- Desktop Sigmanet filed a preliminary prospectus with the CVM for the realization of an initial public offering (IPO). Unify did the same last week.
- Conexão Telecom (Tripleplay) released its results for 1Q21. Net revenue of R$ 111.9 million in 1Q21, an increase of 28.4% compared to 1Q20. The adjusted EBITDA margin was R$ 40.6% in 1Q21 and Capex was R$ 41.5 million.
- MCom authorized SPE Piauí Conectado to issue R$ 152.8 million of incentive debentures.
Oi
- Oi ended March with R$ 2,549 million in cash, R$ 697 million more than in the previous month. R$ 335 million were invested in the month, being R$ 27 million in Oi mobile.
- Oi's ON shares lost 2.5% and PN 3.5% in the week.
More highlights
- A Câmara dos Deputados aprovou a Medida Provisória 1018/20, que reduz o Fistel para estações terrenas de internet por satélite (Vsat) e altera regras de aplicação de recursos do Fust e de incidência de tributos sobre plataformas de streaming (Condecine). A matéria será agora enviada ao Senado.
- The Chamber of Deputies approved Provisional Measure 1018/20, which reduces Fistel for satellite internet earth stations (Vsat) and changes rules for the application of Fust resources and taxes incidence on streaming platforms (Condecine). The matter will now be sent to the Senate.
- Brazil had 194 million installed computers in 2020 according to FGV's annual survey in IT.
Results 1Q21: TIM and FAAMG, Algar, 5G, Oi and more
Eduardo Tude
The table above shows the comparison of FAAMG results: Facebook, Apple, Amazon, Microsoft and Google.
Results 1Q21: TIM
In the comparison between 1Q21 and 1Q20, TIM's net revenue grew:
- +3.0% in total revenue;
- +2.4% in mobile revenue, being +2.8% in services revenue and -10.1% in handsets revenue;
- +12.1% in fixed services revenue which represents 6.5% of TIM's revenue.
EBITDA margin increased from 45.9% to 46.6% in teh period.
TIM closed the sale of 51% of its fiber unity (FiberCo) to IHS for R$ 1.6 billion.
FiberCo's value was set at R$ 2.6 billion. FiberCo was based on the AES Atimus network acquired by TIM in 2011 for R$ 1.6 billion, which at the time corresponded to US$ 1 billion.
Algar
- Algar announced the acquisition of Vogel Telecom for a value of up to R$ 600 million for a stake between 85.2% and 100% of the company. With the incorporation of Vogel, Algar will add approximately 27,000 km of Vogel's fiber network to its network.
- Scala Data Center (Digital Colony) announced the acquisition of Algar Tech's Data Center in Campinas. The value of the acquisition was not disclosed, but it is part of a Digital investment package R$ 2 billion until 3Q22.
5G
- MCom put together a 5G demonstration that was presented by the main suppliers in Brazil (Ericsson, Huawei, Nokia, Qualcomm and Samsung) at Digital Day, held in Brasilia as part of Communications Week.
- 57% of the smartphones sold in EUA in the last 2 semesters were 5G (Counterpoint).
Oi
- Oi S.A. merged Telemar, according to the terms approved at the last General Shareholders' Meeting and by Anatel.
- Oi's ON shares lost 4.1% and PN 0.8% in the week.
Cellular Antennas
- The "Antene-se" movement was launched, which has the support of MCom and Anatel, which aims to clarify the impact on users of the lack of a greater number of antennas. The movement is supported by a study prepared by Teleco for Abrintel that shows that the lower income neighborhoods in the city of São Paulo are the ones that suffer most from the restrictions imposed by the municipality's legislation for the implantation of more cell phone antennas.
- The Brazilian Supreme Court invalidated a device of the municipal law of Valinhos, which prohibited the installation of “Antennas” less than 100 meters from the historical-cultural heritage and areas of permanent preservation of the city.
- The CCTCI of the Chamber of Deputies approved a bill that establishes temporary licensing for the installation of telecommunications infrastructures. After a period of 60 days without the decision of the competent agency or entity, the operator will be authorized to carry out the installation in accordance with the conditions stipulated in the application submitted and with the other rules present in relevant municipal, state, district and federal laws and regulations related to the subject.
More Highlights
- About 26 cell phone antennas and 110 used wireline equipment are "hijacked" by criminal groups in Rio de Janeiro. Criminal factions prevent operators from having access to equipment for maintenance and execution of other services (information from Conexis).
- Anatel removed from the Brazilian market around 600 thousand irregular telecommunications products in 1Q21, 346 thousand of which are cell phone chargers and batteries, 156 thousand modems and other restricted radiation equipment, and 72 thousand Pay TV unblockers.
- Embrapii launched a public call to select up to four new research centers, which will receive R$ 5 million to develop projects in the area of IoT/Manufacturing 4.0 in partnership with the industry.
- Fortinet is the leader in the cybersecurity market in Brazil, with 56% Market Share (IDC).
Coming Weeks
Results 1Q21: Accesses, Claro, FAANG, Smartphones, Vendors and more
Eduardo Tude
Results 1Q21: Accesses
- Mobile services showed an expressive growth in 1Q21 (+6.5 million), led by Claro (+3.2 million), followed by Oi (1.9 million), Vivo (1.2 million) and TIM (0.3 million).
- Claro led in postpaid (2.4 million) and prepaid (813 thousand) net adds.
- Oi led was the fixed broadband leader (+40 thousand), while Vivo (-13 thousand), Claro (-19 thousand) and Competitive operators (-99 thousand) presented negative net adds.
- The number of accesses presented by Anatel to Competitive operators is underestimated, as many do not regularly report their accesses.
- Competitive companies would have presented net adds of +850 thousand accesses in 1Q21, if all those who reported accesses in Dec/20 had also done so in Mar/21.
Results 1Q21: Claro and América Móvil
In the comparison between 1Q21 and 1Q20, Claro's net revenue grew:
- -0.2% in total net revenue;
- +5.2% in mobile revenue, being +5.1% in services revenue and +6.2% in handsets revenue;
- -4.6% in fixed services revenue. +7.2% in fixed broadband, 13.3% in pay TV and -15.9% in fixed telephony.
EBITDA margin increased from 37.9% to 40.0% in this period.
América Móvil's global net revenue decreased 0.8% in Mexican pesos in 1Q21/1Q20, but grew 13% in US$.
Results 1Q21: FAANG
When we compare 1Q21 with 1Q20, net revenue raised:
- 53.6% at Apple;
- 47.6% at Facebook;
- 43.8% at Amazon;
- 34.4% at Google;
- 19.1% at Microsoft.
Results 1Q21: Smartphones in the world
- Smartphone sales worldwide grew 25.5% in 1Q21/1Q20, reaching 345.5 million (IDC).
- Samsung led sales (75.3 million), followed by Apple (55.2 million), Xiaomi (48.6 million), OPPO (37.5 million) and Vivo (34.9 million).
- With the sale of Honor, its most popular smartphone brand, Huawei is no longer in the top five.
- After a two-year investigation, prompted by a Spotify complaint, the European Commission declared that Apple violated local laws by harming competition in the music streaming market and abusing its dominant position in the segment through its App Store.
Results 1Q21: Vendors
In the comparison between 1Q21 and 1Q20, net revenue increased:
- +13.8% (US$) at Ericsson reaching R$ 5.7 billion in 1Q21.
- +3.3% (EUR) totalizing € 5.1 billion in 1Q21.
- -8.6% (US$) at Huawei, reaching US$ 23.5 billion. The reduction reflects the sale of the Honor smartphone brand.
5G
- Federal Court of Accounts inquired Anatel/MCom about the obligations of the 5G notice related to the construction of the subfluvial network in the Amazon (PAIS) and a private network that will serve the government.
- Federal Court of Accounts is concerned about the legality of these obligations. These networks should be built on a public budget by companies selected through a specific bidding process and not by the winners of the 5G auction.
Oi
- Cade admitted the intervention of Algar, Sercomtel, Neo Associação and Idec as interested parties in the merger that analyzes the sale of Oi Mobile to the companies Claro, TIM and Vivo.
- Oi's ON shares had loss of 4.0% and PN of 4.8% in the week.
More highlights
- The government approved the issuance of debentures encouraged by Algar Telecom, totaling R$ 1.497 billion.
- BTG Pactual launched an Infrastructure Investment Incentive Fund to invest in long-term private credit operations via incentivized debentures.
- Hyundai presented its 4G connectivity service in partnership with Vivo which will be available on the HB20 2022 line cars.
Coming Weeks
- May 4th: Launch of the "Movimento Antene-se", which aims to show that the antenna infrastructure is a fundamental part of economic and social development as it enables connectivity https://antenese.org.br/
- May 5th: TIM's Results 1Q21;
- May 11th: Vivo's Results 1Q21;
- May 12th: Oi's Results 1Q21;
- May 12th: IoT2021 BRASIL SUMMIT
- https://telecomwebinar.com/iot2021-brasil-summit/
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).
