Is there space to a new cell phone operator in Brazil?
Anatel ( Brazil's telecom regulator agency) must place in tender in 2008 a new range of frequencies (H with 10 MHz), which will allow the entrance of a new cell phone operator with 3G technology throughout the national territory.
Nextel, showed be interested in the 3G auction held in 2007, is the leading candidate to acquire this frequency range. Nextel in Brazil is part of Nextel International (NII), which had 4.3 million cell phones in the 3Q07 in 4 Latin America countries (Mexico, Argentina, Brazil and Peru).
The technology used by Nextel (IDEN) is being discontinued and the option for a 3G technology is the natural path of evolution for the operator. The investment with the acquisition of a 3G national tender and the deployment of network may require the operator to expand its focus beyond the corporate market.
Not counting Nextel, the possibility of other local candidates, such as GVT, or international, such as Vodafone, is remote. We can't discard the hypothesis of Oi and BrT will acquire these frequencies in order to complete, each, their national coverage. This option would be available only if the joint venture of these operators don't happen.
Depending on the rules, still there is the possibility of band H be acquired by Claro, Vivo or Tim. In that case they would have to return part of the spectrum purchased, cause 15 MHz is the maximum that each operator can have in this range of frequencies (more details)
Whatever the result of this tender, if a new operator decides to enter the Brazilian market, buying this range of frequencies, will face difficulties to get space in this market.
Brazilian market's current situation
In 2008, Brazil might have 4 cell phone operator in each of the regions of the country. Three operator placed in all states (Vivo, Tim and Claro) and 2 regional (Oi and BrT), which together also have national coverage.
The trend is that these 4 groups (Vivo, Tim, Claro and Oi / BrT) dominate the cell phone brazilian market in the following years having each one market share between 20% and 30%.
Still there are in the market CTBC and Sercomtel with operations in cities where they are fixed telephony operators. The amount of these cellular operators hardly grown in the last 4 years.
At the end of 2007, 47.9% of the population and 22.1% of the cities were attended by 4 operators. This percentage should increase with the entrance of Vivo in the Northeast and Oi in São Paulo.
With the commitments made by operators in the tender for 3G, 100% of the cities must be attended by cell phone in 2 years.
Is there space to a new cell phone operator in Brazil?
The competition is one of the factors that propelled the growth of cell phone and most of the countries have 3 or 4 operators with national coverage networks:
The "3" is an example of operator who took the launch of 3G to enter in the market in several countries in Europe. It started its operation in the United Kingdom in 2003 as 5th operator and grew up to 3 million cell phones in March 2005. Since then is having difficulties in overcoming the 5% market share. Already in Italy, where it was a 4th operator to enter in the market, "3" reached in 2007 about 10% of market share.
With a larger number of operators the tendency is a fall in ebitda margins and difficulties in achieving economies of scale, especially in a country the size of Brazil. In a market with a lot of players, they might focus on major markets, such as corporate, and aren't encouraged to implant an intensive coverage.
If, on the one hand, the space for new operators is narrowing, the other, the Brazilian market seems to be getting ripe for operators focused on niches such as virtual cell phone operators (MVNOs). Large operators with tens of millions of customers unable to well attend in these segments and have a higher cost of acquisition.
According to the text above you could ask:
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