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The competition of Local Fixed Telephony in Brazil

The total of fixed accesses in service of Brazil increased untill 2005 when reached the total of 39.8 million. In 2006 decreased 1 million accesses, but increased in 2007 and reached 39.5 million in the 1Q08.

The recovery occurred in 2007, because of the growth of businesses, mainly Embratel and GVT, as the number of accesses in service of the concessionaires continued to fall.

In the first quarter of 2008 (1Q08), the concessionaires of local telephony (Oi, Brasil Telecom, Telefonica, CTBC and Sercomtel) had 34.8 million fixed phones in service as companies with authorization to provide the telephony service had 4.7 million accesses in service.

At the end of the 1Q08 concessionaires represented 88.2% of fixed access service in Brazil while the authorized were responsible for 11.8%. At the end of 2006 these percentages were 92.0% and 8% respectively.

The figure below shows the evolution of the accesses in service of the main operators:

Note: Embratel incorporated Vésper in 2006

In other words, competition in local telephony in Brazil, although still low, increased from 2006 with the acquisition of Vésper by Embratel and the authorized already correspond for 11.8% of fixed access in service.

The competition in fixed telephony in 2007 (locations with at least two providers) was restricted to 7.5% of the municipalities, but corresponded for 61% of the population. It is important to remember, however, those authorized don't offer service to the entire population of these municipalities.

There is competition in the large urban centres, mainly in the corporate market and higher income, but in cities with fewer than 65 thousand inhabitants virtually no competition.

Just as is happening in Brazil, the fixed switched access service in the United States have been decreasing since 2000, when the total was 192.4 million. In June 2007 this number was already 163.2 million.

The participation of CLECS (Competitive Local Exchange Carriers), equivalent to those authorized in Brazil, was 17.1% of 163.2 million accesses exist in the United States (Jun/07).

Revenue of Local Service

The year of 2005 was the fastest growing of revenue for local service for all operators. From then on, there was only decline and only the revenue of Embratel and GVT continued growing.

Note:Companies including Oi, BrT, Telefonica, Embratel and GVT

The concessionaires Oi, BrT, Telefonica, together, are responsible for 93.4% of the revenue of local service, while the authorized Embratel and GVT have a much lower participation.

Considering the operators Oi, BrT and Telefonica, the revenue service of fixed-fixed (fixed-fixed) accounts for 59% of the total gross revenue of local service and revenue of network usage with 3.9% of this total.

Note: Companies including Oi, BrT and Telefonica

And finally, the concessionaires have higher rate of achieving the goals of quality that authorized. But the phone and lack of care staff are targets of quality that need improvement in fixed telephony.

You could ask:

• The accesses in service of fixed telephony will still continue having mild falls? What can change this picture?
• How to keep the competition of large companies in local telephone market?
• Will the authorized companies improve the performance of the quality of service?
• Technologies such as 3G and WiMax may change the competitive landscape in local fixed telephony?

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