01/07/2016
What to monitor in 2016
After four years of performances considered as regular for the Brazilian Telecom sector, 41% of the people that answered Teleco's poll believe that 2016 will also be a regular year for the sector. For 31%, the year will be bad or very bad.
This result reflects the lack of visibility in relation to the political and economic crisis which Brazil is going through with strong impact over the sector. This is undoubtedly the first item to be monitored in 2016.
The trends that should be monitored along the year are presented in the following. The continuity of the transition from voice to data is likely to be the hottest theme of 2016.
- In 2015, Voice ceased to be the main revenue of telecom operators. Fixed/mobile broadband and pay TV revenues overtook fixed/mobile voice.
- The transition from voice to data was accelerated in 2015 with the intensive use of messaging apps like WhatsApp. Data revenue is likely to surpass mobile voice in 2016.
- This board justifies the continuity of investments in the expansion of high speed fixed and mobile broadband networks.
- Messaging apps and the drop of interconnection value paid to other operators, are eliminating the differences between on net and off net calls.
- It's the end of process called "Club effect" which stimulates the possession of more than one voice chip in order to make cheaper calls using cell phones of many operators.
- The consequence is the abandonment of the "2nd chip" what led to the drop of prepaid base in about 20 million accesses in 2015. This trend will continue in 2016.
- Postpaid is likely to continue to grow in 2016, benefiting from the migration of clients from prepaid to postpaid controlled plans. This growth will be, however, affected by the Brazilian economic crisis.
- 4G is consolidating itself as the technology offering speeds that meet users' expectations. By the end of 2015, 4G counting more than 20 million mobile accesses, being available for 54% of the population. While 3G starts to present negative net adds, 4G mobile accesses will continue to increase in 2016 and will probably end the year having about 40 million accesses.
- Fixed broadband keeps growth
- The economic crisis reduced fixed broadband growth rate to 5-7%, but the investments will continue and the connection average speed will keep growing.
- It's worth to monitor the use of the frequencies acquired by small providers in 2,903 cities through Anatel's licitation, to offer 4G fixed broadband.
- In 2016, pay TV will continue to be strongly affected by the crisis, with loss of lower income subscribers, mainly in DTH (via satellite).
- The consumption of video will continue to grow with many streaming options.
- Fusions and Acquisitions in 2016
- Oi positions itself as the main candidate to a process of consolidation in the country. However, it depends on the definitions in relation to its obligations as fixed telephony incumbent (reversible assets, General Plan for Universalization Targets) for this process to be viable.
- While these matters aren't solved, Oi will have to continue to deal with high debt in 2016 (about R$ 37 billion) and market cap growth (about R$ 2 billion).
- Other operators
- AT&T can sell SKY Brasil in 2016. Telefônica/Vivo had already announced itself as candidate.
- Nextel Brasil became the only operation of its controller (NII). The company is likely to go through a fusion or acquisition process in the future, but the possibility that is will happen in 2016 is small.
- Fixed Telephony Concession
- The revision of the concession contracts, valid for the period from 2016 to 2020, was postponed to 2016 and will happen without any big modification.
- In 2016, the Ministry of Communication plans to review the regulatory model, especially the concession contracts for fixed telephony.
- With the economic crisis, the collection of States' ICMS fell and the easiest solution was to increase the aliquot applicable to telecommunications services. In January/2016, eight states will raise the existing aliquots and in February two more states will do it too.
- Federal government also continues to evaluate the growth of Fistel's value. For now, the growth was limited to the contribution given to Condecine.
- The difficulties found in the pilot project, in the city of Rio Verde, pointed out to a revision of the schedule and it's methodology.
- The switch off established for Brasília, São Paulo, Belo Horizonte, Goiânia and Rio de Janeiro will hardly take place in 2016.
- Internet of things is one of the hottest themes in the international scenario and it's taking steps into Brazil. The current IoT's stage in Brazil is object of a study which Teleco is making, sponsored by Febratel.
You could ask:
- Will 2016 be better for the telecom sector in Brazil?
- Will prepaid continue to shrink in 2016?
- Will the analog TV switch off be successfully made in 2016?
- Will TIM and Oi announce intensions of merging their operations?
- What can we expect from 2016?
