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Brazil Telecommunications Report Q4 2011
Business Monitor International, Sep 2011, Pages: 122
Brazil remains BMI's favourite Latin American telecoms market this quarter, reporting rapid expansion, particularly in the broadband and pay-TV markets. In the mobile market, Q211 saw exceptional growth continue. More than 6.8mn new additions were added, slower than Q111 and Q410, but still highly indicative of room for expansion in the market. The market reached 110% penetration in Q211, but the continued growth is a positive sign. It seems clear that operators are very keen to keep driving growth as the market approaches maturity.
This quarter saw a significant shift in the Brazilian mobile market, as Claro lost its second place position to TIM. TIM recorded gross additions of 9.3mn lines - a new record - and net addition of 2.7mn lines. This boosted the company's market share to 25.5%, and reports from July 2011 indicate it finished the month with 25.78% market share to Claro's 25.51%. TIM's strategy of targeting prepaid subscribers is clearly paying off, and BMI expects it to retain this position through Q311.
However, the company is still significantly behind market leader Vivo in terms of subscribers, following another quarter of strong performance from the Telefónica subsidiary. Vivo and Telesp have reported results jointly in Q211. The newly merged company raised the estimate for cost savings to nearly BRL1bn. Although these savings have yet to impact on Q211 figures, BMI expects to see these paying off in the fourth quarter.
The Brazilian broadband market continues on its upward trajectory as the government's national broadband plan (PNBL) gains pace. Market leader Oi reported 4.64mn broadband subscribers in Q211, representing a 30.5% share, down 1.1pp on last quarter. The second-ranked operator in the broadband market is NET Serviços, with 25.4% of the market and 3.86mn connections at the end of Q211. The company saw strong growth as a result of its triple-play partnership with long-distance (LD) operator Embratel, and has retained its market share despite strong competition from other players. Both companies are owned by Telmex Internacional, which was acquired by América Móvil in June 2010, and results are no longer published separately.
This quarter saw Brazilian telecoms regulator Anatel outline a series of reforms to improve broadband service in the country, relating to the quality of service of providers, in terms of connection speeds and customer service. It opened up a public consultation on the proposals to improve service, until September 8 2011, and, if approved, proposals will be implemented in October. However, it has been met with indignation by operators, which find measures too stringent. However, BMI welcomes Anatel's moves towards greater regulation in a sector where current measures are ineffective. BMI also welcomes public consultation on the measures, which is expected provide valuable insight from stakeholders.
Further, the pay-TV industry experienced outstanding growth this quarter, and BMI holds a positive outlook going into 2012. In August 2011 the Brazilian Senate approved a new bill to let telecoms companies enter the cable TV business. The bill also removes the current cap on foreign ownership of cable operators, which at present is limited to 49%. BMI believes the move will benefit telecoms firms, which are currently losing business in the fixed-line and internet sectors to cable-TV companies, which are free to enter the sectors. The law will improve the competitive landscape in the country, encourage investment and provide further opportunities for growth in the sector. BMI believes the move will particularly benefit Tele Norte Leste (Oi), and Mexico's América Móvil, which currently has a 92% stake in Brazil's largest pay-TV carrier, Net Serviços.
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