YOU ARE AT:AmericasTIM calls Brazil’s 4G auction premature, cites risks

TIM calls Brazil’s 4G auction premature, cites risks

A couple of days before the Brazilian national telecom agency Anatel’s intended announcement of the final auction framework of the radio frequency in the 450 MHz, 2.5 GHz bands, mobile carrier TIM released a statement warning of risks in what the telecom operator calls “a premature initiative.” According to the statement, the bidding documents have some issues that could affect competitiveness among potential participants.

TIM listed the spectrum’s occupation by the same corporate group as one of the problems. According to TIM, the issue must be debated urgently, since the auction is expected to be held in June, according to the regulatory agency. “The balance of spectrum use is a principle that has made Brazil one of the most competitive markets in the world. There will be a risk of cannibalization if the carriers’ obligation to waive rights to the spectrum in advance when they have the right to use MMDS  is not taken into account,” noted Mario Girasole, director of regulatory affairs at TIM Brazil.

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Marceli Passoni, research analyst with Informa Telecoms & Media, told RCR Wireless News that she believes that Anatel may not change  the auction rules much in relation to what was in the public consultation, but without a doubt, there are points made by TIM that should be discussed.

TIM’s Girasole stressed that the business groups who already have a range of microwave pay TV or MMDS and who intend to participate in the range of 20 +20 MHz must renounce their interest in this block. “Letting go of the standard preventive resignation would inhibit the competitive environment. In practice, following current rules, those who participate in the block 20+20 megahertz spectrum must renounce what they already have to participate,” said Girasole.

TIM also stressed the association of the frequencies of 450 MHz and 2.5 GHz in the auction. “We believe that rural coverage should be excluded from the obligation,” he explained.

In a statement, TIM said it is not against the arrival of 4G technology in Brazil but stressed that it believes that it is a premature initiative, since 3G has not yet reached its maturity yet. “The backhaul in the country is still too fragile to sustain ultra-broadband speed transmission,” the statement read. A TIM executive noted that if the transmission market is not strengthened, it is no use offering access capability. TIM, however, believes Brazil has a legitimate aspiration to offer cutting-edge technology, such as 4G, in light of the future world sporting events to be held in the country.

Informa’s Marceli Passoni pointed out that LTE coverage targets are very aggressive, and the 3G network will be sufficient to attend to the demand in most of the country, thus making heavy LTE investments unnecessary in the short term in many areas. “In small cities, HSPA or HSPA+ should provide high speed rates for mobile broadband, up to 6Mbps, because comparatively, data traffic is expected to be significantly lower than in larger urban areas,” Passoni said, adding that there is no need to have both 3G and LTE, where the costs to implement LTE networks are not justified by local demand.

“Additionally, it is important to remember that in the previous 3G spectrum auction, operators paid U.S.$3.11 billion (R$5.34 billion) for their licenses with an average premium of 86.7% due to competition in the tender, and as a consequence, they are keen to generate 3G ROI before acquiring new LTE licenses,” Passoni noted.

In turn, TIM noted it believes that the scope and coverage commitments provided in the bidding documents must be changed, prioritizing 4G to cities where there is more concentration of people during the 2014 Fifa World Cup and 2016 Olympics Games, for example. And telecom carriers added that in other locations the ideal would be to wait for a more efficient frequency to increase mobile broadband, such as 700 MHz.

The 700MHz network is easier and more cost effective to deploy than the 2.5GHz band, noted Informa’s Passoni, because it requires significantly fewer base stations, which are the most expensive components of the network. In addition, 700 MHz is a great coverage spectrum in all areas including urban, suburban and rural.

Several specialists agree.

Last month, during Teleco’s presentation of its survey of the mobile broadband evolution in Brazil, Teleco’s CEO Eduardo Tude noted the advantages of LTE deployment in the 700 MHz, citing the United States as an example and explained that it is the most cost effective.

Renato Pasquini, industry analyst for Latin America at Frost & Sullivan, recalled in a recent interview that during the public consultation period, telecom operators came out against the imposition of domestic technology and too stringent commitments; and they came out in favor of decoupling bands 450 MHz and 2.5 GHz.

“They are in favor of the allocation of the 700 MHz band for SMP,” Pasquini explained. “I believe all of these points make economic sense, considering that operators are looking to rationalize investments in a capital intensive industry with short cycles. For instance, the 3G networking is still expanding.”

TIM’s Girasole noted that 4G coverage is not economically viable for operators. “The 2.5 GHz frequency is not economically viable for operators; therefore, it should be directed to the major centers where there is more demand, leaving developments and enhancements of 3G for other cities,” he said.

“TIM has an interest in participating in the auction, since there’s competitiveness among potential participants,” Girasole concluded.

RCR Wireless News requested interviews for TIM’s competitors Vivo, Claro and Oi. They declined to comment.

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