The groundwork for a head-to-head duel between factories is being laid in Brazil, where Nokia Group and Motorola Inc. both are establishing handset manufacturing plants.

Brazil has 1.2 million cellular subscribers, making it the most prolific cellular market in Latin America. An annual growth rate of 70 percent is anticipated for both this year and in 1997. By the end of the decade, Brazilian customers are expected to account for nearly half of Latin America’s cellular subscriber base.

Customers primarily are served by one of the 27 local operating companies belonging to state operator Telecomunicacoes Brasileiras S.A. (Telebras). But the government is beginning to liberalize control and is offering several private cellular licenses this year.

New operators mean new vendor contracts, hence the stepped up efforts of Nokia, Motorola and Japan-based NEC Corp. Brazilian networks continue to be analog, except for a recent digital launch by Sercomtel in Londrina; Brazilian authorities have not dictated a digital standard.

NEC has just announced it intends to ship mobile phones to Brazil from its NEC Australia plant. Previously, NEC exported phones to Brazil from its Mexico plant. NEC’s new distribution contract with Magnetron Industrial S.A. of Manaus, Brazil, is valued at $7.9 million.

“Australia is rapidly becoming one of the chief centers for the design, manufacture and export of mobile telephones for the whole of NEC Corp.,” said I. Ben Okamoto, managing director of NEC Australia. The company said it has increased research and development spending and is hiring more engineers there.

Nokia Mobile Phones and Motorola have firm sales channels for handset sales in Brazil, but have not been manufacturing the equipment in Latin America.

Since 1993, Finland-based Nokia has supplied unfinished phones to Gradiente Electronica S.A., which completed assembly of the phone in a free-trade zone. Nokia now says it intends to minimize the tariffs on imported finished goods by building cellular phones for the Brazilian market in Brazil. Gradiente is Brazil’s second largest phone assembler, and has marketed its own brand of cellular phone as well.

Through a five-year agreement with Gradiente, Nokia plans to invest in Gradiente’s existing plant and equipment, and in a new factory as well. The factory’s location has not been announced.

Nokia will furnish the cellular phone design and software framework, as well as technical support for the new factory. The phones will contain the Nokia brand name.

“The new cellular capacity will increase the existing base of 1.2 million subscribers by over 150 percent,” said Eugenio Staub, Gradiente president.

Illinois-based Motorola Inc. said it holds a significant share of the Brazilian handset market. The company’s Cellular Subscriber Group recently bought 61,000 square meters of land in Jaguarina, in the state of Sao Paulo. It contains an existing building that will be refurbished by Motorola. Manufacturing is scheduled to begin in the third quarter.

This is Motorola’s first phone manufacturing plant in Latin America. The factory will make MicroTac and Pocket families of portable cellular phones; these will be the first Motorola products made in Brazil, according to the Subscriber Group.

NEC do Brazil was established in 1968 in Sao Paulo. The company operates a plant in Brazil that manufactures infrastructure equipment only.

Three equipment vendors dominate the Brazilian infrastructure market-NEC, L.M. Ericsson and Northern Telecom Ltd. While Motorola is a leading handset provider in the region, its infrastructure market share for Brazil is weak, researchers said.

Sweden-based L.M. Ericsson is a dominant infrastructure provider in Brazil. It has a facility in Sao Paulo, Ericsson Telecomunicacoes S.A. Ericsson said it supplied the Time Division Multiple Access technology in the recently launched network of Sercomtel in Londrina for more than 24,000 subscribers.

Northern Telecom also has a strong presence in the Latin American infrastructure business.

By 2000, the total market for wireless infrastructure equipment in Latin America and the Caribbean is expected to increase from $1.5 billion to $3.7 billion, according to Pyramid Research Inc. of Cambridge, Mass.


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