Brazil and India have both followed telecom regulatory policies with the intent of fostering privatization and competition, but the models used by the two countries have produced differing results, according to a recent working paper from the Indian Institute of Management in Ahmedabad.
The paper, titled “Comparison of Privatization Processes of Telecom Services in India and Brazil,” compares the regulatory processes of privatization of telecom services in both Brazil and India and the consequences of those processes for the telecom sector and firms in those countries.
“Brazilian telecom sector had shown higher penetration, both for telecom services in general and broadband in particular, but domestic companies, other than one, which too was recently partially acquired by Portugal Telecom, have not emerged,” the paper said, adding that in contrast, “Phased and controlled FDI in India combined with the hyper competitive scenario has led to the emergence of Indian telecom firms that have become significant global players.”
According to the paper, stringent regulatory policies in India led to the emergence of innovative business models.
“Operating in India, characterized by lower GDP/capita, operators had to devise extremely efficient operations and find out ways of doing business that were potentially profitable. This approach led to creation of new business opportunities, such as tower business,” the paper said.
In comparison, Brazilian policies allowed large foreign-owned businesses, such as Telefonica, Telecom Italia and Telmex, to operate in Brazil, and the country’s government “ensured that asymmetrical regulation would lead to investments in those parts of the network that are not commercially viable,” the paper said. “This allowed the citizens access to technology and benefits of the spread of network. However, the extremely deep pockets of foreign operators created by preferential regulations in the home markets did not allow the emergence of Brazilian companies. The pan Latin American strategies of these operators further consolidated their operations.”
Referring to 3G services, the paper said: “Relative to India, the benefits of 3G were available to a much larger segment of the population in Brazil. Since broadband services also contribute to economic growth, later start of 3G services in India would have implications for India’s economic growth. In contrast, the Indian 3G auctions were delayed due to the government’s inability to make spectrum available through refarming for 3G services. 3G services had yet to take off.”
