Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
The machine-to-machine market in Brazil looks set to enter a high-growth phase as a result of recent regulatory activity. A history of protectionist telecoms policies and recent social unrest have created uncertainty in the minds of investors and constrained the development of M2M in the country. However, the regulatory activity needed to support M2M market growth appears to be gaining momentum.
Brazil has significant demand for M2M services, but several factors have hampered market development
Brazil is the No. 5 country in the world by population, and has significant demand for M2M services – particularly in sectors such as security and industry. Security applications include vehicle tracking, personal tracking, and residential and commercial alarms. In industry sectors that are important to Brazil’s economy, such as mining, companies are looking for M2M solutions that can assist them increase efficiency (such as remote monitoring of heavy equipment).
However, Brazil’s regulatory environment still has a relatively high level of protectionism, which can present significant barriers to new entrants to the telecoms market, such as M2M service providers. For example, it is difficult to secure a mobile virtual network operator licence, which requires the applicant to already have a pre-agreement with a host mobile network operator. The easiest approach to entering the market is to partner with one of the established MVNO licence holders. Despite these obstacles, four companies are authorized to provide M2M services as MVNOs: Datora, Porto Seguro Conecta, Sisteer and Tesa Telecom.
Brazil also faces challenges common to other emerging markets that can impede rapid development of an M2M market. For example, the demonstrations throughout 2013 (sometimes referred to as “the Brazilian Spring”), in which protesters campaigned for greater government investment in healthcare, education and public transport, were a stark reminder of the potential risks associated with investing in Brazil.
Recent regulation could drive a period of high growth in the M2M market
Three recent regulatory developments have significantly improved prospects for the M2M market in Brazil.
–In Sept. 2013, Minister of Communications Paulo Bernardo Silva announced plans to reduce the tax on M2M communications. As a result of this new law, the activation tax per M2M SIM will become $2.61 and the annual subscription tax will be 86 cents.
–The Departamento Nacional de Trânsito (DENATRAN) has also published an updated timeframe for the compulsory installation of location devices in new vehicles. Its June 2013 resolution states that by 2015 all new vehicles produced for the domestic market must have an M2M device to allow vehicle tracking and remote blocking services.
–In addition, the Brazilian Electricity Regulatory Agency (ANEEL) approved a resolution that regulates the basic requirements for smart meters in August 2012. The resolution states that energy distributors have 18 months to start offering smart meters to consumers, although the smart meter installation is only performed when requested by the consumer.
Analysys Mason believes that these changes could drive a period of high growth in Brazil’s M2M market. We forecast that the number of M2M connections in Brazil will grow to 35 million in 2018 (see Fig. 1), at a compound annual growth rate of 32% from 2012 to 2018. The rest of Latin America (excluding Brazil) is forecast to grow at a 25% CAGR over the same period.
Figure 1: M2M connections, Brazil, 2013–2018 [Source: Analysys Mason’s Latin America forecast, 2013]
The more optimistic market outlook has not gone unnoticed outside the country’s borders. In August 2013, Vodafone announced a partnership with Datora to provide M2M services in Brazil, securing a place in a market that is difficult to enter and, as a result, still has limited competition. Established M2M service providers in Brazil are well positioned to build their presence before the market enters its high-growth stage.
Nuno Afonso joined Analysys Mason in 2010, having participated in a wide variety of projects across different areas. These included mobile backhaul, dark fibre, spectrum, telecoms software and CSPs’ operational efficiency. As part of the project scope, Afonso conducted market analysis, market sizing and forecast as well as benchmarks. Prior to joining Analysys Mason, Afonso led numerous projects with an international scope, including the optimisation of performance management methods for a leading financial services provider in Belgium; the assessment of market entry strategy in Latin America for a key player in the water and waste management sector; and strategic planning for an organisation in the FMCG sector. Afonso has a Business Administration degree from Universidade Nova de Lisboa and an MBA from Manchester Business School.
