SAO PAULO, Brazil-Despite its drive for a competitive and liberalized market, Brazilian regulatory agency Anatel finally succumbed to market pressures and postponed to Jan. 15, the tender of licenses to operate one long-distance and three fixed-line “mirror,” or competitive, companies because of the financial crisis battering Latin America.
Renato Guerreiro, head of Anatel, admitted that interested companies’ difficulties in securing the necessary financing and the government’s planned unveiling of a fiscal austerity plan on Nov. 28 led the agency to take this step.
It is expected the liquidity crunch and capital costs will lower the amount collected from the tender, possibly by up to half the originally anticipated $5.55 billion. Another consequence of the market uncertainties may be more modest technical proposals, slowing down sector development.
Many companies, including BellSouth Corp., Brazilian Grupo Globo and U.K.-based Energis, still are interested in getting a foothold on the very attractive Brazilian market, and on Dec. 11 technical proposals and evaluation documents are due.
Unlike the privatization model, there is not a minimum price, but rather a non-disqualifying reference price. Also, the offer will be weighted 70 percent on coverage of cities and 30 percent on price offered for the license. The same group is allowed to win all three fixed-line licenses.
Because of the high coverage requirements, the proposals are expected to rely heavily on wireless local loop (WLL) technology. According to the rules, mirror companies have to serve all cities with more than 200,000 inhabitants by Dec. 31, 2001.
“To build a conventional network within such a short period of time is physically very difficult. [The mirror companies] need to serve an expressive number of cities to be competitive,” said Joao Miguel da Rocha Filho, sales division general manager of the Wireless Business Unit at NEC do Brasil S.A. NEC has prepared WLL projects for all Brazilian cities.
Last B-band license goes
It took more than one year and two failed attempts for the Brazilian government to sell its last B-band cellular license-for region 8, covering the sparsely populated and geographically vast Amazon region. On Oct. 19, the consortium Tele Centro Oeste/Inepar was the sole qualified contender, paying $50.9 million, well below the minimum price of $168 million set for the initial offerings earlier in the year.
This time, to attract bidders the government refrained from setting a minimum price and also delayed the introduction of personal communications services to the region until Dec. 31, 2001, one year later than the rest of the country.
Consortium Tele Centro Oeste, including Brazilian telecom company Splice do Brasil, controls the A-band cellular license in adjacent states, while Inepar controls the fixed-line operator in the region.
Investments of up to $151.3 million) are expected in the region for the next five years.
Telecom revenues bail out economy
The Brazilian government and some of Telebras’ new owners reached an agreement for prepayment of the balances on their purchases. On Oct. 1, Brazil’s National Economic and Social Development Bank received $3.885 billion from Telefonica de Espana, Iberdrola Investimentos and Portugal Telecom, equivalent to their balance for fixed operator Telesp Participacoes S.A., and cellular companies Telesp Celular Participacoes S.A., Tele Sudeste Celular Participacoes S.A. and Tele Leste Celular Participacoes S.A.
The prepayment was attractive to all parties involved. It gave the country much-needed cash after the Russian and Asian crisis provoked an extreme dollar outflow from Brazil, bringing the country’s foreign reserves down.
As a result of the deal, the operators received debt titles from the bank, which now will be responsible for the companies’ debt with the National Treasury. The cost of capital in foreign markets for these companies is lower than its cost for the Brazilian government. BNDES’ remuneration and exchange variation rates are also greater than the cost of borrowing on international markets for these companies, providing them with a favorable spread. Also, through this transaction, Portugal Telecom transferred the debt from its Brazilian subsidiary to the parent company, reducing its tax duty with the Brazilian government.
