SAO PAULO, Brazil-The pace of liberalization in the Brazilian wireless markets has taken on new speed in the past two weeks following a judicial ruling grant-ing the region 2 B-band license to the Telia-led Tess consortium and swift movement by the Ministry of Communications to wrap up the B-band auction.
Following the long-awaited award of region 2, the Ministry of Communications opened the bids for region 3 last Tuesday morning and turned around and awarded in the afternoon the license to the Algar consortium, which includes Grupo Algar of Brazil (45.5 percent), Korea Mobile Telecom (20 percent) and Brazilian construction company Queiroz Galvao (34.5 percent). Region 3 includes the states of Rio de Janeiro and Espirito Santo.
Grupo Algar said it will spend $350 million during the first year on building out its cellular network in the two states, and $260 million during the next four years.
The company plans to begin offering commercial service in late 1998, according to one source at Algar.
The ministry is speeding ahead with the remaining B-band licenses as well. Investors face a looming deadline on Tuesday this week, the one-year anniversary of when the B-band auction began. According to the tender rules, bidders essentially would have to raise their bids after Tuesday by 20 percent to account for inflation.
As another incentive for speed, investors also are anxious to get their B-band licenses in hand because the Telebras A-band sell-off is just around the corner.
The government already has spun off the cellular operations of government-owned Telebras into eight “Baby Telebras” companies and it aims to privatize them and the other Telebras operations by July.
That puts a time crunch on B-band winners, which want to be able to build out their networks before the newly privatized A-band companies receive a cash infusion for expansion by their new owners.
The bid for region 4, comprising the state of Minas Gerais, was expected to happen on Friday. Remaining after that will be regions 5 and 6, covering the extreme southern states. The final region likely to be sold is region 8, which includes the rural Amazonas area. This region twice has not attracted any bidders.
It is not clear whether the government realistically will be able to auction regions 4 through 6 by Tuesday.
But the market here nevertheless is intense, with incumbent carriers and new players meeting head-to-head-fully financed-this year. That puts an incredible amount of pressure not only on the carriers, but on the infrastructure vendors, and they know it.
Yet this speed of events in Brazil is good for suppliers, said Pyramid Research analyst Jason Dyett. “The additional carriers [being formed] help. Whether or not the vendors win is another story.”
Neither Lucent Technologies Inc. nor Motorola Inc. has announced any contracts for the B-band. So for them, the new carriers speeding onto the market mean more opportunities more quickly.
Lucent’s Art Medeiros, president and CEO for Lucent Technologies’ Caribbean and Latin American region, pointed to the speed at which his company has deployed other cellular networks in the region-including a large analog network for Compania de Telefonos del Interior for the interior of Argentina, as well as a CDMA network on the Caribbean island of Guadeloupe-the first in six months, the latter in three weeks.
“I’m very impressed with [the speed of the cellular awards], and so is Lucent,” said Medeiros. “Lucent is absolutely committed to participate in all of these bids. We have participated in a number of bids, and we still have quite a few outstanding quotations of future bids that still have to be opened.”
Medeiros said Lucent aims to be number one in Brazil. He said the company has garnered $330 million in A-band analog contracts during the past year.
Northern Telecom Ltd., which already has seen success in Brazil-with B-band TDMA contracts in region 1 (Sao Paulo City), region 7 (central and western Brazil) and region 10 (northeastern Brazil) has an ambitious goal as well-50 percent of the B-band contracts.
Daniel Hunt, president of Nortel CALA (Caribbean and Latin America) Inc., is aware of the necessity and danger of fast deployments in Brazil.
“There’s always a challenge of speed,” said Hunt. “And from a fundamental technology standpoint, we don’t have any concerns. All of our technologies … are all proven.
“There’s always a concern about how much one can push through a logistics pipeline. And those are real concerns, but they are manageable concerns.”
Hunt didn’t mention a goal for A-band contracts. The contracts largely depend on the auction winners.
“The rise of privatization on the A-band side, certainly the sell-off of the A-band customers, will bring in, we think, some new investors and new operators,” said Hunt. “As a result … pre-existing relationships [with vendors] may matter maybe less or more. We’re not sure.
“If global operators enter the market, as we suspect they will, then they will bring with them, I suspect, their biases from other places in the world where they’ve had successful relationships with equipment vendors.”
In Brazil, Nortel already has existing A-band analog contracts with Telebrasilia, Telegoias and Telest, as well as analog and TDMA contracts with Telemig.
