Breaking News

Tweet TWEET

Brazil Approves Rules for 4G Wireless Airwaves Auction

Brazil approved plans to hold by June 10 an auction of airwaves for use in fourth-generation wireless networks.

Rules for the event were cleared yesterday by the board of Anatel, as the nation’s telecommunications regulator is known. Carriers that win airwaves must offer the new technology in the six host cities of soccer’s Confederations Cup by April of next year and in the 12 cities holding 2014 World Cup matches by the end of 2013, according to a presentation by Anatel yesterday.

Brazil’s five largest carriers -- Telefonica Brasil SA (VIVT4), Tim Participacoes SA (TIMP3), America Movil SAB, Oi SA (OIBR4) and NII Holdings Inc. (NIHD) -- will be the biggest participants in the auction, said Jose Otero, an analyst at Signals Telecom Consulting. DirecTV (DTV) may also participate through its Sky Brasil Servicos Ltda. unit, he said.

“I expect all interested parties to the upcoming auction to be companies that already have a presence in Brazil’s telecommunications market,” Otero, who is based in Montevideo, Uruguay, said on April 10 in response to e-mailed questions. “The only possibility of this not occurring would be a party interested in entering the market to deploy a network targeting wholesale services.”

Sky Brasil could use the airwaves since it only has licensed spectrum in a limited number of cities and doesn’t have access to major markets such as Sao Paulo, Rio de Janeiro and Brasilia, Otero said.

Rural Areas

The auction will include airwaves in the 2.5-gigahertz frequency range for 4G networks. Airwaves in the 450-megahertz range will also be auctioned for wireless coverage in rural areas. It will provide enough airwaves for three or four carriers to offer nationwide 4G coverage, Marcelo Bechara, an Anatel commissioner, said yesterday at the agency’s board meeting.

The government plans to publish details of the auction process by April 26, after the plan is reviewed by the federal accountability office, Joao Rezende, Anatel’s president, told reporters today in Brasilia. All large carriers in Brazil, including fixed-line companies, should bid in the auction, and foreign companies may choose to enter, he said.

“The 2.5-gigahertz band is one of the last available for mobile service, which makes the auction attractive,” he said. “We’re expecting demand for the spectrum to accommodate the growth in mobile voice and data use.”

Consumer Prices

While the 4G auction winners will be determined by the highest bids, the auction for rural airwaves will be based on which participant proposes the lowest prices for consumers, Rezende said.

In the rural auction, participants will have to make deposits of 10 percent of the value of the investment, or around 200 million to 300 million reais ($109 million to $163 million), Rezende said. The winner must pay 2 billion to 3 billion reais to guarantee completion of the project, he said.

“We want to keep speculators away,” he said.

Brazil had a record 248 million wireless lines at the end of February, according to Anatel, surpassing its estimated population of 210 million.

The government of President Dilma Rousseff expects the auction of two new frequencies to boost the demand for Internet use among middle-class Brazilians, Communications Minister Paulo Bernardo said in a January interview.

Main Advantage

Fixed-line Internet access grew 22 percent in Brazil last year, while mobile expanded 99 percent, Bernardo said in January.

Networks using 4G technology will offer faster Internet speeds as their main advantage, said Eduardo Tude, president of Teleco, a consulting company.

“The services are the same, but with faster speed consumers can start doing things they couldn’t before, such as accessing more video and storing more photos and documents in the cloud,” Tude said in an April 11 phone interview.

The scarcity of 4G equipment could be a hurdle for carriers who acquire the new airwaves, Otero said. Brazil’s decision to move to 4G networks at about the same time as other countries around the world will hinder operators’ ability to get economies of scale, which will lead to higher prices for network infrastructure and handsets, he said.

Telefonica Brasil, the local division of Madrid-based Telefonica SA, fell 1.7 percent to 55.20 reais at the close in Sao Paulo. Tim, a unit of Milan-based Telecom Italia SpA, dropped 1.6 percent to 11.51 reais. Rio de Janeiro-based Oi slid 1.7 percent to 8.76 reais. America Movil, based in Mexico City, fell 0.3 percent to 15.74 pesos in trading there.

To contact the reporters on this story: Carla Simoes in Brasilia Newsroom at csimoes1@bloomberg.net; Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.