Can you give us an overview of the telecommunications and IT sectors in Brazil?

Brazil already represents the largest ecommerce market in Latin America. Brazil’s online population, 78 million people, is larger than the total population of Spain, France or UK. E-commerce has been skyrocketing in Brazil, average growth of 32,5% in the last two years and expected 26% growth in 2015. However, the use of mobile phones to access the web is still in its infancy: online traffic generated from mobiles and tablets represent only 1.5% of all web traffic in the country.

 

Today, Brazilians are still using their phones only to talk and to send texts. Tomorrow they will use their phones to surf the web and shop as well. There are 116 cell phones for every 100 people in Brazil, however smartphones are still underutilized in Brazil. The proportion of purchases made from mobiles phone is strikingly small, below 1% of total online sales. Following the global trend, m-commerce is expected to rise steeply. By 2015, at least half of Brazil’s population, or 100 million people, will have a mobile phone with Internet access.

 

What are the major challenges in the telecommunications of Brazil today?

The tax burden in Brazil to Telecommunications is one of the highest in the world. Telecommunications is one of the major sources of revenue for states, next to the ICMS on electric power, fuels, beverages and automobiles. It is easy to charge, because the tax is collected by a small number of companies, the consumer does not even notice. Proposals to reduce these taxes have been made, but do not go very far in Congress.

 

I believe that high-taxes create a colossal deficiency in the sector. We are suggesting that the Government limits the State tax to a maximum of 25% from the current 35%, in the States of Minas Gerais, Rio Grande do Sul, Santa Catarina e São Paulo. We have to organize and gradually relieve, I do not want to unbalance the financial market. There is enough resources in Fust, Funttel and Fistel so there is no excuse not to reduce federal taxes. That is to say, the government use some of the collected money to achieved budget surplus of 3,1% of Gross Domestic Product (GPD) in which committed.

 

We are looking to reduce the taxes in the pre-paid services so that we can allow a higher growth in this segment. Today the high cost of telecommunications services is also because of distortions on the cost of the pre-paid service. While in post-paid plan the client spends R$54,33 for 100 minutes, in pre-paid service the cost is R$135,37. The taxes are R$23,36 and R$58,20, respectively. The main cost is the interconnection fee–the payment that operators receive to terminate the call.

 

The operators have clients who don’t have money to buy credits to make a call, they receive calls because they are paid by the person who originated it. We believe that if we cut down the taxes, the market will grown 250%, instead 130%, as in the last 15 months, it will explode. This was already verified and it does not apply just in telecommunications, but in almost every activities. If the companies make more money, the tax balance won´t be affected, in spite of lower fees.

 

In 2013, Brazil was the world’s third-largest market for PCs and the world’s fifth-largest market for mobile phones. The country is building fiber-optic links that will cover half of our population. We will launch a tender for radio spectrum bands required to deploy 4G mobile phones in Brazil. Brazil’s telecom revenues are expected to reach $150 billion in 2014 according to Research and markets. Vivo, with about 29% of market share, is the market leader, followed by TIM Brasil, 26% and Claro, 25%.

 

What has been the effect of organizing the World Cup and Olympics in the telecommunications sector?

With the 2014 FIFA World Cup and 2016 Olympic Games being held in Brazil, operators have been rushing to roll out new technology such as LTE and FttP networks. The government has issued a law offering tax breaks for new telecom investments in networks that support access to fixed or mobile broadband. The asymmetric measures introduced by the General Competition Plan are a significant step in the Brazilian telecom environment.

 

The regulation of network unbundling and controlled wholesale prices should pave the way for a more competitive broadband market. The General Competition Plan requires operators with Significant Market Power (SMP) to share their networks and infrastructure with small or new service providers, at reference prices approved by Anatel. Brazil’s telecom revenues are expected to reach $94.4 billion in 2014; Anatel has identified five SMP operators in the fixed-line sector (Vivo, Oi, Embratel/Net, CTBC, Sercomtel) and four SMP operators in the mobile sector (Oi, Claro, TIM Brasil, Vivo); mobile companies had to submit investment plans to lift a sales ban imposed by Anatel.