Forum Brazil: Portugal Telecom reaffirms engagement in Brazilian market
Thursday, November 24, 2005
On 24th November Lisbon staged the Forum Brazil, an event where the perspectives for Luso-Brazilian relations were discussed. Miguel Horta e Costa recalled Portugal Telecom’s course in said market and restated its importance for the growth of the Group and underlined the need for the regulatory framework to assure the necessary conditions for just profitability of the considerable investment effort carried out in Brazil
Forum Brazil was held on 24th November during which the political and economical perspectives for the Brazilian market as well as the relations between Portugal and Brazil were discussed.
This Forum had the participation of Miguel Horta e Costa, Executive Chairman of Portugal Telecom and Deputy Chairman of the Luso-Brazilian Foundation.
Referring to Brazil as a brother country, the Executive Chairman recalled that this market is of extreme relevance for many companies and national economic groups, amongst which is Portugal Telecom.
Miguel Horta e Costa recalled the months of June and July of 1998, when, against all expectations, the PT Group gave start to its success course within the Brazilian market by purchasing a participation in Celular CRT and Telesp Celular. It is worth noting that the Telesp Celular participation was the biggest international investment by a Portuguese company ever.
The path towards leadership within the Brazilian market started with the launch, in 1999, of Baby, an innovative product based on Portuguese technology which became the product with most brand awareness in Brazil (even superior to that of Coca-Cola). This strong belief in innovation was complemented by the reinforcement of investment in Brazil between 1999 and 2001 in different fronts. To be more specific, the PT Group increased its participation in Telesp Celular to 41% (representing an extra investment of Euro 2,6 billion), went into the data and multimedia business and extended its activity to the states of Paraná and Santa Catarina by acquiring global Telecom for Euro 570 million.
In 2002 the historical partnership between PT and Telefónica for the Brazilian mobile market resulting from the joining of mobile operators held by PT and Telefónica was formalised, leading to the largest mobile operator in South America. This joint venture expanded in 2003, namely through the acquisition of TCO, thus assuring an operation that covers 80% of Brazil’s GNP. In 2003 there was also the launch of the brand Vivo – a rather successful and noteworthy brand within the Brazilian market and which is market leader in Brazil with approximately 29 million clients, corresponding to a market share of around 35%. The figures reveal the importance of Vivo for the PT Group: 75% of the total of the Group’s clients; 30% of operating revenue and around 22% of EBITDA.
Miguel Horta e Costa underlined that, in spite of the intense level of competition “the PT Group has a long-term commitment with the Brazilian market”.
The Executive Chairman complimented the capacity and political courage of the current Brazilian government to “follow in a distinguished manner the monetary and fiscal policies better adjusted to the Brazilian context, which have much contributed towards the crucial control of inflation and public debt”. This effort resulted in the creation of an environment of economic stability, together with a real economic growth that reached 4.9% in 2004 and it has contributed towards a clear increase in the level of trust of the economic agents, both at national and international level.
Regulation must assure the necessary conditions for profitability of investment
In order for the PT Group commitment with the Brazilian market to be sustainable, possibly through the reinforcement of the Group’s investments in Brazil, “we consider it fundamental that the regulatory framework for the telecommunications sector assure the conditions deemed necessary for a just profitability of the considerable investment effort already carried out in Brazil. However, I would like to enhance that it is not our intention that the revision of the regulatory framework hamper the healthy competitive environment felt within the Brazilian market. Actually, for us it would be very important that the conditions be assured in order for us to have national coverage. As Vivo is the first Brazilian operator, it seems rather unacceptable that nearly 30 million clients be in unfavourable situation due to the fact that the quality of the service provided in the Northern states, in which Vivo is not present, can not be considered the best, placing our operator in clear disadvantage in comparison to competitors”. Miguel Horta e Costa underlined that “PT’s intention is to not be in an unfavourable situation in the regions in which it is not present due to the fact of having opted for a CDMA technology, which affords its clients a vaster range of services in comparison to the GSM technology (for example, more speed in data transmission), allowing thus for a higher offer of value to the Brazilian society today and in the future”. In the words of the Executive Chairman there are two ways to solve this issue. On the one hand, there can be a technological upgrading of the operators installed in the above mentioned regions offering digital roaming service, similar to that provided to GSM clients. On the other hand, there can also be an auction of the spectrum available for the CDMA operation in theses regions.
Pertaining to the universalization of the mobile service in Brazil, Miguel Horta e Costa explained that with approximately 80 million users, the mobile service in Brazil is already a universal service. However, “we believe there is still potential for additional penetration within ill-favoured social classes via an innovative offer based on reduced tariffs, therefore more accessible. The viability of this model implies a greater flexibilization of taxes charged for the mobile telephone service in Brazil.”
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