Siemens to invest $700m in Brazil over three years
By Raymond Colitt in São Paulo
Published: September 26 2000 20:21GMT | Last Updated: September 26 2000 22:51GMT
Siemens, the industrial conglomerate, on Tuesday said it would invest US$700m over three years to develop its mobile communications business in Brazil.
The announcement marks the beginning of a race among international telecommunications equipment providers to position themselves before a new round of operating licences for GSM technology are tendered from early next year. They will trigger multi-billion dollar investments to meet strong demand growth in Brazil's mobile telephony.
According to Anatel, the regulator, the cellular telephone market will grow from 15m users last year to 58m in 2005, requiring investments of $38.2bn.
The new operating licences will open opportunities particularly to suppliers from Europe, where GSM has been the standard mobile telephone technology. The US uses TDMA and CDMA technology.
Finland's Nokia is preparing to offer GSM networks to new operators and to add GSM technology to its assembly line of mobile handsets. While handset sales represent the bulk of Nokia's sales worldwide, network sales in Brazil could eventually match revenue from the sale of handsets, which totalled $500m last year, said Edward Fernandez, president of the company's mobile telephone division in Brazil.
Sweden's Ericsson also believes it has an advantage in GSM technology.
"We expect to be quite successful when the operators select their vendors," said Gerhard Weise, head of Ericsson Brazil.
Siemens is also looking to develop local content for its technology applications with $150m of its overall investment package. Part of the $500m earmarked for project development is to go towards a new assembly plant for GSM handsets. The remaining $50m will go towards marketing.
Siemens hopes to obtain a 25 per cent share of the GSM market with sales of R$1bn (US$540m) in 2001-02.
"Our road map shows GSM and TDMA converging. Major players are already operating on both sides," said José Geraldo de Almeda, manager for Motorola's new business development in Brazil. He said Motorola intends to compete in Brazil's GSM market and points to successes in China and Germany.
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