I am here in Sao Paulo near my apartment the 1st digital phones are on sale from Bell South band B, they said should be up and running between April 15 - May 1st R$650 for a Nokia and I think she said i could use my old analog number to call that fone telsp could lose a bunch of amps cellular subscribers to digital, they have 6 month head start,and experience
one advantage for the future will be telsp/ telrj will choose CDMA which is IMHO a far superior technolgy than Bell south tdma.
regards
bruce
biz.yahoo.com
Latin Loot: Picking Winners and Losers
Among the Telebras Cellulars
By Peter Eavis
Staff Reporter
4/13/98 1:20 PM ET
The breakup of Telebras (TBR:NYSE ADR) is like the
demise of the Beatles.
A highly popular entity splits. Many followers mourn. After a
while, some of the composite parts start to do well on their
own. But others do not.
And just as Paul McCartney's subsequent career far
surpassed those of others in the Fab Four, we can also
expect very different fates from Telebras' 12 successor
companies.
For the eight cellular companies included in that 12, it is
becoming increasingly clear which are best prepared for the
competitive post-breakup environment.
If the hospitalization last Tuesday of Sergio Motta, Brazil's
telecommunications minister, does not lead to delays,
controlling stakes in all 12 telcos could be sold to strategic
investors as early as August.
Simultaneously, the government is forcing each of the 12 to
compete against newly established firms (for a more detailed
outline of the plan, click here).
The cellular companies each will have to face off against one
new entrant in its respective geographical area. That means
each zone has two cellular licenses: Band-A, which is for
the eight companies formed out of the Telebras cellular
network, and Band-B licenses for the new guys.
Nearly all the Band-B licenses have been sold, and some of
the new entrants' business plans look extremely aggressive.
Not only do they aim to slash connection charges and
tariffs, but they also seem to have the ability to offer better
service and more sophisticated technological features.
No controlling stakes in the Band-A companies have been
sold, which makes it a little difficult to know how they will
perform over the long term. However, even without knowing
who will control the Telebras eight, it is already clear that
some will give their Band-B rivals a tough run for their
money.
A spirited defense is expected from the Band-A company for
Minas Gerais, whose operations are still part of Telemig,
the Telebras subsidiary. It looks well positioned to take on
the Vicunha consortium, which this week won the Band-B
license for the area.
Relatively well-managed, Telemig has almost totally met
demand for cellular phones in the area, meaning that, in
contrast to Rio and Sao Paulo, there is no huge waiting list
for the new entrant to eat away at. Also in stark contrast to
Sao Paulo and Rio, the Minas Gerais Band-A is likely to
have its digital network fully operational by the time
competition starts. That means better-quality calls and
strong loyalty among high-usage customers, which are the
most valuable.
"The Minas Gerais company could be the most profitable of
the Band-As," says Alexandre Gartner, telecom analyst at
Banco Bozano Simonsen in Rio. "The company could be
returning 20% on equity in two years." Analysts forecast
that the Band-A firm for Minas Gerais will see its market
share drop by a relatively small 15%.
However, there are worries: An undetermined portion of
Telemig's current cellular customers are from Sao Paulo and
Rio, and will probably leave once Band-B operators are up
and running in those two cities. The Rio Telebras subsidiary,
Telerj, says some 10% of Telemig's cellular subscribers are
from Rio. Some reckon 15% are from Sao Paulo. "There's
something to this, but those estimates are probably too
high," says Oliver Mizne, telecom analyst at Garantia in
Sao Paulo.
The other concern about the Minas Gerais Band-A cellular is
the very absence of a big waiting list. The existence of
massive pent-up demand is seen by some as the most
attractive feature of the Brazilian telecommunications
market.
That's why the Band-A firms for Sao Paulo and Rio are
considered to be worth buying, despite their problems. "The
pie is getting bigger for both Band-A and Band-B cellular
companies," says William Beavington, Latin
telecommunications analyst at Paribas Capital Markets.
"Everyone will benefit as pent-up demand is satisfied and big
promotion drives generate even more customers."
However, fast subscription growth does not always produce
high profitability. In cellular, better margins can come from
amassing the best customers. "Over time, the quality of
customers is going to count more than quantity," says Zain
Manekia, Latin telecom analyst at SBC Warburg. "The
Band-A company for Sao Paulo will be in most danger of
losing its best customers."
The Band-A company for the city and state of Sao Paulo will
inherit the cellular operations now belonging to Telesp, the
largest Telebras subsidiary.
The Band-A has to compete against a company set up by a
consortium led by BellSouth (BLS:NYSE). Last July, the
consortium won the Band-B license for the metropolitan area
of Sao Paulo, where there is a 1.5 million-strong waiting list.
It should become fully operational this month.
Some of the key weapons in BellSouth's bid to win higher
spenders are caller ID and call-waiting, which Telesp does
not provide. And it may be some time before the successor
Band-A does: Telesp has still not even signed a technology
agreement that would enable it to digitize its network.
Providing that the Band-A signs this agreement in the next
month, its network will probably be digitized by the end of
this year, which gives BellSouth a six-month headstart.
BellSouth has received criticism because its service is
currently restricted to Sao Paulo itself. But the company is
expected to have a roaming agreement in a couple of
months, which, BellSouth claims, will allow users to call
from anywhere in the Americas. All this competition should
reduce the Band-A's market share by about a quarter by
2000, according to analysts' estimates.
Most nervousness, however, centers on the Band-A
company for Rio. As reported last week, the Algar
consortium, comprising one Korean and several Brazilian
firms, won the Band-B license with an extremely competitive
bid, which included plans for low connection fees and tariffs.
Some analysts think Algar will be hard pressed to make
early profits. But they agree that, even with the huge pent-up
demand in Rio, the Band-A company is under serious threat.
The Band-A firm will mainly be formed out of cellular
operations currently part of Telebras subsidiary Telerj, which
has an appalling reputation among cellular customers in the
city.
Algar and the Band-A company are likely to both start
running digitized networks by year-end. True, this makes the
playing field more level than in Sao Paulo, and should
therefore keep market share loss down to 20%.
But the high dissatisfaction with the Telerj system should
spark an immediate exodus of big-spending customers to
Algar.
See Also
LATIN LOOT
Telebras'
Cellular
Fears; Brazil's
Trade Bind;
Peruvian
Gold Wars
4/3/98 8 PM
TOP STORIES
Life After
Telebras
1/22/98 2 PM
LATIN LOOT
ARCHIVE
Telebras
Company
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