By Jose Paulo Vicente
SAO PAULO, Brazil, July 7 (Reuters) - Two years ago,
Marcelo Bachellar had no interest at all in his teen-age son's
computer. As far as he knew, the clunky beige box sitting on
the desk was nothing more than a toy.
Today, not only does the 48-year-old businessman have his
own computer, he relishes every aspect of his PC with glee. "I
use e-mail, browse the Web, buy groceries, CDs and books, do my
banking online. I can't live without it," he said.
Just like Bachellar, some three million other Brazilians
have jumped on the Internet bandwagon, making the fast-growing
Latin American nation of 160 million one of the most coveted
and competitive online markets in the world.
"It's a war out there," said Antonio Tavares, head of
Brazil's Internet Service Providers Association. "It's
fascinating. Everyone wants to be part of it, and everything is
happening very fast."
Such excitement, analysts said, has solid roots.
They said the combination of a quick economic recovery
after a sharp currency devaluation in early 1999, the
privatization of the telecommunications sector in mid-1998, and
a fairly wide usage of credit cards makes Brazil a perfect
ground for the Internet to blossom.
Also, figures recently compiled by International Data Corp.
of Framingham, Mass., showed that the number of Internet users
throughout Latin America should jump to 19 million in 2003 from
4.8 million in 1998, for a compounded annual growth rate of 32
percent in the period.
In 1998, Brazil accounted for roughly 49 percent of
Internet users in the region, by far outpacing Mexico's
713,000, Colombia's 349,000 and Argentina's 330,000.
IDC also said spending on electronic commerce in Latin
America is expected to soar to $8 billion by the end of 2003,
against the $167 million seen in 1998.
Given such growth potential, analysts said, businesses are
wasting no time digging their trenches in Brazil.
Over the last three months, Brazilians sawmost of their
household Internet names either merge with or be acquired by
larger, often foreign, corporations.
The young, yet aggressive, Starmedia Network <STRM.O>,
which recently debuted in the U.S. stock market with a
successful public offering, purchased Cade?, a popular search
engine, and Zeek!, a web portal.
U.S. giant network concern PSINet <PSIX.O> gobbled up
Openlink, Horizontes and STI, all corporate-driven local
Internet Services Providers, or ISPs.
Telefonica<TEF.MC>, the Spanish telecom giant that became a
strong player in the local market after the privatization of
Brazil's telecommunications monopoly, snatched ZAZ, the
country's second largest ISP.
Local, privately-held Universo Online, Brazil's largest
online services company, with more than 400,000 users,
purchased web directory and portal Familia Miner.
Meanwhile, global Internet titans Microsoft Corp. <MSFT.O>,
America Online <AOL.N> and Yahoo! <YHOO.O> opened their own
portals in Brazil with great fanfare, triggering a gory battle
for content and consumers.
"Brazil is currently one of the most competitive markets
for (web) portals in the world," said Osvaldo de Oliveira,
director of Internet Business at Microsoft's unit in Brazil.
Analysts said the fight for the portals, web sites that
serve as an entry path to a variety of online services, is just
a small sample of what is yet to come.
In fact, analysts said, the arrival of the large global
players just poured even more hot water on the already boiling
market, which is expected to generate annual revenues between
$2 billion and $3 billion, including spending on hardware,
software, advertising, personnel and content.
"This is just the beginning of the game," said Tavares,
whose own company, Dialdata, an ISP, was purchased by U.S.
network Via Internet in January.
AOL, for example, is one of the hungry players on the prowl
for more. "Currently we are not in talks with any one
particular company. But that doesn't mean we are not interested
in buying ... in the future," said Charles Herington, AOL's
chief executive for Latin America.
Herington said he believes that consolidation will be the
key word in the Brazilian Internet market in the near future.
"The industry will consolidate. I don't think we are going
to have any more than 10 ISPs with more than 100,000 clients in
a very short period of time," he said. Brazil currently has
some 350 ISPs, way fewer than the 420 seen last year.
Microsoft's Oliveira said the software behemoth is also in
talks with several local companies to start offering Brazilians
its popular Web TV product, a box that allows users to cruise
the Web from their television sets.
"We will provide the software platform so companies can
develop products for it," Oliveira said.
Analysts said Rede Globo, Brazil's largest media empire, is
also putting final touches on a new Internet product, which is
expected to include Globo's news and entertainment content.
A source familiar with the project said Globo is also
likely to use its cable TV network to provide high-speed
connection to the Internet in the future. "They have a project
for high-bandwidth connection as well," the source said.
Feeling the heat from the growing competition, Universo
Online, which is owned by Brazil's largest daily Folha de
S.Paulo and media conglomerate Abril S/A, is also trying to
raise extra cash for future investments.
Caio Tulio Costa, UOL's managing director, said the company
is currently negotiating the sale of 10 percent of its capital
to a group of private investors.
"We are ready to face the competition," Costa said. "We
have a strategy in place to keep our number one position," he
added without giving further details.
The financial market has also realized the potential for
profits in the new virtual niche, and players have not been
left out of the country's Internet frenzy.
Six local brokerage houses, following the footstepsof U.S.
giants E*Trade <EGRP.O> and Charles Schwab <SCH.N>, are already
offering their clients the possibility to buy and sell shares
online.
Analysts said the brokerage houses -- NetTrade, Souza
Barros, Hedging-Griffo, Socopa, Coinvalores and Novacao -- are
investing heavily on their new online trading products.
"Electronic trading will play a bigger role in Brazil as
investors become more acquainted with the process of trading
stocks online," said a banker who asked not to be named. "There
is definitely a growing market there."
REUTERS
Rtr 16:00 07-07-99
Copyright 1999, Reuters News Service
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