Brazil has a population of 201.0m and is served by 4 principal mobile network operators: Vivo (Telefónica), TIM, Claro (América Móvil) and Oi – which between them account for 99.6% of subscribers. Vivo is the only operator using CDMA as the principal technology – the others all adopted GSM, which Vivo also implemented in 2006. With 268.3 million subscribers (September 2013), penetration is estimated at 135% - up from 132% in September 2012. 79% of mobile subscribers had a pre-paid account in September 2013, down from 81% a year earlier.
Brazil mobile operators
Brazil has a population of 201.0m and is served by 4 principal mobile network operators: Vivo (Telefónica), TIM, Claro (América Móvil) and Oi – which between them account for 99.6% of subscribers. Vivo is the only operator using CDMA as the principal technology – the others all adopted GSM, which Vivo also implemented in 2006. With 268.3 million subscribers (September 2013), penetration is estimated at 135% - up from 132% in September 2012. 79% of mobile subscribers had a pre-paid account in September 2013, down from 81% a year earlier.
3G was launched in Brazil in 2007-8. By September 2013 Brazil had 88.3m mobile broadband subscribers, of which 80.7m were via a 3G (WCDMA) handset, 7m via broadband data terminals and 552,600 via LTE.
LTE is the 4G standard adopted in Brazil by all operators. In 2012 Anatel (the Regulatory Authority) carried out an auction of 2500 MHz frequencies in order to enable 4G networks. The main companies to acquire frequencies were Vivo, TIM, Claro, Oi, Sky and Sunrise. As part of the rules following the auction Anatel set a deadline for winning operators to provide 4G coverage in the six host cities for the FIFA Confederations Cup by April 30 2013, and all cities hosting and co-hosting the 2014 FIFA World Cup must be covered by December 2013. Anatel has pushed hard for operators to roll-out 4G, including issuing an ultimatum to pay-TV providers to vacate the 2.5-2.6MHz bands reserved for 4G, which helped the April 30th deadline to be met.
This has led to rapid LTE growth in 2013 – with Vivo and TIM leading the way with 40% and 28% LTE market share respectively. In September alone there were 154,000 new LTE subscribers. Vivo covers 64 cities and nearly 30% of the population. In November 2013, Anatel published a decree formalising the allocation of the 700MHz spectrum for 4G mobile broadband in Brazil. The new 700MHz assignment will take place after the publication of the tender terms in 2014. The next auction then is expected in 2014, as Anatel aims to make use of 700MHz spectrum freed by analogue to digital TV migration – anticipated to occur before 2016. SindiTelebrasil, the Brazilian association of telecommunications companies, announced in May 2013 that operators have invested US$2.5bn in 4G spectrum and network infrastructure – leading to in the roll-out of circa 3,500 antennas for 4G, with another 6,000 estimated to be installed by the end of 2013.
There have been a number of recent developments in the Brazilian market regarding tower sharing and outsourcing. In 2012 Vivo announced its intention to move away from owning and managing towers, and sold 2,000 of them to BR Towers – a new company established by investment firm GP Investiments and Bradesco Private Equity Fund. It also sold 1,800 towers to American Tower. According to Valor Economico, Vivo sold 3,925 towers between late 2010 to Q3 2012, for a total of BRL 1.1 billion.
BR Towers itself absorbed another tower company SiteSharing, an organisation created in 2003 which manages towers leased to operators across Brazil.
Another recent entrant, US company SBA Communications (SBAC), purchased a further 800 towers from Vivo in December 2012, and announced in July 2013 it would buy 2,113 towers from Oi for US$302.6 million, bringing its tower count in the country to over 3,000. Oi will sign a long-term lease agreement with SBAC. Meanwhile, SBAC will maintain and commercially operate all the towers and have the right to enter into leasing agreements with other operators. The tenancy ratio on the towers currently stands at 1.15.
TorreSur is also investment fund owned and operates 4.000 towers, 65 percent of which it owns – with the rest involving a right of use arrangement.
Highline do Brasil - with a focus on building and buying wireless infrastructure such as distributed antenna systems and towers – was also established in 2012.
American Tower’s website lists 4,343 sites in Brazil – and in August 2013, it announced plans to acquire an additional 2,790 towers from Nextel for c. US$413 million. The new towers were said to be mostly located in and around major population areas and along major highways, and to have a tenancy ratio of just over 1 tenant per tower, with Nextel Brazil the primary tenant – having agreed to lease back the towers from American Tower for a minimum of 12 years.
In March 2013 BNAmericas reported that TIM Brasil had approved an infrastructure sharing deal with Oi. The online journal stated that the LTE Ran sharing project is limited to the physical sharing of towers and network equipment for the provision of LTE services in the 2.5GHz band. Each of the operators is responsible for roll-out in a different set of cities, relating to the Confederations and World Cup targets. This is in contrast to Telefonica (Vivo), which is apparently also looking to share frequency spectrum. In May 2013, Brazil’s antitrust regulator, Conselho Administrativo de Defesa Economica (CADE), approved a network sharing partnership between Vivo and Claro - to share part of their backhaul network and transmission sites.
In total, Highline do Brasil estimates that there are 60,000 cellular sites in Brazil – with independent tower operators owning about 15% - but this number, and the tendency to share, are expected to increase significantly over the next few years as operators strive to meet 3G and 4G coverage targets. Sharing in Brazil may also be stimulated by the significant amount of time it takes to acquire a tower in Brazil and high property prices in urban areas.
Regulation is also playing a part. The operators which secured 4G spectrum in the 2012 auction were obliged to sign an agreement committing to share at least 50% of their 4G towers. Brazil’s communications minister, Paulo Bernardo, declared in July 2012 that Brazil will make infrastructure sharing mandatory, with Anatel regulating the sharing of mobile towers. He went on to state that later in the year he would be sending a proposal to Congress to define the parameters for the installation of antennae in Brazil. Whilst municipalities cannot be obliged to change local legislation, he stated a desire to open dialogue with them – necessary given a statistic highlighted by SindiTelebrasil which revealed that there are currently over 250 laws governing the installation of cellular masts. In 2012 Anatel also approved a new plan, called the General Plan of Competition Goals (PGMC) which includes rules for network sharing.
Whilst the market for tower sharing offers a lot of potential the degree of existing market activity means that any company considering market entry needs to act now.
Ed Siegle
Ed Siegle is a Principal Consultant in Mott MacDonald’s Technology & Communications Division. He has 20 years of experience as a consultant, primarily focused on the telecommunications industry, working for operators, vendors, investors, regulators and public sector organisations. His particular expertise lies in market analysis, commercial due diligence, product and market strategy development, demand forecasting and business case production.
In the course of his career he has worked for clients in the UK, Europe, the USA, Africa and Latin America. He has spent over 2 years living and working in Latin America, including 18 months in Brazil where he helped establish new offices for two consultancies. Over the past 3 years, he has been part of a Mott MacDonald team commissioned to execute a series of advisory projects for towercos looking to invest in developing markets.
Additional articles in our Brazil case study:
SBA Communications’ expansion into Central and South America
Over 9,000 towers needed ahead of the Brazil World Cup
A legal perspective on the Lei das Antennas
Exclusive: How Brazil’s Ministry of Communications is encouraging tower industry growth
