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Vivo Triples 2008 Capex to US$3.51 bil.
28 Mar 08
The southern hemisphere's biggest mobile operator, Vivo, has announced a 6.07-billion-Brazilian-reais (US$3.51 billion) investment for 2008, which is three times higher than last year's 1.92-billion-reais injection, local daily Valor Econômico reports.
Global Insight Perspective | | Significance | Brazil's largest mobile player, Vivo, has approved one of the highest capital expenditure budgets this year of 6.07 billion Brazilian reais, three times higher than the sum it paid last year. | Implications | A big chunk of this is associated with the upcoming roll-out of 3G services resulting from the successful bid for spectrum in last year's tender. | Outlook | Vivo's aim is to break off leaks to rival players by the swift introduction of GSM services, amidst plans to achieve a reputation for innovation on the technological front with the large-scale introduction of 3G services and the implementation of the number portability scheme. |
Vivo's capital expenditure (capex) for this year is also considerably higher than that indicated by its main competitors, Telecom Italia-owned TIM and América Móvil's local unit, Claro. The former has projected capex of 3.6 billion reais, whereas the latter will invest a mere US$700 million in addition to 1.4 billion reais to be paid for the spectrum blocks acquired in last December's 3G tender. Vivo's shareholders, who granted their approval to this year's capex, have not clarified whether this includes the sum of 1.3 billion reais required for the acquisition of regional player Telemig Celular. Vivo, which is jointly owned by Spanish giant Telefónica and Portugal Telecom, announced that it had reached an agreement to take over Amazônia Celular and Telemig Celular in August 2007. The acquisition would provide it with access to the latter's service area—Brazil's second-most-populous, south-eastern state of Minas Gerais—where Vivo lacks operations. Following a series of regulatory obstacles, the deal will be soon coming to an end after another operator, Oi, consented to buy Amazônia Celular from Vivo in order to avoid the deadlock resulting from the current telecommunications legislation. Outlook and Implications Brazilian telcos' biggest bet this year will be the successful deployment of 3G services, as a result of the December 2007 auction that scooped 5.3-billion-reais worth of revenues into the state's treasury. Eight companies competed for lots in four (F, G, I, J) of the phases designated for the deployment of 3G services in the 1.9-GHz and 2.1-GHz frequency bands. Given Nextel's eagerness to achieve mobile operator status—demonstrated via an aggressive approach at last December's tender that did not help it win any lots but raised the prices considerably for the rest of the participants—the telecoms regulator, Anatel, believes there is enough interest in the market to justify a second round, which may take place as early as June 2008. Vivo, together with rival companies TIM, Claro and Oi, paid the highest premiums in most service areas, which is indicative of the increased interest of the participating players in the auction. Vivo is now bound by the tender's contractual obligations, which aim to establish equal interest for all spectrum blocks linked to different geographical regions and quick coverage expansion even in non-competitive areas of the country. In addition to the quick roll-out of 3G services, Vivo will also be required to proceed with the expansion of 2G services following the successful bid for additional spectrum in the 900-MHz and 1800-MHz frequency bands in the September 2007 auction, which granted it nationwide coverage and will allow it to compete more effectively in a highly aggressive market. TIM and Claro are also present in the whole of the national territory, all three totalling some 97.04 million customers, according to Anatel's latest market data release. Finally, part of this year's capex will be used for the implementation of number portability, which is due to be concluded on 1 March 2009 as a result of a seven-month process between 29 August 2008 and 1 March 2009. The process will be implemented in areas according to their national numbering codes (CNN), which correspond to the national dialling codes, such as 11 for São Paulo's metropolitan area. According to Anatel, the schedule will give operators enough time to adjust their systems and prepare their networks. Rival operator Oi, active in both fixed and mobile segments, has allocated some 400 million reais to cover this development this year.
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