VZCZCXRO8653
PP RUEHRG
DE RUEHBR #1130/01 1691741
ZNR UUUUU ZZH
P 181741Z JUN 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 9266
INFO RUEHSO/AMCONSUL SAO PAULO 0159
RUEHRI/AMCONSUL RIO DE JANEIRO 4603
RUEHRG/AMCONSUL RECIFE 6821

UNCLAS SECTION 01 OF 02 BRASILIA 001130 
 
SIPDIS 
 
EB/CBA FOR SMITH-NISSLEY 
RM FOR PINEDA 
WHA/EPSC FOR SALAZAR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON BEXP ELAB ETRD BR
SUBJECT: AMEMBASSY BRASILIA NOMINATES RURALFONE FOR THE SECRETARY'S 
2007 CORPORATE EXCELLENCE AWARD (SMALL AND MEDIUM-SIZE ENTERPRISE 
CATEGORY) 
 
 
¶1. (U) Based upon its outstanding program aimed at using technology 
and resources to assist communities located in Brazil's remote, 
underprivileged areas, the Ambassador nominates the U.S. company 
Ruralfone, Inc. for the Secretary of State's 2007 Award For 
Corporate Excellence For the Small to Medium Size (SME) Category. 
 
¶2.  (U) Begin Text of Award Nomination 
 
Ruralfone and its Brazilian subsidiary, Local Servicos de 
Telecomunicacoes, Ltda., provide land-line telephone services for 
consumers outside the country's large metropolitan areas, a market 
niche that is all too often not served by the telecom giants. The 
company was created in 2004 and has an outstanding program through 
which United States entrepreneurship, technology and resources 
contribute to the development of small communities not only through 
financial investment, but more importantly, through the commitment 
of staff (at all levels) to community social development.  The 
result has been an improvement in both the productivity and quality 
of life of the firm's customers. 
 
In 2004 Ruralfone's principals quit their jobs in San Francisco to 
found the company.  To finance the effort, they raised US$2 Million 
from friends and family and obtained a US$1 million loan from the 
Overseas Private Investment Corporation "OPIC."  They learned 
Portuguese and  moved with their families to Northeastern Brazil in 
order to start their pilot project in a city named Quixada, in the 
State of Ceara. 
Ruralfone selected one of the poorest cities in one of the poorest 
States in Brazil to start its operations in order to prove that its 
concept was not unique to mid-level per capita incomes, but could 
work at the lower income levels present in developing countries. 
The company soon plans to expand.  By the end of June 2007, it will 
start operating in three more cities: Quixeramobim, Russas and 
Aracati. 
 
DEVELOPMENT OF COMPETITIVE AND INNOVATIVE ACTIVITIES WITH MEASURABLE 
RESULTS. 
 
Within the Brazilian telecommunications industry, Ruralfone has been 
a leader in embracing innovation.  Ruralfone's strategic plan relies 
upon decentralization and is built around the idea of an autonomous 
"independent business unit" in every city.  It is breaking the 
established "way of thinking" about telephony in remote areas, 
insisting that service can be provided profitably without government 
subsidies. 
 
Ruralfone has proven its concept is successful, and has filled a 
needed market niche.  Its recent customer satisfaction survey, in 
which over 95% of those surveyed rated their service as very highly 
satisfactory as compared to the other alternative in Quixada. 
 
Ruralfone's price per minute, compared to other operators, is the 
second lowest in the world.  Ruralfone's price of $0.016 per minute 
is only bested by TAC of Thailand, which charges a price of $0.015 
per minute.  As a result, Ruralfone's customers talk an average of 
400 minutes per month compared to Brazil's average of 80 minutes for 
mobile and 200 minutes for fixed lines. 
 
Its financial model is also proving to be a success.  The local 
subsidiary is now fully self-sufficient, operating at a positive 
earnings before interest, taxes, depreciation and amortization 
(EBITDA) of about 50% after only 24 months in operation.  This is 
twice the EBTIDA of national Brazilian carriers. 
 
Overall, Ruralfone has made a very large contribution to a community 
located in one of the poorest areas of a developing country. The 
challenges Ruralfone, Inc. faces are enormous, but if this model 
spreads it could revolutionize the way telecom carriers do business 
in the world's developing economies. 
 
GOOD CORPORATE CITIZENSHIP 
Ruralfone partners and employees dedicate their personal time and 
knowledge to community-based educational programs. One employee has 
provided two weeks of training in sales to area residents. In 
addition, the company gives free English classes to its employees. 
During the holiday season, Ruralfone sponsored an event in which its 
employees gathered toys and distributed them to children in the less 
fortunate neighborhoods of Quixada. 
Finally, in order to help local citizens in distress, Ruralfone set 
up a number of special "hotlines" for citizens with emergency needs. 
These include a suicide hotline and a telephone number for victims 
or those threatened with sexual abuse and/or child exploitation. 
 
CONTRIBUTION TO THE RULE OF LAW AND OVERALL GROWTH AND DEVELOPMENT 
OF THE LOCAL ECONOMY 
 
BRASILIA 00001130  002 OF 002 
 
 
Through its outstanding program to provide telecommunication 
services for small communities, Ruralfone has contributed greatly to 
local economic development. After only two years of operation, 
Ruralfone has already attracted 3,000 subscribers, which represents 
roughly 50% market share of the total number of fixed lines 
installed in Quixada. 
 
Ruralfone has also increased Quixada's teledensity (number of lines 
per inhabitant) by 65% in only two years. This is significant as the 
majority of the lines sold are to people who did not have a fixed 
line before, and more importantly, previously could not afford one. 
 
Ruralfone has also shown it can adapt American management philosophy 
(rewarding people based on the results obtained) to developing areas 
of Brazil. The concepts of commission and bonus are relatively new 
to the region and the introduction of these tools by Ruralfone has 
enabled its employees to generate above average incomes.  Another 
incentive package that it has introduced is a stock option plan for 
its Brazilian employees, a business practice that is uncommon in 
Brazil for SME's. 
 
Finally, Ruralfone promotes development of the local economy by 
utilizing local resources (radio stations, printing companyies, van 
advertisements, etc) to do its promotion campaigns:. For example, it 
sponsored a contest within the city, complete with prizes for the 
winner, to create its advertising logo and company song. 
 
EXEMPLARY EMPLOYMENT PRACTICES 
Ruralfone provides training to its local employees in Quixada to 
enable them to operate and maintain the "high technology" equipment 
required for an independent telephone company.  One of its highest 
priorities in the training field is to augment employees' technical 
skills.  Accordingly, the company provides job opportunities to 
students from the three universities neighboring the community.  The 
company itself is managed and operated by local residents. 
Ruralfone is meticulous in abiding by the highest ethical standards, 
treats its employees with respect, and invests in its human 
resources. It is because of Ruralfone's commitment to the quality of 
life of both its employees and the community in Quixada that U.S. 
Mission Brazil nominates Ruralfone for the Secretary of State's 2007 
Award for Corporate Excellence for a Small to Medium size 
Enterprise. 
 
End Text of Award Nomination 
 
Sobel