VZCZCXRO1340
RR RUEHRG
DE RUEHBR #1332/01 2821435
ZNR UUUUU ZZH
R 081435Z OCT 08
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 2613
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 6724
RUEHSO/AMCONSUL SAO PAULO 2879
RUEHRG/AMCONSUL RECIFE 8560
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREAS WASH DC

UNCLAS SECTION 01 OF 02 BRASILIA 001332 
 
SIPDIS 
SENSITIVE 
 
STATE FOR WHA/BSC, WHA/EPSC, EEB/CIP 
DOC FOR ADRISCOLL, PHERNANDEZ 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EINT MARR PINR TINT TSPA BR
SUBJECT:  Growth Trends in Brazilian Telecommunications 
 
SENSITIVE BUT UNCLASSIFIED 
 
¶1. (SBU) Summary:  Brazilian Ministry of Communications (MOC) staff 
noted in a recent meeting that information technology use has 
increased by 40% over 2006 in the mobile service sector, by 35% in 
the internet service sector and by 30% in the pay TV service sector. 
 The MOC also confirmed the rumor of the pending merger between 
Brazilian mobile services companies Oi and Brasil Telecom, which 
will create the second largest mobile service company in Brazil. 
Jefferson Nacif, a primary MOC contact, will be transferring to 
ANATEL, the Brazilian telecommunications regulatory body, in 
mid-October.  He cited an increased emphasis on regulatory 
oversight, given the industry's growth, as the main reason his 
expertise is needed at ANATEL.  End Summary. 
 
MOBILE PHONE USAGE GROWING 
--------------------------- 
 
¶2.  (SBU) In a meeting with Econoff, MOC's International Affairs 
officer Jefferson Nacif highlighted the mobile sector's growth, 
stating that Brazil currently has 138 million cellular phone users 
compared to 99 million in 2006. The MOC attributes this growth to 
the presumption that many Brazilians are using more than one cell 
phone, often separating them between professional and personal use. 
Nacif commented that monthly service packages are still much cheaper 
than pre-paid phone cards on a cost per minute basis given that many 
mobile service companies are using the user access fee (VUM), which 
is generated on each call, to subsidize the packages in hopes of 
enticing customers into long term contracts.  Nacif cautioned that 
this practice unduly favors those who can afford these packages, 
while marginalizing those consumers who can only invest limited 
resources in the phone cards. 
 
MAJOR TELECOM MERGER IN THE WORKS 
--------------------------------- 
¶3.  (SBU) The merger between Oi and Brasil Telecom was announced 
last month with approval by ANATEL expected in December 2008. This 
new company, whose name is yet to be announced, will directly 
challenge major mobile phone service provider TIM in terms of 
geographic coverage, with the only omission in their coverage being 
the state of Sao Paulo. Nacif predicted that by 2016, Brazil will 
have complete geographic mobile service coverage. 
 
INCREASES IN INTERNET USAGE 
---------------------------- 
¶4.  (SBU) Nacif commented that internet use in Brazil, through fixed 
and mobile connections, will be the largest IT growth sector in the 
years ahead.  Currently Brazil has about 30 million internet users 
(out of a total population of 189 million) and Nacif stated that the 
GOB's goal is to have 90 million by 2010. To achieve this goal, 
Nacif stressed the importance of continued fixed line infrastructure 
expansion, especially to rural areas.  However, he noted that, given 
the infrastructure challenges expanding fixed line access in 
extremely remote areas presents, mobile internet access would be the 
largest growth component of this sector.  He also pointed to the 
steady decline in the prices of computers and mobile internet 
devices as another factor that will contribute towards achieving 
this growth target. (Note: Apple Brazil introduced the iPhone 3G on 
September 26. End note).  Nacif referenced an uptick in consumer 
preferences for premium access in Brazil, citing the 10 million 
broadband access users who are willing to pay for these premium 
services. 
 
MORE WEALTH MEANS MORE UPSCALE CABLE TV 
-------------------------------------- 
¶5.  (SBU) Nacif cited pay TV service growth as an indicator of 
increased consumer purchasing power in Brazil.  Both cable and 
satellite TV service companies have shown impressive growth over the 
past decade.  Nacif noted that cable TV appeals to an audience 
looking for multiple service packages through 
one service provider.  The convenience of having telephone, internet 
and pay TV managed by one company has attracted more than 5 million 
users in the last 5 years.  Nacif commented that Satellite TV 
appeals to a consumer that wants more international channel options, 
but noted that this service tends to be more expensive than cable 
TV. Nacif mentioned that this segment of pay TV has more growth 
limitations due to its higher cost, the scarcity of dish supplies 
and dish placement restrictions in certain types of residences. 
 
¶6. (SBU) Comment: Sustainable economic growth in Brazil will greatly 
depend on its ability to broaden economic benefits to Brazilians on 
the margins, and this connection, according to Nacif, begins with 
information technology. Post believes these growth trends in the 
Brazilian IT sector present excellent opportunities for U.S. 
business participation, especially in the area of mobile 
 
BRASILIA 00001332  002 OF 002 
 
 
connectivity. Post believes Nacif's transfer to the ANATEL, where he 
will retain the portfolio of international issues he followed at 
MoC, will be helpful in encouraging ANATEL to maintain a 
forward-looking, open approach to developments in the IT sector. END 
COMMENT. 
 
SOBEL