ronutz
← Все вендоры

Vendor lineage

Brasil Telecom

One of the twelve pieces, which spent a decade becoming part of a larger piece again.

Brasil Telecom was one of the three fixed-line holding companies created when the Telebrás system was auctioned on 29 July 1998, covering the south, centre-west and part of the north of the country. It lasted about eleven years as an independent company.

Its history is the argument about the privatisation, in miniature. The system was split in order to create competition, on the reasoning that several operators would serve customers better than one. What happened over the following decade is that the pieces began buying each other: Brasil Telecom was acquired by Oi, the group built on Telemar, another of the three fixed-line holdings, in a deal completed in 2009.

So two of the three parts the state had deliberately separated were back together inside eleven years, and the third - the São Paulo operator, Telesp - had become the Brazilian business of a Spanish multinational. Nine hundred companies had become one, then twelve, and were now heading back toward a handful.

Whether that is a failure of the design or simply what telecommunications does is a fair question, and it remains open. Networks have strong economies of scale and interconnection costs that reward consolidation; regulators know this and try to hold the line against it. The pattern is not particular to Brazil, and any argument that it proves something about privatisation has to explain why the same consolidation happened in countries that privatised differently, and in some that did not privatise at all.

The company's later years were also marked by a long and public shareholder dispute, and the group that emerged from the merger has had a difficult financial history of its own. Its current position is best checked against recent filings.

Founding stories

1998

Tele Centro Sul Participações

Brasília · Founders: Banco Opportunity, Telecom Italia, Brazilian pension funds

Incorporated on 22 May and auctioned in July to a consortium rather than to a single operator - a domestic bank, an Italian carrier and pension funds, which is a fair description of who could raise that much capital in Brazil at the time. It took the Brasil Telecom name in April 2002.

The timeline

  1. The premium tells you what was worth having

    São Paulo's fixed-line concession sold at a premium of 64% over its reserve price. This one sold at 6%. The buyers were not confused about which lot they wanted; the difference between those two numbers is the difference between a city and a continent, priced on the day.

  2. The auction was not uncontested

    More than three thousand police protected the Rio de Janeiro exchange against demonstrations by the landless workers' movement, the unions and the central trade union confederation. The MST had entered the development bank's lobby the day before, and the sale began only after several court injunctions were overturned.

  3. CRT

    The Rio Grande do Sul operator bought for around R$1.4B, making the group second in the country by coverage area - the first move in a decade of buying rather than building.

  4. Submarine cable

    The GlobeNet submarine fibre system acquired, along with a stake in MetroRED - a regional fixed-line operator buying intercontinental capacity, which is a larger ambition than its concession implied.

  5. The brand goes

    Control passed on 8 January through a chain of holding companies, and the Oi brand replaced Brasil Telecom on 17 May.

Flagship products and solutions

  • Fixed-line concession, Region IILocal and intra-regional service across the Federal District and nine states, reaching 8.1 million lines at its peak.
  • CSP 14 long distanceThe carrier selection code, from 1999 regionally and 2004 nationally and internationally - the mechanism by which a regional concessionaire competed outside its own region.
  • MobileEntered in 2004, six years after the fixed business, and past four million subscribers within three years. The late start is itself the story: the mobile licences had been sold separately in 1998.
  • Broadband and data centre1.8 million ADSL subscribers and hosting services - the businesses that grew while fixed voice declined.

Key innovations

  • The geography was the business case, and it was a bad oneRegion II covered about a third of Brazil's territory and roughly a quarter of its people. Telecommunications economics reward density, and a concession with a third of the land and a quarter of the population is the inverse of what an operator wants. The 6% premium was not pessimism; it was arithmetic.
  • Buying reach instead of building itA regional operator that acquires another operator, then a submarine cable system, then a stake in a metropolitan network, is trying to escape the boundaries of its own concession. The strategy is coherent and it is also an admission: the licensed territory alone was not a sufficient business.
  • Competing outside your own region by codeCarrier selection codes let a customer choose whose network carried a long-distance call by dialling two extra digits. It is a regulatory device rather than an engineering one, and it is how a market designed as separate regional monopolies was made to have competition in it at all.

Main markets

Around 41 million people across the Federal District and nine states, served with 8.1 million fixed lines, 5.6 million mobile subscribers and 1.8 million broadband connections at its largest, with roughly twenty thousand employees.

Its competitors were the other concessionaires operating across regional boundaries by the same mechanisms it used, and eventually the group that bought it.

Analyst standing

  • Any assessment now is of the successor group rather than of this company, and the record of that group is its own subject.
  • The number worth carrying away is the one from the first day. A 6% premium meant the market thought this concession was worth almost exactly its reserve price, while São Paulo went for two thirds more than its own. Eleven years later the cheap lot was absorbed by the group that had bought a different one, and the expensive lot had become a Spanish multinational's Brazilian business. The consolidation the entry above describes was visible in the auction prices before any of it happened.
Brasil Telecom ↗
Sources