First Round of Brazil's Leftover Spectrum Auction Raises US$188mn

Brazil's telecoms regulator Anatel successfully auctioned 20 spectrum blocks for 2G mobile telephony on Tuesday, accepting bids worth a total of 347mn reais (US$188mn), according to local press reports.

There were three blocks that drew no bids Tuesday, leaving 82 blocks still to go to auction on Wednesday.

The country's largest mobile operator Vivo won 13 licenses, with bids worth a total 170mn reais, Oi won four, worth 151mn reais, and America Movil's unit Claro won two, for 15.8mn reais. TIM Brasil won the last license, for 10.6mn reais. On average the operators bid 40% more than the minimum price.

Both Vivo and Claro got what they wanted from the auction, finally achieving full national coverage, which was previously a situation enjoyed only by TIM. For Vivo the areas most in need of coverage were parts of the northeast and it made use of the opportunity to snap up blocks in the 1,895MHz-1,900MHz band, which no other operator uses.

Claro targeted blocks in the states of Amazonas, Amapa, Para, Maranhao and Roraima. But the most hotly contested block was for Londrina, which was relatively inexpensive at 5.8mn reais, but led Claro to pay a 1,200% premium over the minimum price.

Oi placed the highest bids for individual blocks, with 42.3mn reais for São Paulo state and 80.6mn reais for Sao Paulo city. The group now has coverage of 17 states.

For Anatel the most important aspect of the auctions' success is that there will now be at least four operators in each of the country's arbitrary operating areas for mobile telephony. Anatel originally tried to auction several of these spectrum blocks in 2004, without success.

The spectrum is now much more attractive because the market has evolved, according to Yankee Group analyst Julio Puschel. There has been consolidation, and Claro and TIM have gained strength, putting pressure on Vivo to gain full national coverage and compete more effectively, he told BNamericas.

There is also a lot of speculation that Oi and Brasil Telecom will merge and pressure for the resulting national operator to compete evenly with the above companies.

Indeed, BRP's absence from the bidding led local press to conclude that it is banking on a merger with Oi, whereupon both firms will share Oi's licenses.

On Wednesday there were at least another 14 blocks that did not attract bids. Part of Anatel's mission is to ensure universal access, but rather than insisting on 2G mobile coverage for these areas Anatel is likely to allow them to be covered by WiMax operators in the future, Puschel added.

Two other firms, Options Computadores and Easytone Telecomunicações, are also qualified to bid in Wednesday's rounds.

Posted to the site on 27th September 2007