SAO PAULO -(Dow Jones)- Sweden's Telefon AB LM Ericsson (ERICY) expects Brazilian mobile operators to add another 12 million customers in 2005, following strong subscriber growth in 2004, Ericsson Brazil President Anders Runevad told reporters Tuesday.
"On the global scale, Brazil is one of the fastest-growing markets in terms of new subscribers," Runevad said.
At the end of October, Brazil had 59.7 million mobile customers, and Ericsson expects this to reach roughly 64 million by the end of the year, or 38% growth for the year. The GSM mobile network technology in which Ericsson specializes accounted for 29% of the market, up from 15% at the beginning of the year.
Some analysts have suggested Brazil's market cannot maintain this strong pace of growth in 2005, but Ericsson executives said they believe operators will have to innovate, suggesting they may follow the example of European operators and reduce the price of calls to attract customers.
They said that there may also be opportunities in 2005 or 2006 for the launch of so-called mobile virtual network operators, or MVNOs, which leverage existing mobile infrastructure to offer low-cost services, a model that could be well-suited to some Brazilian retail chains with nationwide brands.
Brazilian fixed line operator GVT, which operates in the south of Brazil, previously had indicated that it wants to launch an MVNO and is in talks with different mobile operators, though nothing concrete has emerged.
Ericsson Brazil's revenues from sales of telecoms infrastructure and services are expected to end the year close to 2 billion reals, up 60% from BRL1.2 billion in 2003, Runevad said.
Much of this growth was driven by the better-than-expected subscriber growth in Brazil, he said. The company won contracts to expand GSM networks for Claro, the local unit of America Movil SA (AMX) and TIM Brazil, the local unit of Telecom Italia Mobile SpA (TIM.IT).
Ericsson also won contracts to build new GSM networks for Brasil Telecom Participacoes SA (BRP) and Telemig Celular Participacoes (TMB), Runevad said.
Despite strong competition in the mobile infrastructure market, margins held up in 2004 as Ericsson focused on improving efficiency, Runevad said, adding that the company also benefits from the economies of scale of its global operations.
Although there will be a slight fall in subscriber growth in 2005, when combined with migration of customers using the outdated TDMA technology to GSM, Ericsson expects to maintain a strong financial performance in 2005, Runevad said.
With mobile operators adding hundreds of new customers and increasing their share of the voice market, fixed line operators are increasingly turning to broadband services to drive their revenues, Runevad said. Ericsson claims a 33% share of the installed fixed line market in Brazil.
The third leg of Ericsson's business in Brazil is providing services to companies, a growing segment which accounted for 30% of revenues in 2004 and is likely to rise to 35% in 2005, he said.
-By Matthew Cowley, Dow Jones Newswires; 5511 3145 1479; matthew.cowley@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 7th December 2004
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