Brazil - The largest telecom market in Latin America
Frank Pendle and Isabelle Paradis
July 2006

Brazil is by far South America's largest telecom market, with 50.3 million installed fixed lines, 39.6 million fixed subscribers, 86.2 million mobile subscribers and 12.3 million Internet customers at the end of 2005. In terms of users, Brazil is the fifth largest mobile market in the world and the 10th largest in terms of Internet users.

2005 has shown significant telecom growth across the board in Brazil, generating over US$48.6 billion in revenues. Industry analysts expect further growth in the next 5 years, with SMEs and lower-income segments driving growth.

Brazil's fixed telecom usage is average for Latin America, and is on a par with neighboring Argentina and Chile. Fixed line telephony has been stagnant and even decreasing, losing customers to mobile, while higher income households disconnect narrowband lines in favor of broadband connections. Voice over Internet Protocol (VoIP) services are growing in popularity, accounting for around 36% of Brazil's International calls, and causing long-entrenched operators to lose revenues. It is therefore forecasted that fixed lines should continue to remain stagnant with at a Compound Annual Growth Rate (CAGR) of -0.2% over the next 5 years.

Industry observers agree that 2006 will continue seeing accelerated growth in cellular and broadband services.

According to Anatel, Brazil ended 2005 with 86.2 million mobile service subscribers, with a penetration rate of 46.8%. In the last quarter of the year, the Brazilian market continued showing a solid performance despite slowing its pace of growth. In the fourth quarter of 2005, against a backdrop of intense competition, less commercial pressure was seen in the pre-paid segment, with the main operators targeting their commercial initiatives at high-value segments.

Mobile services are forecasted to grow at a CAGR of 12.8% over the next 5 years to reach 157 million mobile subscribers by the end of 2010. At that time, mobile connections should represent 80.0% of Brazil's telephone connections.

Brazil's Internet market is by far the largest in the region, with an estimated 25.9 million active users and 28.5% of the region's paying Internet customers. The market has expanded rapidly in recent years, with a growth rate of 114.1% between 2001 and year-end 2005.

Internet user penetration is still low in relative terms at 17.4% compared to the total population, but new growth is expected - and, indeed, observed in late 2005 and early 2006 - due to two key factors: government efforts to enhance accessibility to computers and strong emphasis on affordable access via differentiated phone tariffs. Actions such as the passing of MP255 "the Good Provisional Measure" significantly lowered taxes on computer components. Other state-sponsored financing for purchasing computers also were great successes.

The number of Internet customers is therefore forecasted to grow at a CAGR of 12.1% over the next 5 years to reach 21.6 million connections at the end of 2010.Broadband connections grew by 60.2% to 3.7 million by the end of 2005, with continued growth forecasted over the next 5 years (CAGR of 35.0%).