Brazil’s failed PCS auction points to regional caution

Brazilian telecommunications regulator Anatel failed for the second time last week to auction off certain PCS (personal communication services) wireless licenses, underscoring both the region’s tight financial conditions and telecom players’ decisions to stick with what they’ve got, at least for now.

Although Latin America’s booming growth potential has led telecom companies to go on spectrum shopping sprees in recent years, analysts predicted Thursday that regional telecom players are now going to work on their existing commitments, while they wait out the current economic slump, before diving into new ventures and technologies.

Brazilian telecom operator Telemar was the only company to put a deposit on a minimum bid in Anatel’s Band E PCS auction May 31, but then abandoned the bid, claiming that it was being squeezed by the nation’s current energy crisis and saying that it wanted to concentrate on its fixed-line service.

Pyramid Research Inc. analyst Juliana Abreu said this was a smart move. Telemar already had US$4 billion in planned investments for 2001 and taking on a new PCS network would considerably add to the company’s debt.

“Companies are being a lot more cautious than they were a year ago,” said Abreu.

Anatel also failed to lure any bidders when it initially tried to auction off the license last March 13.

The fact that Latin American telecom players are currently wary of leaping into new technologies is not necessarily bad news for users, analysts said. Analysts are hoping that the companies will take some time to improve their current services, work with their existing partners and take advantage of the spectrum they already have available to them before weighing themselves down in more debt, which could ultimately be passed on to consumers.

Besides careful spending, Abreu pointed to another reason why Brazil’s PCS auction flopped – Latin America currently has a wealth of valuable licenses up for grabs.

“There are so many auctions in other parts of the region and a limited amount of capital,” said Abreu.

While Latin American telecoms may currently be scaling back investments and reinforcing their current operations, the region’s potential will certainly not be ignored in the medium term. Analysts expect that as soon as the economy perks up, stabilized, healthy operators will be ready to leap on the region’s thriving opportunities and upcoming technologies.

Meanwhile, Anatel is expected to try to auction off its Band E PCS licenses again as early as two to three weeks from now. While that may be a little optimistic, they will no doubt get rid of them before too long, analysts say.

Pyramid Research, based in Cambridge, Mass., can be reached at Telemar is at