So Paulo, Brazil-Telesp Celular announced that as soon as October it will begin commercially operating a network based on the CDMA 1x technology. The operator, controlled by Portugal Telecom and Spain’s Telefonica, provides wireless service to 4.5 million customers in So Paulo, by far the largest wireless subscriber base in the country.
The company said 1x technology, which can carry data transmissions up to 144 kbps, will be the first third-generation (3G) operation in Brazil. Telesp Celular plans to invest BRL520 million (approximately US$200 million) during the next two years to expand and upgrade its network. Only part of the investment will be used to purchase 1x equipment. Lucent and Motorola will be the infrastructure providers, with Lucent procuring the largest share (R$335 million/US$133 million).
For some, however, it’s too early to celebrate the arriving of 3G. “The Telesp announcement is a very good sign for the market,” says Andy Castonguay, a telecom analyst for the Yankee Group in its Rio de Janeiro office. “But I don’t see it as 3G. Actually, it is more an advanced form of 2.5G.” He says that true third-generation technology should reach higher speeds: at least 2 Mbps for stationary equipment and 144 kbps for mobile. Telesp, Castonguay continues, will be capable of reaching that speed only when it deploys a 1xRTT overlay to its current network. “This will not happen before late 2002 or early 2003,” he adds.
When this occurs, Telesp Celular may in fact be the first to operate a 3G technology in this country. “It seems that CDMA will reach 3G before GSM,” says Castonguay. Observers expected that 3G would reach Brazilian shores as a natural evolution of the GSM network that Italia Telecom and Telemar are expected to launch by early 2002 in Brazil. Both companies won licenses to operate the so-called D and E bands, and will have to use GSM as a mandatory condition required by Brazilian telecom regulator Anatel. The operators are expected to use a General Packet Radio Service (GPRS) overlay, another technology that will not reach truly 3G requirements. “Telesp may reach 3G before others,” Castonguay states.
Telesp Celular, created in the early 1990s as a part of the Telebras state-owned monopoly, was privatized in 1998. Servicing the heavily populated state of So Paulo-which with 35 million inhabitants is the most rich and industrialized metropolis in Brazil-it collects the largest revenue among all operators in the country. The operator has been challenged by BCP, a private operator backed by BellSouth and Brazilian Bank Safra, in the metropolitan area around the capital county (also called So Paulo). Three years after it was privatized, however, Telesp has succeeded in keeping 67 percent of the market while BCP captured only a 33-percent share. “We hope to reach 5 million customers by the end of this year,” said Carlos Vasconcellos, Telesp Celular president. Instead of CDMA, BCP uses TDMA technology and has not announced any plans to migrate to other platforms.
Most Telesp growth, says Castonguay, is due to sales of prepaid terminals. Even so, Telesp registered a $128 million profit in 2000, while BCP has accumulated losses since beginning operations in May 1998 (US$820 million in 1999 and US$142 million in 2000). “Telesp inherited an operating network, with already many clients, while BCP had to begin from zero,” Castonguay said. “It (BCP) is still paying huge debts.”
In any case, Telesp will continue to give its competitors a hard time. The company pioneered the launching of WAP technology in Brazil and has already announced a partnership with Microsoft and Lotus to offer corporate customers a platform capable of running the Lotus Notes document exchange system. “Telesp is trying to keep the lead,” said Castonguay.
