Mobile Playing a Major Role in Brazil’s Economic Transformation

By October 17, 2012

The fast-growing mobile sector is generating jobs, creating new services and improving the socio-economic life of the country. However there are a number of constraints relating to regulation, taxation and bandwidth which still need to be overcome.

Mobile is having a major impact on the Brazilian economy. The recent Brazil Mobile Observatory 2012 report, written by international consultancy Deloitte’s on behalf of the GSM Association - the organisation representing the interests of mobile operators worldwide - points out that Brazil is now the fourth largest mobile market in the world, with more than 260 million registered mobile connections, of which 60 million are mobile broadband connections. And the rate of growth is apparently not slowing down, with the figure for mobile broadband connections estimated to reach 135 million by 2014. These figures, combined with ever-greater affordability of smartphones and tablets (75 million smartphones forecast to be in use by 2016), mean that data traffic per user will carry on rising. Between 2008 and 2020, data traffic is expected see a rise of 83% per year. And these figures are all seen as elements of a virtuous circle. When more people are using cutting-edge equipment with mobile connections, and many affordable services – e.g. in the areas of health, education, trade and payments – are being created, this transforms the way individuals and companies communicate, work and live. At a stroke this enables small and medium enterprises to play a role in the value chain, producing local content, software and applications.

The next wave: NFC and M2M

And all this should take off in a new wave when technologies such as Near Field Communication and Machine-to-Machine (M2M) solutions become more widespread. “There’s now a real opportunity for mobile to deliver even greater socio-economic benefit for the country and beyond,” stressed GSMA Chairman Franco Bernabe. According to the report, benefits which are already being felt include the 11 billion euro equivalent in revenue that mobile operators generated in 2011, making a contribution of 2% to GDP. However, for growth opportunities to materialise, a series of constraints for mobile operators and consumers need to be tackled. The first constraint is the allocation of bandwidth. Exponential growth means that the country must stay on top, technically speaking, if it wants to be able to meet the challenges of multiple connections and services. The report’s authors points up the benefits of the recent auction of spectrum in the 2.5GHz band, but warn that this will only alleviate spectrum constraints in the short term.

Allocating new spectrum

For full national coverage they suggest allocating the 700MHz band, known as the ‘Digital Dividend’, which is currently the preserve of broadcasting, for mobile services. Other improvements needed relate to regulation and taxation. The Deloitte’s-GSMA report stresses how complex and slow it can be to obtain approvals from local and federal authorities for site and antenna deployment: this has been identified by the mobile community as the greatest single obstacle to further investment. In addition, it is vital to simplify the regulations. There are for instance currently more than 250 different regional and local antenna policies in Brazil. Taxation also needs to come down, argues the GSMA. In Brazil today mobile users pay 27% VAT on calls and text messages, while corporation tax takes a 34% slice of mobile operators’ profits. However there is good news here for mobile operators: the government has meanwhile agreed to lower taxation substantially for the sector over the next two years.

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