Industry Trend Analysis - Unused Spectrum A Dilemma For Anatel - JAN 2018

BMI View: Anatel should try to strike a balance between improved coverage in underserved areas and more efficient monetisation of spectrum. As a result, it will most likely recall frequencies from players whose business plans are deemed unviable, and auction the reclaimed spectrum in the near future.

The Brazilian regulator Anatel is considering recalling unused frequencies sold in its December 2015 auction, as the two-year period to put the frequencies to use is close to expiration. At the time, these unused resources were of marginal interest to bigger players; as a result, they were sold at great discount to smaller, often localise players that have largely been unable to put them to use so far. Anatel's rationale was to help local operators to offer services in the underserved areas of Brazil's highly fragmented mobile market. For many of these players a two-year time window to build up a network, make a business plan and launch operations is unfeasible, so some have asked for deadline extensions.

Given the mixed success of Anatel's spectrum strategy, and the constant pressure from major operators for more frequencies, we expect the regulator to recall those resources allocated to operators that have failed to present a viable business plan. Anatel's dilemma is that, on one hand, its mission includes maximising coverage throughout the territory. On the other hand, growing mobile data demand means other operators need more spectrum to maintain quality of service, so Anatel cannot afford to have precious frequencies remain unused. Furthermore, there is pressure from a budgetary standpoint, as these frequencies were offered at a heavy discount, and could be much better monetised if auctioned again.

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f = BMI forecast. Source: Operators, Anatel, BMI

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