Telefonica pumps $14.6 billion into Brazil

01 April 2011 |


Spanish telco Telefonica has announced a four-year investment plan worth $14.6 billion aimed at developing its operations in Brazil.

 

Telefonica’s stake in Brazil consists of its ownership of Telesp, which operates in the country’s biggest and richest state of Sao Paulo, and mobile phone provider Vivo. The company has recently taken 100% control of Vivo after buying out partner Portugal Telecom’s 50% interest in the operator.

Telefonica has said most of the money, which amounts to 52% more than the company’s previous four-year investment in the Brazilian telecoms market, will go on modernisation and expansion of its phone network, as well as improvements to broadband and cable television services. It will also be looking to acquire new operating licences in parts of the country where it has had little role to date, and may also make some acquisitions to further this aim.

The carrier said the latest round of investment is in response to an anticipated surge in demand for next-generation telecoms services across Brazil, the region’s biggest economy. Wally Swain, a senior vice president with the analyst firm Yankee Group, believes the sharp rise in Telefonica’s investment over the previous four years may be connected to the recent Vivo acquisition.

“I believe they are going to build out a national wireline presence based on reinforcing Vivo’s national backhaul network,” he said.

“They are also very confident, as is America Movil, that there will continue to be significant growth in mobile broadband. Also, within the next four years, probably earlier, they will have to start spending on LTE or higher-end HSPA+ upgrades. And they committed to ramp up their FTTH programme a few weeks ago.”

Swain believes that the growth in basic voice traffic across Brazil will be small, with far more potential coming from areas such as enterprise, mobile broadband and fibre access services.