A Rocky Evolution

Sep 10, 2003

Brazil's telecom operators both big and small have clashed with regulators as the post-privatization landscape continues to evolve.

This year's developments in the Brazilian telecom industry have played out like a steamy novela, with political wrangling and struggling companies starring in the leading roles. The issues at stake - competition, government interference and ambiguous regulations - remain hotly contested, particularly since more than half of the population still lacks basic phone service.

In June, the four incumbent fixed-line companies - Telemar, Brasil Telecom, Telefônica, and long-distance carrier Embratel - agreed to sign contracts with the government extending their operating licenses until 2026. All four companies bought control of their respective region and industry (see map) during Brazil's 1998 telecom privatization, a $19 billion program aimed at opening the market to competition, lowering the costs for consumers and increasing the availability of phone service. Prior to 1998, only 11% of the population even had a phone. There are now 40 million lines in service.

When the negotiations for the new contracts began,...

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