Brazil is hot. No, I’m not talking about its famed beach-friendly climate, I’m talking about the country’s fiery economy, the sixth largest in the world and growing. Brazil’s middle class is on the rise, wielding greater levels of disposable income. Reuters reports that foreign investments are pouring into Brazil, despite the worldwide slowdown.
Making things even hotter, Brazil will soon host two huge international events, the 2014 World Cup and the 2016 Olympics. To prepare, the country is madly building not just in concrete sports facilities but in the airwaves: auctioning spectrum and deploying networks to serve the rocketing popularity of mobile devices.
There are 256 million mobile users in Brazil, nearly half of all the mobile users in Latin America, according to Forbes. And while prices are high in the U.S. and Europe, in Brazil, fierce competition among the four largest telecoms is resulting in voice and data plans for as little as 20 to 25 cents per day.
But when the heat is on, there is also a chance of getting burned.
Brazil auctioned 4G spectrum to the telecoms in June and included requirements to get the latest high-speed technology up and running in time for the World Cup. All four telecoms bought a slice.
Then just a month later, (well before any carrier could even get started on rolling out the new technology), Brazil’s telecom regulator, Anatel, suspended the sales of three carriers, citing high numbers of customer complaints about the poor quality of their current services.
It’s important to note here that the four top telecoms in this country are not Brazilian natives. The suspensions hit Italian-owned TIM Brasil the hardest, suspending its sales in 19 Brazilian states. Two others, Mexican-based Claro, and Oi, which is partially owned by Portugal Telecom, were suspended in a handful of areas. Spanish-owned Telefónica, which operates as Vivo in Brazil, was the only one that escaped the ban.
The suspension was seen as highly political, appealing to frustrated cell phone users countrywide. But it was also intended to help prepare for the World Cup and the Olympics, as one Anatel supervisor told The Financial Times. Apparently, when taking its turn on the global stage, Brazil doesn’t want to be embarrassed by weak signals and dropped calls.
The ban only ended up lasting 10 days, but it did damage to the carriers’ reputations as well as their stock prices. Which makes this a cautionary tale for anyone looking to enter the mobile business in Brazil, or any hot market for that matter.
Sure, there’s a lot to be gained in such markets. But do your homework. Know the political and regulatory pitfalls. And make sure your product is not just low priced but of high enough quality that it will last past the heady “gold rush” days of a hot market.
Otherwise, it will be just another flash in the pan.