Brazil's 4G cell spectrum auction awarded the top four wireless carriers with licenses for new technology in preparation for the 2014 World Cup, raising U.S.$1.24 billion.
Reuters reports Telefonica Brasil, Claro, Grupo Oi and TIM Participacoes won the coveted licenses for 4G cell service and frequencies for broadband coverage from telecom regulator Anatel required during the World Cup. The licenses also require carriers to provide 4G coverage in the host cities of the Confederations Cup in 2013 and to provide less-profitable rural broadband service. However, the license also calls for at least 60 percent of the hardware for the new frequencies to be Brazllian-made.
Yankee Group Senior VP of Research Wally Swain comments
"The operators all complained mightily about the auction conditions, but as expected, they showed up at bidding and paid significant premiums, 67 percent over minimum in Telefonica’s case. The innovative part of the deal was regulator Anatel's 'bundling' of 450 Mhz spectrum for rural broadband with the more attractive 2.6 Ghz LTE spectrum. If you won 2.6 Mhz spectrum, you have to take a slice of 450 Mhz as well and deploy in 'less economically favored' areas. That is an economically sound way to get infrastructure where operators won't go on their own. The part that will bite everyone—especially with the need to have infrastructure in place for the World Cup in 2014—is the need for at least 60 percent of investment to be sourced from Brazil. That kind of technological and manufacturing capacity simply doesn't exist today, and operators do not need to be paying the premiums that this will imply. I've heard the arguments from Anatel and they simply don't wash if the manufacturing capacity cannot be created in time. This was a big mistake by the Brazilian government. Yet another 'full employment act' for lawyers is on the horizon."
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