Three of Brazil's largest telecommunication companies will have to spend more than $9.8 billion to upgrade their internet and mobile access services ahead of the upcoming football World Cup in 2014, reported the Financial Times on Monday, after the Brazilian government threatened to punish the companies unless they did so.
FT reported that TIM, Claro and Oi had been banned by Brazil's telecom regulator, Anatel, from selling their SIM cards in 19 of Brazil's 27 states just a few weeks ago; but the ban was lifted after the companies' pledged to invest money into improving their network.
Bruno Ramos, a superintendent at Anatel, told FT that the regulator had been forced to act after receiving numerous public complaints of poor reception and dropped calls, though he also said that the prospect of hosting the World Cup in 2014 and the Olympics in 2014 also factored into their decision.
"We reached a point where we realised that considering there is still time before the big events in two years, it was the ideal moment to take a decision," he says.
Presently, the four biggest telecoms companies are all at least partly foreign owned - with TIM owned by Telecom Italia, Claro, owned by Mexico's Carlos Slim, Oi, part-owned by Portugal Telecom, and Telefonica's Viva from Spain.
Some analysts have thus claimed that the Brazilian government's move may be an attempt to regain control over one of the few industries that is still dominated by foreign companies in the country.
"What kind of atmosphere does this create for companies that are looking at Brazil from the outside?" asked Wally Swain, a telecoms analyst at Yankee Group.
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But few dispute the need for Brazil to improve its Internet and mobile phone services. Poor reception and interrupted calls are common even in business hubs such as Sao Paulo, while operators have invested far less in Brazil than in other Latin American countries.
Over the past year, telecoms companies have invested just 16.1 percent of their local service revenues in Brazil, compared to 28.9 per cent in Mexico and 25.1 per cent in Chile, according to the Yankee Group's Mobile Carrier Monitor.
President Rousseff herself is believed to have "highly approved" of Anatel's decision to impose bans on the telecoms companies, claimed Brazil's O Estado de S. Paulo newspaper last month.
Yet, analysts also question to what extent more investments will actually improve services and say that the complicated bureaucracy surrounding the Brazilian government itself may be to blame for delays in infrastructure development.
If we see more new measures which have not been negotiated with the operators it could be negative, even for the country as a whole," said Roger Oey at BES Securities in Sao Paulo. "Continuous rule changes will, if anything, just make the operators start to invest less."