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Vesper vs. Telefónica: Gigantes luchan en São Paulo
TelePress Latinoamérica / September 2000

By Larry Luxner

SÃO PAULO -- The numbers 15, 21, 23 and 89 have taken on new meaning in São Paulo, as Spain’s Telefónica and three formidable rivals battle for long-distance customers in Brazil’s richest and most populous state.

Huge billboards plastered with Telefónica’s "15" access code for intra-state long-distance calls clutter the major avenues of São Paulo, and can even be found on the sides of skyscrapers. Yet only one company, Vésper, is currently competing with Telefónica for a potentially much bigger pie: basic local phone service in São Paulo state.

"Telefónica is the incumbent, and we’re the mirror company, though we’re trying to act more as a CLEC with a niche market," says Rodolfo Cardemuto, vice-president of marketing at Vésper. "About 25% of our market are A and B customers, another 25% are D and E, and the remaining 50% are C customers."

Vésper (Latin for the planet Venus) is a consortium formed by Bell Canada International (34.4%), VeloCom (49.4%) and Qualcomm (16.2%). So far, the company has invested $1 billion, and plans to spend another $2 billion over the next five years. According to Cardemuto, Vésper has 250,000 fixed-line subscribers in 34 cities throughout São Paulo state. These include poor neighborhoods of metropolitan São Paulo like Itaquera, Penha and Barueri, and very wealthy ones like Morumbi.

Yet that pales in comparison to the 3 million lines installed by Telefónica since the August 1998 privatization of Telebrás, bringing the total number of lines operated by the Spanish telco in São Paulo state to over 10 million.

"São Paulo state has Brazil’s highest per-capita GDP and the biggest share of industries and company headquarters, so the potential market growth in São Paulo is much higher than anywhere else in Brazil," says José Manuel Massó, director of corporate communications at Telefónica.

Yet Telefónica has been beset with customer-service problems since its takeover of Telesp; calls were mixed up, phone numbers changed without notice and users were charged for calls they never made. All of this has helped steer customers toward Vésper.

Since then, Massó says his company has cleaned up its act, investing R$2.7 billion in São Paulo state alone. About 70% of that is going to fixed-line service, 25% to cellular service and the remaining 5% to Internet access, submarine cables and other miscellaneous operations.

"We have an aggressive marketing plan for different types of clients, for instance small and medium-sized businesses and residential customers," said Massó. "We also have special discounts for people who call certain numbers most frequently." Massó refused to say how much Telefónica spends on advertising, though the number is believed to be in the tens of millions of dollars.

"Why are we being so aggressive?" he said. "Because we want to surpass our goals and benefit our stockholders and clients, and to be able to operate fixed-line service in other states.

At the moment, Telefónica, Vésper, Embratel and Intelig can all route calls between cities within São Paulo state, but only Embratel and Intelig can provide service between São Paulo and other states.

"Most of our revenues, at least 90%, will come from our local service," said Cardemuto, who worked for Hewlett-Packard for 10 years and then Nextel before joining Vésper last August. "Of course, we’ll push for our own subscribers to use ’89,’ but we’re not going to get involved in the fight over the long-distance market."

Vésper -- which is employing wireless local loop (WLL) technology throughout its network -- charges R$23.75 for monthly basic phone service; this fee includes three hours of local calls as well as call-waiting and voice-mail.

"Telefónica charges about the same, but they don’t offer the value-added services," claims Cardemuto. "Our service is 100% digital. We don’t have the legacy of problems associated with the outside plant, so we’re starting from scratch. Maybe because of that, we can offer a higher quality of service than Telefónica."

Like his counterpart at Telefónica, Cardemuto declined to say how much the company is spending on advertising, or what its projected revenues are for 2000. But he did say he expects Vésper to turn a profit within three years.

"We have a fairly good regulatory environment in Brazil that encourages foreign companies to invest here," he said. "After 2002, it’ll be even more competitive, and that’s good for the customers because tariffs will come down."

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