Global Telephony / October 1996
RIO DE JANEIRO -- Londrina, long regarded as one of Brazil's most prosperous and livable cities, now has a new claim to fame. This summer, it became the nation's first city to offer mobile digital cellular phone service.
Meanwhile, Motorola is putting its own CDMA technology to the test in a similar digital trial with Ceterp in Riberão Prêto, just outside São Paulo.
The news comes as Telesp -- the Telebrás operating company for the state of São Paulo, with 34% of Brazil's installed access lines -- announced it would purchase one million digital cellular lines. According to Brazilian law, a Telebrás operating company can adopt a digital standard to augment cellular capacity as long as this digital technology is compatible with the existing AMPS technology utilized by other Telebrás operators. Aware that its analog cellular network will reach full capacity by December 1997, Telesp must begin the process now in order to allow time to build out the network. This timing will coincide with the market entry of private sector (Band B) cellular operators.
On Aug. 27, Telebrás President Fernando Xavier Ferreira confirmed that Telesp's choice of a digital technology will serve as the standard for all cellular operators in the Telebrás system. As a result, there is speculation that competition between cellular equipment suppliers could drive costs as low as $500 per terminal.
"Given the market pressures on Telesp's cellular network, Telesp is pushing forward with the adoption of a digital technology," observes the U.S. Embassy in Brasília. "If their time line goes forward as planned, Telesp will be the first major telephone operator in Brazil to adopt a digital cellular network."
Serviço de Comunicações Telefônicas de Londrina (Sercomtel) is one of only three municipally owned phone companies in Brazil; the others are Ceterp and CTBC in the state of Minas Gerais.
"We re-invest all our revenues in the company," said the company's services director, Antonio Moreno. "We're not dependent on the federal government. We only follow their regulations."
That independence makes for some interesting statistics. At present, Londrina has 120,000 fixed and 24,000 cellular lines, giving it an overall penetration of 35%. That's more than three times Brazil's current teledensity of nine lines per 100 inhabitants. And its cellular penetration rate of 6% is among the highest anywhere in Latin America.
Interestingly, Londrina was only the fourth city in Brazil (and the first non-capital city) to get cellular service -- after Brasília, Rio de Janeiro and Curitiba. Sercomtel, which employs 960 people, covers a service area of around 2,200 square kilometers. And unlike much larger cities like São Paulo, where a customer might wait several years for a phone, getting a line in Londrina isn't a bureaucratic nightmare. "We have no waiting list," says de Sousa. "If you want a phone, you can get one immediately."
Sercomtel's contract with Ericsson is valued at around $50 million for fixed-line infrastructure and $20 million for cellular infrastructure. The company also has contracts with NEC for transmission equipment, Newbridge for its data network and Unisys for voice mail. Recently, Londrina got the first Ericsson CMS-8800 system to begin commer-cial operation in Brazil. A few months ago, Sercomtel became the first to introduce TDMA IS-136 technology in Brazil.
Lars Birging, director of cellular sales and marketing at Ericsson's local office, says that while Sercomtel isn't Ericsson's biggest customer in Brazil (CRT of Rio Grande do Sul, and Telesc, in the state of Santa Catarina, share that distinction, with contracts valued at over $100 million each), Sercomtel's new $2.5 million digital system is "extremely important" because it incorporates the IS-136 standard, which can use both digital TDMA and analog networks.
"The idea behind IS-136 technology is that you can move from analog to digital very smoothly," he explained. "It offers security and you, as a subscriber, can encrypt communications. As an operator, you need less infrastructure, theoretically one-third of what you needed before."
Adds Meredith Persily, an associate with Pyramid Research in São Paulo: "While Telebrás is evaluating the digital standard choice for Brazil, independent operators are going ahead with plans to digitalize their networks. At this point, both CDMA and TDMA trials have reported successful results. How these trials go will ultimately affect the Telebrás choice to some degree."
Persily pointed out that Ericsson is already the leader in cellular technology, with a 30% market share in Brazil. "Ericsson is the only cellular supplier in Brazil to not have a CDMA technology option," she said. "So if Telebrás selects the TDMA standard, Ericsson will be extremely well-positioned for maintaining its large market presence. Obviously, the Sercomtel trials are essential in proving TDMA's capabilities."
At present, Sercomtel's cellular subscribers pay $270 for the initial set-up, and thereafter a monthly fee of $29, plus 30 cents a minute for the calls themselves. In order to go digital, customers will need to purchase Ericsson's new DF-363 cellular hand-held unit, which retails in Brazil for around $800 -- about $200 more than a normal cellular phone.
"We started with 2,000 digital subscribers, and plan to increase this to 5,000 by migrating high-volume analog users to digital" at no extra cost, said Moreno, adding that the company is beginning to develop other technologies such as videoconferencing and Internet access; it already has 1,000 Internet subscribers.