Simplicity, boldness and, above all, freedom. These are the concepts that drive growth at Oi, a company that in the last 10 years became the biggest telecommunications operator in Brazil. Since the Brazilian telecommunications industry was privatised in 1998, Oi, whose control is 100 percent in the hands of Brazilian shareholders, competes with giants such as Telefónica, Telmex, and other multinational operators. During this period, Oi was not only able to withstand – but indeed to beat – the competition, becoming one of the 20 biggest telecommunications companies in the world, with a market value of approximately $8 billion.
In January this year, Oi took the decisive step to strengthen its position: the company acquired Brasil Telecom, a regional operator covering Southern and Midwestern Brazil. As a result, the Federal District and nine states – in addition to 17 in which Oi already operated – were added and became fully integrated throughout the national territory. After this shift, Oi’s share of the Brazilian market reached 33 percent in terms of revenue. The company ended March with about 57.6 million customers, with 21.8 million in fixed segment, 31.9 million in mobile segment and 3.9 million broadband customers. With Brasil Telecom, Oi’s EBITDA rose from $0.9 billion in 1998 to $5.2 billion in 2008, making Oi the largest telecommunications company in Brazil by revenue.
Oi (“Hi”, in English)was created in 1998 when the privatisation of the sector sparked a telecommunications revolution in the country. In the 10 years that followed, Brazil, which has 190 million inhabitants and a $1.5trn GDP, experienced a boom in this area. The 20 million fixed lines in operation and the seven million mobile telephone users in 1998 increased to 41 million and 157 million in 2009, respectively. The highly-competitive broadband market emerged from nearly zero to 10 million users. After the boom of fixed and mobile segments, this is the service that leads the new wave of investment in the sector in Brazil. Apart from commercial motives, agreements signed between the operators and the Brazilian government will bring broadband infrastructure to all municipalities in Brazil by the end of 2010. This, added to the popularisation of personal computers, shows a huge growth potential for companies in Brazil, where the number of broadband users is high but the density rate is still low at 18 percent of homes. The growth of 3G users confirms that the country’s entry in the digital age will be promoted by a combination of technologies, and fixed and mobile access.
On the tube
Another promising front is the subscription TV market, which remains virtually unexplored by telecommunications companies due to regulatory restrictions. As a result, Brazil has one of the lowest rates for subscription TV in Latin America: about eight percent, compared to 63 percent in Argentina and 49 percent in Uruguay. In a recent move, Oi launched the DTH (Direct to Home) service intending to capture the growth potential of this service.
Aiming to become a global operator, Oi surprised the competition and frustrated experts, who after the privatisation bet on groups consisting of international operators, which they claimed would defeat a national company formed by shareholders from different sectors. However, the market has witnessed the retreat of many foreign operators and the strengthening of Oi. From 1998 to 2008, the company invested more than $18 billion to improve services, unify operations and establish a new corporate culture focused on customer satisfaction.
Over the years, Oi expanded its services and its coverage. The company was the first operator to bring GSM technology to Brazil, the first to bundle fixed and mobile phone access with internet and broadband, in an aggressive move to win new customers. Oi was also the first company to sell unlocked handsets and to have a radio and cable TV. From 1998 to 2008, more than 11 thousand locations started to count on fixed telephone lines for the first time. In the same period, the company’s net revenue jumped from $2.6 billion to around $9.2 billion. In May 2007 the company’s rating was upgraded to investment grade, which helped it obtain funding even in times of scarce credit.
In October 2008, Oi took another important step. After winning a hotly-disputed bidding, Oi began operating mobile services in the state of Sao Paulo, which has 41 million inhabitants and the highest GDP among Brazilian states. The introduction of Oi to that market established a new dynamic in the region, whose low density was incompatible with the high purchasing power of its inhabitants. With an aggressive offer allowing three months of free calls, and relying on a time-tested business model, Oi reached unprecedented results for a start-up. At the end of May, the company had 3.5 million customers in São Paulo.
Sustainability
The entire Oi business strategy has been accompanied by a strong sustainability policy, which in 2008 was recognised by the market with its entry into the Corporate Sustainability Index (ISE) of the São Paulo Stock Market (Bovespa).
To contribute with social transformation and human development in Brazil, Oi created “Oi Futuro”, an institute for social responsibility with an emphasis on education and culture. “Oi Futuro” is present in several cities in the country, making the access to knowledge more democratic, fostering artistic creation, valuing the Brazilian cultural diversity and investing in cutting-edge technology to accelerate and promote development. Since its inception in 2001, Oi Futuro has served more than 3.5 million young people, besides investing in several cultural initiatives in different places in Brazil.
Additional initiatives were the sales of unlocked handsets and GSM sim cards, an innovative strategy that once again surprised the market using a simple concept: the consumer’s freedom to move to any operator. Meanwhile, the competitors continue to “handcuff” the customer to annual packages. This strategy was complemented with the end of the penalty for cancelling or changing packages. Also, Oi offers a wide variety of plans, allowing consumers to choose what is most appropriate for them – an important item in continent-sized Brazil.
The financial crisis that fell upon global markets did not affect the expansion plans of the company. For 2009 we anticipate operational investments between $2.6 billion and $3.1 billion.
Oi foresees the expansion of the market, especially in the mobile and broadband internet access segments. The company will expand its strategy of acting as a provider of convergent services. With a backbone spanning 138 thousand kilometers of fiber optic cables and 30.4 thousand kilometers of metropolitan rings, combined with 22,000km of undersea cables connecting Brazil to Venezuela, Bermuda and the US, Oi wants the top spot in the Corporate Data Segment. International expansion is also part of the plan. Oi plans to take its services to Europe, Latin America and Africa. To this end, Oi will draw on its ability to exceed expectations and write its own history.
For further information tel: +55 21 3131 1212;
email: alex.zornig@oi.net.br
web: www.oi.com.br
