BRAZILIAN TELEPHONE COMPETITION ON THE RISE.

The battlefield is set for competing suppliers of local telephone service when the system is deregulated in 2002. Even though Telebras has overcome the worst of its local service deficiencies, the market is ripe for new private companies that offer competitive prices and improved customer service.

Renato Navarro Guerreiro, president of the National Telecommunications Agency (Anatel) explained in a Reuters interview that since mid-1998, when Brazil privatized Telebras, the number of fixed lines has more than doubled to reach 47 million. During that period, the black market for phone lines, which thrived on Telebras' ineffectiveness, was virtually eliminated.

As of January 2002, a number of new operators had already met Anatel's numerous requirements, including offering nationwide coverage capabilities. Those companies will be allowed to expand beyond their current concessions to enter new markets throughout Brazil.

Competition among international telecommunication companies for Brazilian market share portends increased demand for telecommunications products and services during 2002 and 2003. It should also result in a double-digit increase in publicity expenditures by the telecommunications sector. The most heated competition will be found in Sao Paulo and Rio de Janeiro.

As competition drives basic service prices down over the next few years, Brazilians will have more money available to invest in wireless communications. The demand for cellular phone service and Internet communications capabilities in Brazil should increase steadily through 2005.