Brazilian spending watchdog TCU suspends 4G auction citing ‘grave irregularities in its design’

8 Aug 2014

The upcoming auction of 4G mobile frequency spectrum in Brazil has been suspended by the body responsible for monitoring government spending, the Tribunal de Contas da Uniao (TCU), which has expressed concerns at what it sees are ‘grave irregularities in its design’. The telecoms regulator Anatel now has 15 days to respond to questions from the TCU and is barred from publishing the terms of the auction until it has satisfactorily addressed the agency’s questions.

Last month, Anatel approved the terms for the proposed auction of 700MHz spectrum for 4G mobile services, which were set to be published as soon as the TCU finalised the reserve price for the licences. In June this year Brazil finalised the schedule for shutting down analogue TV signals and freeing up the 4G 700MHz band across Brazil, which, following a pilot phase, begins in major cities in April 2016 and will see the 4G frequencies available in areas representing around 60% of the population by the end of 2017, and the entire country by November 2018. Usage of the 700MHz range for LTE enables coverage of large areas using fewer antennas, enabling high speed mobile broadband services to rural areas at a lower cost. The auction is widely seen as a ‘once in a lifetime’ opportunity to gain capacity for high speed data services.

An unnamed press officer for Anatel is quoted as saying that the watchdog intends to provide the clarifications requested by the TCU, but as an auction can only be held 30 days after bidding terms are published, the delay could push back the entire process. Anatel may then have to wait until after the October presidential election to hold it. Such an outcome would be a blow to President Dilma Rouseff who has been banking on the 4G licence tender to generate significant revenue to help Brazil reach its target of a primary surplus of 1.9% of GDP. One beneficiary however, is Brazilian carrier Oi SA, whose recent merger with Portugal Telecom has left it with a debt level that would make it difficult to bid on the 4G airwaves in the near future.

Meanwhile this week, Brazil’s Ministry of Communications approved projects worth USD197 million to bring 4G LTE mobile internet to 14 Brazilian states using the 450MHz band (see CommsUpdate article today).