Government minister sees signs of telecoms recovery

There are concrete signs that a resumption of investment is under way in Brazil, Communications Minister Miro Teixeira said Tuesday, September 9, at a seminar in São Paulo on Telecommunications: Competition & Policies. ?We?re overcoming the macroeconomic obstacles thanks to the Government?s prudential policy,? he added, citing as examples of a telecoms recovery Embratel?s recent announcement that it has agreed to buy Vesper, GVT?s interest in investing 1 billion US Dollars in Brazil, and negotiations on acquisition of Intelig by a U.S. group who could take a ?70%-80% stake? in the competitive long-distance carrier, according to Mr Teixeira.
Tariffs
A favorable investment climate will lead to increased competition in telecoms and the end of tariff indexation, Miro Teixeira said. The incumbents are currently entitled to link annual fixed-line tariff increases to an inflation index under the licenses granted at privatization.

Mr Teixeira said indexation is poison for any economy because it acts as an inflationary feedback loop. The Government has already issued a decree with its telecoms policy for 2006 on, when the telcos will be operating under new licenses. Index-linked tariff hikes are out, he said. The new model is similar to the approach used in other countries, where telcos can raise prices only in line with their own operating costs.
Finally, Mr Teixeira clarified the position adopted by the Government on this year?s tariff review. It opposed contractually justified pass-through of annual inflation but negotiated rather than trying to block it by intervention, he said. ?We issued a written statement explaining President Lula?s position against the increase but at no time did we advocate breach of contract.?