On November 23rd, ANATEL (www.anatel.gov.br), the Brazilian telecoms regulator published the rules for MVNO (Mobile Virtual Network Operator), Resolution n. 550[1]. Reselling of telecoms services – mobile virtual operation is a kind of reselling – has for long been on Anatel’s plans, but only May this year the public consultation was launched. Six months later the rules are in force. In this short article, we will review the regulatory basics of the model established by ANATEL.
The Agency has created two categories of MVNO. The “Credenciado” is similar to a light MVNO/Brand Reseller. It does not need licensing from ANATEL and is characterized by the exclusive relation with one of the current mobile operators, the MNOs (called SMP operator in Brazil). The Credenciado acts as a representative of the MNO, being allowed to add services to the basic mobile service. The Credenciado is not a provider of telecom services as defined by law, but rather a provider of “inherent, accessory or complementary” services. The users who contract telecom services through a Credenciado will be clearly informed on the MNO behind them. The “Autorizado”, on the other hand, is a full MVNO, i.e., a mobile operator without the frequency. In every other aspects the Autorizado has all rights and duties of a regular SMP operator.
The basic rules for the Credenciado are:
- Exclusive relation with one single MNO per region;
- No licensing needed before ANATEL, though the contract executed between the Credenciado and the MNO must be approved by the Agency to enter in force;
- Numbering and Interconnection must remain under the control of the MNO;
- Anatel’s approval of Service Plans[2] offered by a Credenciado must be obtained by the MNO;
- Billing remains a responsibility of the MNO, although, as other activities, can be contracted out to third parties;
The definitive regulation brought two novelties in view of the regulation publicly proposed. The Credenciado will own the customers base acquired during the relation with the MNO. When such relationship ends, the Credenciado can transfer its customers to other MNO of choice. The other major modification is the possibility of an MNO to establish – through a related third company – an MVNO. Such a possibility makes more attractive the business for investors, as MVNOs could eventually be acquired by an MNO group. Nonetheless, it certainly raises antitrust concerns, due to the incentive to the MNO to discriminate non-related MVNOs.
Another relevant aspect is the recognition, by ANATEL, that since the Credenciado is not a telecom service provider according to the law, the Agency could not impose sanctions on it, thus the only penalty in case of non compliance with the regulation is the cancellation, by the MNO, of the agreement with the Credenciado.
As to the Autorizado, since it is essentially an SMP operator, it will have all the current rights and obligations before customers and the regulatory agency. Therefore, the process of obtaining a license to become an Autorizado MVNO is almost as complex as the obtaining of an SMP license. All requirements of the Brazilian public procurement legislation will apply and the documentation to be presented is extensive, including proofs of technical and legal qualification, financial capacity and fiscal good standing.
In both models, the complex part will certainly be the negotiation with the MNOs. Brazil has currently four major mobile operators, each one with a market share between 20% and 30%. As a general proposition, ANATEL’s regulation obliges the MNO to negotiate, but not to contract. As a matter of fact, the incumbent SMP operators were initially very resistant to the MVNO business, but recent movements indicate that some of them are seeing MVNO as a business opportunity. ANATEL has chosen to leave to the market most of the decisions on this new business, but it is hard to foreseen how MNOs will behave regarding the many requests from MVNOs of different kinds and sizes. From large retailers and banks to small service providers and ISPs, the MNOs are expected to treat every interested on equally terms.
A final and relevant issue is the taxation on MVNO operators. In the case of an “Autorizado” is clear that, as they are telecom services providers, they will be subjected to the burdensome ICMS, the state value added tax, which is of 25% in most states. However, in the case of a Credenciado, ANATEL’s rulings, in a clear attempt to avoid such a heavy taxation, did not define the activity as telecom service. However, tax authorities are not abide by Anatel’s rulings, thus it would not be a surprise if certain states try to impose ICMS on Credenciado as well.
Indeed, there are many questions to be addressed by the companies interested in this new market. Realistically, it will take from six months to one year for the players to find the adequate terms of operation.
[1]http://www.anatel.gov.br/Portal/verificaDocumentos/documento.asp?numeroPublicacao=252226&assuntoPublicacao=null&caminhoRel=Cidadao-Biblioteca-Acervo%20Documental&filtro=1&documentoPath=252226.pdf
[2] Any telecom service offered by a mobile operator must be based in a “Service Plan” previously approved by ANATEL;
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