Phones for São Paulo: Mission Possible

Phones for São Paulo: Mission Possible

December 3, 2001—A cell phone whistles the piercing tune to "Mission Impossible" in the bustling offices of BCP Telecomunicações, a Brazilian telecom company tucked in the emerging high-tech corridor Novo Brooklin, São Paulo. Staff member Adriano Pascoaloto, from BCP's Treasury Department, flicks on the phone and explains with a smile that in just three years, BCP has grown into one of the country's largest providers of cellular telephone service, with a client base of some two million customers, half of whom are low-income. "It was mission possible," he says.

Helping to make it possible was the Multilateral Investment Guarantee Agency (MIGA), which issued a $230 million guarantee for a five year loan of $650 million to BCP, S.A. US government insurance agency OPIC and the American Insurance Group (AIG) insured all but a small portion of the remaining amount. It was MIGA's largest contract to date.

Adriano Pascoaloto demonstrates cell phone's capabilities outside one of BCP's stores	BCP has 500 towers in São Paulo, serviced by technicians who ouldn't be there if it weren't for the company, says BCP's head of strategic planning

When BCP hit Brazil's telecom scene in 1997, fixed lines were prohibitively expensive and there were long waiting lists for connections. The government had recently decided to privatize the telecommunications sector, and BCP had won the B band license to operate cellular services in São Paulo and the country's Northeast.

"When we launched the company, the market was facing an enormous pent-up demand for telecommunications services, which were exorbitantly expensive," says João de Moura Filho, director of strategic planning. Filho ought to know, because when he moved to São Paulo five or so years ago, he had to pay $4,000 for a fixed phone line, $1,000 for the handset, and another $3,000 for a cell phone. "This was the market in São Paulo, and very few people could afford it. On top of that, the service itself wasn't very good."

BCP entered the market ofering a phone connection for $200 and a handset for $400-$500. The company now offers special promotions on handsets at rates as low as $45 and a basic subscription for about $20 a month. "From the very first day, the price drop was dramatic," says Filho.

The company has also made it easier to get phones with the introduction of 16 new stores, in addition to authorizing more than 700 retailers, including supermarkets to carry the phones. Before then, there had been just one store for the entire state. "When we opened the stores," says Adriano Pascoaloto, "there were huge lines."

To make its phone services affordable to a broader clientele, BCP decided to offer pre-paid services, which avoids a monthly fee and the need for a credit history. Customers can buy cards at gas stations, kiosks, newsstands, lottery stores, and on the Internet. "This has made a huge difference in terms of making phones accessible to the poorer people. For a lot of those on the pre-paid plan, this is their first phone," says Filho.

The strategy has paid off in terms of growth in business volumes. CFO Luis Schiriak estimates wireless penetration in São Paulo to be about 23 percent. BCP claims a 35 percent share of that market, with a customer base of 1.78 million clients in São Paulo and 970,000 in the Northeast of Brazil. About 60 percent of these customers are in the lower income groups. This is particularly important in the country's Northeast, where there is a high concentration of poverty.

"We knew it made sense to tap the low-income market and cater to different needs," says Filho. "Low-income customers were the end-of-the-line and there was a huge mass of people without service. We wanted to sell clients what they needed."

The developmental impact has been significant. "People who never even dreamed of owning a phone before now have two," Schiriak says. "Poorer people feel empowered. For the first time, they feel like they have some control over their utility companies, and a connection to the broader society." The service gives people a sense of identity, he says.

"Self-esteem is an issue if you live in a poor area or a slum," Filho adds. "You have no address, no zip code. You don't exist. But if you have a phone, people can call you. You are someone, and that makes a difference."

The pre-paid service has had a strong impact on people who are self-employed, such as street vendors and taxi drivers. "Having a cell phone has changed my life a lot," says Roberto Chagas Bezerra, who has worked as a cab driver in São Paulo for 10 years. "Passengers can call me now, which makes me more efficient." Bezerra says he used to make R$1,600 a month before he had his phone, and now makes about R$2,500 a month.

Another key issue is security. Crime is high in São Paulo, and being able to get help when you need it is important, said Valentino Browne, a local engineer as he browsed in BCP's retail store in the city's Sumaré suburb. Browne, a BCP client since it launched operations, says the phone is practical, keeps him in touch with his family, and is an important safety factor.

The project is having other important developmental benefits. BCP employs some 3,000 local staff, with women well represented at all levels, and has contributed over $500 million in taxes to the government in the past three years, in addition to the $2.4 billion it paid initially for licensing fees. The staff are considered among the best trained in the industry, and BCP sponsors a telecommunications-focused MBA training program for its staff in São Paulo and in the Northeast. Service representatives also receive over 60 hours of training a year.

There are significant indirect benefits as well, through links with service providers. "Companies have come to Brazil to supply the growing telecommunications sector," Filho says. "We have 500 towers in São Paulo, with people servicing them daily. There was no one there before. We're sure that service providers are here because of BCP." Just as important, the technical know-how is being disseminated widely. Lucent built BCP's call center, which was considered the most sophisticated in the world at the time. Others in Brazil have now been able to replicate this.

Looking to the future, BCP faces the challenge of staying ahead of the competition, and aims to do this by balancing the goals of market share with profitability. Its vision is: "To be the best telecommunications company in Brazil." Its mission is: "To revolutionize the way people and companies communicate by offering innovative telecom solutions, exceeding the expectations of our customers, employees, and shareholders." With a young, dynamic staff in tune with its core values, and a reputation for quality service and well trained staff, BCP is well positioned to handle any future "mission impossibles."