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COVID-19: What is the impact on government and consumer accounts?

COVID-19: What is the impact on government and consumer accounts?

By Dane Avanzi

The telecommunications sector in Brazil has undergone intense transformations in the last two decades, but I dare say that none will be as impactful and profound as the one to come. I explain. In any country in the world, telecommunications are financed by the International Financial System. Telecommunications operators finance their network expansion and technology update projects with funds raised from financial institutions. Well then.

The international financial system will undergo a profound transformation in the coming months due to the profound economic and financial impacts resulting from the COVID-19 pandemic, which affects 187 countries, according to data from WHO (World Health Organization), and has already caused approximately 13 thousand deaths worldwide.

In this context, the world economy, which had been recovering from the last major crisis of 2008 (according to experts, the second worst in history, with 1929 being the worst of all), will face an unprecedented challenge that will depend on a major agreement among the main central banks in the world to try to stabilize the various assets that make up the global economy, especially stock exchanges and currencies that govern public and private international trade relations – essentially, dollar and euro.

As a result, the entire value chain of the e-commerce, streaming and telecommunications sector that includes OTT’s (Over The Top) applications will possibly also be revised, since large companies in the sector are publicly traded on electronic exchanges such as Nasdaq, which in recent weeks has accumulated the biggest losses since 2008. With the closure of borders around the world, even if temporarily, globalization will also be scaled up.

In Brazil, despite the efforts of the authorities of the Anatel and MCTIC sector, the financial crisis, which previously knocked on the door of some of the major operators, is unlikely to be aggravated, due to the increase in the default of millions of consumers who will have their income reduced or severely impaired. Add to all this the increase in the internal debt, the reduction in the collection of the Union, States and municipalities.

In view of this scenario, if operators are able to keep service quality to a minimum, which demands constant maintenance of equipment and towers, it will be a victory for the sector. As for small operators, the challenge will be as intense as for large ones. With less fat to burn, having to circumvent default, less financing capacity and inputs also quoted in dollars, many challenges will arise.

5G auction? There will hardly be a climate for it to take place in 2020, being a very optimistic bet at the end of 2021, if the global recession does not deepen much and the major players find creative solutions to harmonize the deep imbalances.

In this way, authorities and operators will have to find innovative solutions so as not to pass the costs on to the consumer’s account. In Portugal, for example, three operators have already joined together to present a plan to the Government to minimize the impact of the new coronavirus on the sector, maintaining the quality of services and ensuring the necessary network capacity for critical State functions.

More than ever, state and municipal governments need to invest in proprietary telecommunications networks focused on critical mission, to support the demand of those who really make a difference in critical moments: Police (Military and Civil), Fire Department, SAMU’s, Defense Civil, among others. Only with much dialogue and goodwill from everyone, will we overcome the COVID-19 crisis with minimal damage to the Government, companies and society.

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