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Tech Roundup: Redemption closer for Oi Telecom

. Dec 04, 2020
oi telecom public telephone Oi Telecom is one of Brazil's biggest providers of public telephones

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: the impact of Itaú’s digital transformation on Brazil’s corporate sector, the newest developments with Oi’s recovery plan, and the cyber threats surrounding Latin America. 


Path to redemption becomes clearer for Oi Telecom

Telecom operator Oi has excited investors by taking major steps to recover from its four-year-long court-supervised recovery process. At the time it was filed, Oi’s BRL 64-billion case (USD 12.38 billion) was the largest in Brazil’s history.

</p> <p><strong>Climbing out of a hole.</strong> Last week, Oi <a href="https://www.convergenciadigital.com.br/cgi/cgilua.exe/sys/start.htm?UserActiveTemplate=site&amp;infoid=55605&amp;sid=8">announced a deal</a> with telecom regulator Anatel — its main creditor — to settle 1,700 lawsuits and cut Oi’s debt in half, to BRL 7.2 billion. This was the biggest deal ever struck by the Federal Prosecution Service. Moreover, as we reported in our <a href="https://brazilian.report/tech/2020/11/27/tech-roundup-brazil-5g-auction-gets-for-increasingly-political/">November 27 Tech Roundup</a>, the company auctioned datacenters and mobile telephony towers for BRL 1.4 billion.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4562483"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>What’s next?</strong> On December 14, Oi&#8217;s most sought-after asset will go to auction: its mobile telephony operations. So far, a BRL 16.5-billion bid by a consortium of competitors TIM, Vivo, and Claro leads the race. Federal courts also authorized the company to <a href="https://www.telesintese.com.br/juiz-autoriza-da-venda-de-7-imoveis-da-oi/">sell off seven of its properties</a>, valued at a combined BRL 24 million. Overall, Oi needs to raise at least <a href="https://www.seudinheiro.com/2020/empresas/oi-acoes-3tri-analise/">BRL 26.9 billion</a> with these auctions.</p> <p><strong>The great reorganization.</strong> The &#8220;New Oi,&#8221; as <a href="https://einvestidor.estadao.com.br/mercado/entrevista-oi-rodrigo-abreu">observers are calling the company</a>, will have an infrastructure unit named InfraCo centered on fiber-optic broadband, while the parent company will focus on the services required to support this infrastructure. Oi intends to sell control of InfraCo for <a href="https://valor.globo.com/empresas/noticia/2020/09/09/com-plano-aprovado-oi-pede-ofertas-pela-infraco-ate-16-de-novembro.ghtml">BRL 20 billion</a>, which is set to happen in the first half of 2021; the company has already received at least a dozen offers.</p> <ul><li>If successful, InfraCo itself will become a fiber-optic giant in Brazil; the goal is to <a href="https://exame.com/exame-in/oi-os-outros-r-20-bi-que-vao-definir-fracasso-ou-sucesso-da-tele/">reach 32 million homes</a> with FTTH technology by 2025. And Oi is on course to meet this target: of Brazil&#8217;s four major telecom players, it is the one with the fastest market share growth in this technology.</li></ul> <p><strong>A long-term call. </strong>Régis Chinchila, a stocks analyst at Terra Investimentos, has maintained a &#8220;buy&#8221; recommendation for Oi stocks. He believes the recovery should last until 2022, as the company looks for higher efficiency and focuses on more profitable business.</p> <hr class="wp-block-separator"/> <h2>Itáu’s digital leap a model for Brazilian business</h2> <p>Itaú Unibanco, South America&#8217;s largest private bank, announced a 10-year deal this week to migrate its IT infrastructure from mainframes and data centers to AWS, Amazon Inc&#8217;s cloud services. The deal encompasses almost all areas of technology the bank needs to operate, including call centers, online banking apps, as well as insurance.</p> <ul><li>In a statement, Amazon said the use of its cloud services — including technologies such as analytics, machine learning, and serverless computing — will provide Itaú with insights “that allow it to develop new business and apps with safety and compliance.”</li><li>There is no set deadline for complete migration, given the magnitude of the changes required. But Itaú has already trained 1,300 staff in cloud capabilities to work in its new IT environment.</li></ul> <p><strong>Trendsetter. </strong>Digital transformation specialist Fernando Moulin told <strong>The Brazilian Report </strong>that Itaú’s transformation is “the final step to make cloud computing irreversible in Brazil”. He highlights that, considering banks require extra security, Itaú’s trust in AWS should set an example and foster even more investment in cloud computing. He also believes AWS technology can prepare the bank for state-of-the art technology such as quantum computing and open banking.</p> <ul><li>Regarding the cloud computing business, he believes it will be “a market for the big players,” such as Amazon and Microsoft. However, he sees Locaweb as being well positioned to offer solutions for small companies.</li></ul> <p><strong>Execution is key. </strong>BTG Pactual analysts recently said Itaú is heading in the right direction, but “we just need to know if they will also excel in the execution and when we will be able to see results in a clearer manner.”</p> <ul><li>According to Mr. Moulin, the first results could appear in the second half of 2021 — as Itaú should first focus on a successful migration to avoid disruption and damage to its reputation. Among potential solutions to be developed, he mentions the need to create a seamless experience for costumers — for instance, sending solutions via apps for complaints sent via social media.</li></ul> <p><strong>Stark contrast.</strong> While big companies such as Itaú are heavily invested in becoming more digital and competitive, Brazil’s small businesses — which amount for 90 percent of companies — are still in the dark ages. A <a href="https://valor.globo.com/publicacoes/suplementos/noticia/2020/11/25/pequenas-empresas-ainda-estao-longe-da-transformacao-digital.ghtml?GLBID=17f566ccfc4f06b1798fe24f7cb26943a43784730724d6d3763786a6d566e6547586e4e486d6e6c4e5a6d366e53574f4254554330494c5352624b76693736744f4761353359536c634d4d3870306d50754f72766362466a427257503339396941647a546132513d3d3a303a7532797770636937643076396277617468387461">survey</a> by entrepreneurial service Sebrae showed that a staggering 40 percent of Brazilian small businesses still do their financial management on physical books, while only 27 percent know how to use tools such as Microsoft Excel.</p> <ul><li>Mr. Moulin says it is natural for small businesses to have a delay in their technological advances, as they have less resources to invest. But as technology becomes cheaper and easier to use, this gap is likely to diminish.</li></ul> <hr class="wp-block-separator"/> <h2>Cyberthreats loom over Latin America</h2> <p>A new <a href="https://www.kaspersky.com.br/blog/previsoes-ciberseguranca-america-latina-2021/16670/?utm_source=newsletter&amp;utm_medium=Email&amp;utm_campaign=kd%20weekly%20digest">report</a> by cybersecurity firm Kaspersky draws a grim prospect for Latin America when it comes to computing safety. Following a record year for ransomware, misinformation campaigns, and similar threats, Kaspersky’s team believes criminals will continue to exploit the vulnerabilities caused by remote work and focusing on social engineering crimes, such as WhatsApp cloning. See the main takeaways below:</p> <p><strong>Ransomware goes local, trojans go global.</strong> Kaspersky believes that domestic criminals will develop ransomware in house, instead of continuing to import techniques from Eastern Europe. On the other hand, the experts believe more Brazilian trojans will be able to operate on a worldwide scale, “even sharing the same infrastructure to gain agility.”</p> <p><strong>Banking systems are the target. </strong>As banks prioritize smartphone apps, hackers are likely to migrate from desktop attacks to Remote Access Trojans (RAT). Points of sale may also be targeted by mass attacks, using the Malware as a Service business model.</p> <ul><li>And even WhatsApp Messenger is threatened. With the company intending to launch WhatsApp Pay in Brazil, cybercriminals will have even more incentive to takeover individual accounts. Currently, this scheme uses social engineering, with criminals convincing victims to share their one-time passcodes and “steal&#8221; the accounts.</li></ul> <p><strong>Insurance. </strong>Remote work and e-learning are likely to continue to be part of the &#8220;new normal&#8221; and Kaspersky says hackers will continue to attacking universities and work platforms in attempt to steal credentials. However, companies are becoming more proactive in protecting themselves, which may lead to the adoption of cybersecurity insurance — a form of coverage already being offered by players such as Zurich and Allianz.</p> <p><strong>Political instability.</strong> In 2020, public institutions and governments were mercilessly hacked in Latin America — with a special mention to a ransomware attack which <a href="https://brazilian.report/tech/2020/11/12/justice-system-hack-exposes-brazil-worrying-cybersecurity-flaws/">halted Brazil’s second-highest court</a> for several days and a <a href="https://brazilian.report/podcast/2020/11/18/explaining-brazil-podcast-who-tried-to-hack-the-brazilian-election/">breach of the country&#8217;s electoral systems</a> on its November 15 Election Day.</p> <hr class="wp-block-separator"/> <h2>Take note</h2> <ul><li><strong>IPO. </strong>Brazilian electric equipment maker Intelbras <a href="https://www.sunoresearch.com.br/noticias/intelbras-registro-para-ipo/">filed</a> for an initial public offering at the São Paulo stock exchange. The company produces electronic equipment for security purposes — and is Brazil’ largest security camera maker — but also makes equipment for the energy and communications sector. Intelbras aims to use the resources raised to expand its productive capacity, increase investment in its hardware-as-a-service business, as well as beef up its teams and IT investment.&nbsp;&nbsp;</li><li><strong>Unicorn. </strong>Digital bank C6 became Brazil’s newest unicorn this week, after raising BRL 1.3 billion in a new funding round with private investors. Now, the bank has a BRL 11.3 billion valuation (USD 2.18 billion), after launching last year and amassing over 4 million customers. In an <a href="https://exame.com/invest/c6-bank-recebe-aporte-bilionario-e-passa-a-ser-avaliado-em-r-113-bi/">interview</a> with magazine Exame, CEO Marcelo Kalim said the company will use the money to increase its customer base and improve its investment platform, as well as opening up new business areas. Per BTG Pactual, C6’s growth is good news for TIM, as the telecom operator has a partnership with C6 and will receive equity in the bank based on the number of clients it manages to take onboard.</li><li><strong>Digital wallet. </strong>Ride-hailing app 99 made a new foray into finance with its digital wallet 99 Pay. The service will be initially available in nine cities on a trial basis. With 99 Pay, customers will be able to transfer money to other people with no charges and receive a return of 220 percent of the benchmark interbank interest rate for their funds — three times more than the returns of savings accounts.</li><li><strong>5G. </strong>Telecom giant Nokia and Claro have <a href="https://www.larepublica.co/empresas/nokia-y-claro-trabajan-en-pruebas-piloto-de-5g-en-cuatro-ciudades-de-colombia-3090491">teamed</a> up to pioneer 5G tests in Colombia. The technology will be implemented in the capital Bogota and three other cities for six months. The trials include mobile and wireless fixed telephony networks, as well as 5G corporate cases used in the 3.5 GHz spectrum.</li><li><strong>Transparency. </strong>A study by Kaspersky showed that informing customers of a data breach could reduce expenses by 40 percent. In Latin America, the average cost of a breach for small and medium businesses who warn customers about the leaks is USD 93,000, while those who had the situation exposed by the media spent an average of USD 163,000. A similar ratio is seen in corporations, which spend on average USD 1.36 million when they do not inform customers, versus USD 800,000 for when they do. The survey also found that more companies are voluntarily exposing issues, whether to mitigate the reputational damage or to comply with regulations such as Brazil’s General Data Protection Law.</li><li><strong>Retail.</strong> A survey by eCommerce intelligence company Compre&amp;Confie shows that Black Friday and CyberMonday raised BRL 7.72 billion for the Brazilian e-commerce sector — a 27.7 percent increase on 2019 levels. Customers also spent more, with an average ticket price of BRL 592.85, or 4.7 percent more than last year.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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