Embratel had enjoyed a monopoly on long-distance calls in Brazil, but regulatory changes brought in competition that threatened to undermine its market. By aggressively responding with an NGN solution from Huawei, Embratel turned around a bleak picture and returned to market dominance.
Background
Embratel, the subsidiary of Telmex Group in Brazil, has 44.4% of the toll market revenue share, and is the largest toll operator in Brazil as well as the largest enterprise-access operator. Prior to 2002, Embratel was the only authorized toll service provider in Brazil.
In 2002, the Brazilian government fully lifted restrictions on toll voice services and local voice services. This allowed existing local and mobile carriers to deploy toll voice services, which meant that Embratel must suddenly face a fiercely competitive toll market. In the following months, Embratel lost significant amount of toll voice traffic, culminating in a worrying decrease in revenue over 2003 and 2004.
Due to a lack of resources and related local services operational experience, Embratel was not advantageously positioned to acquire voice subscribers. It became clear that if the company failed to find a way to reduce its high CAPEX and OPEX, and increase its revenue, the company might gradually lose its profit and its market in Brazil.
Joining hands with Huawei
Eager to break out of this situation and execute a comeback in the toll market, Embratel began consulting industry-leading equipment vendors to find a suitable and effective solution that could adapt to Embratel's existing network conditions and assist Embratel to return to market leadership.
Huawei was among Embratel's list of consultants. After gaining an in-depth understanding and investigation of Embratel's history and current situation, Huawei offered a solution. Huawei suggested that Embratel build a softswitch-based VoIP (Voice over IP) network instead of using the existing PSTN network, allowing their existing IP network to be reused. Huawei also suggested that Embratel not only use the VoIP network for toll services, but also use it to develop PBX (Private Branch Exchange) access for VIP customers and enter the local voice market by providing services for enterprise users. After cautiously assessing the proposal, Embratel executives agreed with Huawei's adaptive and progressive NGN solution. With the solution ready for implementation, Embratel was determined to compete with other toll carriers.
In 2004, Embratel launched its NGN (Next Generation Network) project aiming to construct a VoIP network instead of a high-cost PSTN network.
Within the NGN network construction, Huawei also provided Embratel with network optimization suggestions featuring the separation of C4 and C5 office solutions. Consequently, C4 office softswitches were connected with the toll network only, whereas C5 office softswitches employed AG and PBX to access VoIP users. This stimulated optimum performance as the dedicated softswitches could achieve their highest processing capabilities, while also obviating the need for further investment. In response to the success of the various projects, Embratel requested that Huawei quickly customize a range of value-added services that were adapted to local application features.
Embratel's efforts and its partnership with Huawei paid off. Having taken the above measures, the carrier witnessed a marked and rapid improvement in its core competitive capability and profitability.
Regaining leadership
Underpinned by the technological and cost advantages of Huawei's NGN solution, Embratel dramatically reduced its high CAPEX and OPEX; meanwhile it can easily satisfy customer requirements and enjoyed a fast revenue growth of both the toll market and enterprise market.
Since 2005, Embratel has benefited through a continuous and swift increase in both subscriber numbers and service handling capacity. In the first quarter of 2007, the increase in network traffic was a staggering 6 times higher than the traffic in 2005's second quarter.
Moreover, in the first quarter of 2007, income from voice services increased by 18.6% compared with the previous quarter, and Embratel's annual growth rate reached 36.6%. In April 2008, Embratel began phase 13 of its NGN expansion scheme. Based on a four-year partnership with Embratel, the stable operation of online equipment and a rapid response to customer requirements, Huawei was awarded a contract for constructing 210 thousand expanded trunks.
Since its NGN scheme underwent commercial application in late 2004, Embratel has completed construction of Brazil's largest NGN, which covers the whole country. This has laid a solid foundation for Embratel to become an industry leader in Brazil.
