Brazil telecoms: crossed lines - FT.com Ten thousand kilometres is quite a distance. Even so, it could be events in Europe that determine how Brazil's telecoms market pans out in 2014. In principle, the market has much to offer - favourable demographics, scope for economic growth, and potential for more data usage. Brazil's 3G penetration in 2012 was 35 per cent, less than half the US or UK levels. However, the promise is overshadowed by high taxes, regulatory pressure, investment needs, and poor pricing. Annual revenues at Brazil's big operators have grown at under 4 per cent in the past three years, says Deutsche Bank, below inflation of about 6 per cent. Earnings growth (before interest, tax and depreciation) has largely stalled. Hopes ride on consolidation, in the mobile market in particular. This is divided among four players - Vivo (Telefónica Brasil), TIM (Telecom Italia), Claro (América Móvil) and Oi (Portugal Telecom) - and has seen slightly higher revenue growth rates. Mobile penetration runs at 135 per cent, with many Brazilians taking advantage of cheap call plans and holding more than one SIM card. Users tend to stay on pre-paid plans, meaning operators have to push usage levels to increase revenues. And that comes partly at the expense of fixed-line business. Breaking up TIM Brasil, which would alleviate its parent's debt issues, could have investor appeal if the parts went to the other three players. Synergy estimates on such a deal run as high as €9bn-€10bn (on a net present value basis.) But the obstacles are large, ranging from the complex Telecom Italia situation to local regulators" attitude. Their terms might involve reallocation of spectrum in some regions, which could tempt in new entrants. Last year, Latin American telecom stocks underperformed European peers by a quarter. That may not change fast. Promise abounds but so do hurdles.