Reuters: Regulatory News: RPT-Brazil takes a tough line over consumer complaints

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RPT-Brazil takes a tough line over consumer complaints Jul 20th 2012, 14:15 Fri Jul 20, 2012 10:15am EDT * Telecom regulator suspends mobile carriers' sales * Watchdog halts sales of health plans until September * Government urges banks to pass on cheaper borrowing * Online retailer suffers under consumer group's scrutiny By Brad Haynes SAO PAULO, July 19 (Reuters) - The one thing growing faster than Brazil's middle class: their complaints about lousy service. Officials have heard and they made clear in recent weeks that if companies want to sell to Brazilian consumers, they will have to make necessary investments -- or they will face sales restrictions, public ridicule or worse. The latest agency knocking skulls is telecom watchdog Anatel, which will ban sales by the worst wireless carrier in each of Brazil's states starting Monday, after surging complaints about spotty coverage. The unprecedented measures caught even the most irate consumer advocates by surprise, but they reinforce investors' rising concerns about the government's eagerness to cajole more capital spending out of companies in a struggling economy. "It should be clear to investors by now -- lots of companies in Brazil are growing fast with great returns, but there are a lot of unhappy consumers being masked by those financial results," said Renan Ferraciolli, the head of regulation for consumer group Procon in Sao Paulo. That could mean slower and more expensive growth for businesses trying to tap Brazilian household consumption, the key driver of growth in Latin America's largest economy and an enduring bright spot amid sagging global demand. Brazil's largely autonomous federal agencies have dominated the recent crackdown on subpar service. A senior government source told Reuters on Thursday that the Anatel action was not the result of a concerted push from President Dilma Rousseff. Still, investors have taken notice, turning more cautious on sectors from telecom and healthcare to retail and even the country's famously profitable banks. CLIMBING THE WALLS Anatel's penalties shook stocks immediately, wiping out 11 percent of the market value of Brazil's No.2 wireless carrier TIM Participações in two days, with knock-on effects for parent company Telecom Italia. TIM got the brunt of the regulatory punishment, with sales suspended in 19 of 26 states, because it was reportedly the subject of the most complaints among the companies involved. Anatel said the operator led indices of dropped calls, overloaded networks and bad customer service. "Anatel is sending a clear message: either companies invest more or sell less," BTG Pactual analysts led by Carlos Sequeira told clients in a note that suggested caution when investing in the sector. "We anticipate revenues and capital expenditures to remain under pressure." TIM said it was "quite surprised by such an extreme measure," in a statement on the penalties, calling the sales suspension "disproportional" and "anti-competitive." The carrier also sent text messages to clients on Thursday, assuring it was investing in the quality of its services. TIM had garnered the most complaints of any company in Brazil on consumer rights website Reclame Aqui -- a list loaded with telecoms, e-commerce sites and other retailers. "I lost business because nobody could reach me," said TIM client Lafael Gonzaga, who works in beverage distribution in the northeastern city of Salvador. The interview on his mobile phone was interrupted, perhaps unsurprisingly, by spotty reception. Gonzaga complained on the website that he had resorted to climbing trees and scaling walls for a better cell connection. TIM and rival operators Grupo Oi and Claro, run by America Movil, have to present investment plans to improve service within 30 days before they can resume sales in designated states. Private health plans will have to wait longer after federal regulator ANS blocked 37 providers from selling coverage due to excessive wait times for exams and surgery. The suspensions, which took effect this week, will run until September at the earliest, when the agency makes its next quarterly review. Shares of health service providers Amil and Qualicorp lost 4 and 5 percent respectively in the week following the ANS announcement. PRESIDENT LEANS ON BANKS President Rousseff has also brought more pressure to bear on the country's banks, which have reputations for unparalleled profitability even as they topped lists of consumer complaints. As the central bank cut borrowing costs to record lows this year, Rousseff's administration strongly urged lenders to reduce the cost of consumer credit in tandem, driving markets rates lower with aggressive offers by public banks. Shares of Brazil's biggest banks fell about 20 percent since the government began pressing for lenders to cut rates, as measured by the MSCI Brazil Large Financials index. Brazil's No.1 online retailer B2W has also seen 50 percent of its market value vanish since Procon began trying in November to suspend its sales following thousands of complaints about delayed deliveries and a misleading website. B2W has invested more heavily in logistics and customer service to reverse its slipping market share and eroding public image. The retailer said its isolated troubles did not merit punitive measures and appealed the penalties. Maria Rachel Coelho, a Procon lawyer in Rio de Janeiro, said a slow-moving judiciary has traditionally interfered with the group's efforts to hold companies accountable, but reinvigorated government watchdogs like Anatel should get their attention. "It's surprising. We've never had such a drastic measure from a federal institution," Coelho said. "This should encourage other agencies to be more proactive." Link this Share this Digg this Email Reprints

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