Brazil considers mobile phone ban

Brazil's mobile phone firms are fearful of proposals to ban prepaid cell phones because of a rising wave of organised crime.

President Fernando Henrique Cardoso has condemned the phones an "instrument of crime", following growing outrage over the murder of a popular mayor in a city of Sao Paolo.

Telecoms regulators are thought to have met with justice officials to debate the ban proposal.

Concern over the use of mobile phones by organised crime groups has risen in Brazil since last February when about 20,000 inmates in 29 jails staged Brazil's biggest ever prison rebellion.

The mass action was thought to have been arranged through prepaid cell phones smuggled into jails.

Calls on prepaid phones cannot be traced.

Tracking calls

Analysts said a ban would have drastic consequences on the sector, but think it would face such fierce opposition that it was unlikely ever to become law.

But shares in the country's 20 mobile phone operators have fallen on the news.

Stock in Telesp Celular, Brazil's biggest mobile phone provider, slumped 3.7% on Tuesday.

Andrew Campbell, an analyst at Credit Suisse First Boston, said that the regulator may instead ask operators to implement systems to track prepaid calls.

And that would mean fresh investment from the carriers.

The president also said the government was seeking to install blocking devices in prisons to eliminate mobile phone transmissions between prisoners and criminal gangs outside.

Prepaid preference

Brazil's operators are thought to gain most of their revenue from prepaid phones.

Operated by cards bought in advance, the phones require no formal registration and have proved particularly popular in less economically developed countries.

Brazil's client base is likely to stagnate without prepaid phones, since people with credit problems or low incomes find it much more difficult to pay monthly fees.

In November, there were 19.5 million customers of prepaid phones in Brazil, compared with 9.2 million contract users.