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Brazil’s telecommunications sector has been going through a process of privatization that will change conditions for information technologies (IT) diffusion among Brazilian firms. The impacts of privatization will be especially important to Brazilian firms that are still in the early stages of IT diffusion, such as small‐ and medium‐sized enterprises (SMEs). The aim of this paper is to discuss the impacts of privatization of telecommunications on IT diffusion among Brazilian SMEs. The paper will first analyze the factors that stimulate SMEs to adopt IT, such as the positive impacts on competitiveness. The paper will then describe how the changes that are taking place in the telecommunications sector can influence IT diffusion. In the third section, the paper will consider the case of Brazil, discussing the specificities of IT diffusion in SMEs from developing countries. As a conclusion the paper will discuss how policy measures can be taken so that Brazilian SMEs can benefit from the changes in the telecommunications sector.