17/01/2007


Should the operators decrease the price of SMS in Brazil?

 

In Brazil are sent around 500 million SMS ( messages) per month. This represent, for example, less than 50% of the SMS sent in Portugal which has 12% of the cellulars of Brazil.

 

The monthly average of SMS per cellular in Brazil is low ( 5 to 6 SMS). In Venezuela the monthly average is 140 SMS per cellular.

 

The high cost is one of the main barriers to the use of SMS in the country. The average cost of a SMS is US$ 0.15 in Brazil and US$ 0.03 in Venezuela.

 

Study realized by UIT indicated that Brazil is the 151st country in SMS cost between 186 countries analyzed.

 

 

 

Brazil presents a highest cost to SMS than the other countries of Latin America being surpassed only per european countries as Germany, Italy, Spain and United Kingdom that presents a cost of US$ 0.19 per SMS.

 

The high tax of telecommunication services in Brazil, the 3rd highest between 50 analyzed countries in a GSM Association study, contributes to this high cost. Don't explain, however, cause in the other countries of Latin America a SMS average cost is US$ 0.04 and in Brazil cost US$ 0.15.

 

Should cellular operators decrease the price of SMS in Brazil?

 

A lesser price of SMS would cause a decrease in the revenue of the operators, that would be later on compensated for a increase of traffic. The cellular operators of Brazil still aren't convinced of what would be the advantage with the reduction of SMS prices. However could be convinced by the competitive dynamics, case some of them reduce SMS price, as has recently happened with Vivo.

 

Vivo used to have SMS prices superior to the market. In the 3Q06 it reduced in 40% the price of SMS to be similar to the other operators, which caused a decrease of revenue in the trimester. It wants to compensate the lost of revenue with a increase of traffic on the next trimesters.

 

The fear of reducing the prices of SMS by the operators is because the fact that SMS be the main component of revenue datas of cellular operators, as examplified in the follwoing tables to Vivo and Tim.

 

Vivo's Net revenue of Datas

 

 

R$ Thousands
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
Net. Rev. Datas
134
144
ND
159
158
168
157
SMS
71%
65%
62%
ND
59%
65%
54%
Wap
16%
21%
23%
ND
22%
18%
24%
Zap +others
16%
14%
15%
ND
19%
17%
22%

 

Gross Revenue of Datas/Vas's Tim

 

R$ Thousands 1Q05 2Q05 3Q05
4Q05
1Q06 2Q06 3Q06
Gross Revenue of VAS
124
147
137
ND
181
237
217
Traditional (SMS)

 

ND
63%
64%
ND
66%
59%
61%
Innovators (MMS, GPRS, downloads, etc...)
ND
37%
36%
ND
34%
41%
39%

 

Consult: Revenue of datas and other services of cellular operators.

 

The 2nd quarter of 2006 (2Q06) is the biggest revenue. This result is because of the the use of SMS because of the promotion that TV Globo did during the World Cup.

 

 

You could ask :

  • Should cellular operators reduce the price of SMS in Brazil?
  • The lesser SMS price would stimulate its use by the clients of low revenue that use pre-paid ?
  • Would the eventual decreasing of SMS price affect the agreements with partners of the operators, as an example rede Globo?

 

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