01/21/2007


What will be Cellular Growth in 2007?

 

Brazil finished 2006 with 99.9 million cellulars and density of 53.2 cell/100 inhab. The base of cellulars grew 15.9% in 2006 with net adds to the base of 13.7 million cellulars. With this resullt Brazil reached the 5th position between countries with more cellulars in the world, surpassing Japan that finished the year with 99.8 million cellulars.

 

The growth of the market was lesser than the projections done by Teleco in January/06, that projected to 2006 Net adds between 18 and 22 million cellulars (More details).

 

The following figure presents a monthly comparison between net adds of 2005 and 2006.

 

 

The decrease in the net adds from 20.6 million cellulars in 2005 to 13.7 million cellulars in 2006 can be explained by the following factors:

  • The cleaning of base promoted by Vivo. Beyond the cut off of 1,8 million cellulars in Jun/06 Vivo continued the cleaning of base in the following months, with negative growth in September and December. Teleco esteems that this cleaning of base reached more than 2.5 million cellulars of Vivo.
  • Lesser agressiveness of the operators in its promotions in holidays as Mother's Day ( May) and Christmas, specially on the subsidy of the operators to cell phones of low cost offered to pre-pay segment.
  • Search of bigger profit. The profit of the cellular operators in Brazil isn't big comparing with international standards and the pressure for better results , the shareholders decreased the discountings offered to the consumers.

The year 2006 presented a uniform growth between operators. Tim, Claro, OI and BrT were responsible for the cellular growth in 2006. Together present net adds of 14.4 million cellulars in the year. Between them, Claro was the only one to present net adds in 2006 bigger than 2005.

 

 

Teleco's projections to 2007

 

 

Teleco's projections, kept the actual situation of operators, Brazil should finish 2007 with 111 to 114 million cellulars. Net Adds in 2007 must be between 11 and 14 million cellulars. So, the cellular growth is similar to 2006. However, the launching of new models of cellular devices will improve the market in Brazil, in which the growth will be based in the churn and checked in market share and revenue share. New plans for clients will make part of the brazilian's day-by-day in 2007.

 

The following table presents the probable situation to 2007, projected by Teleco:

 

Thousands
2004
2005
2006
Projection 2007
Cellulars
65.6
86.2
99.9
112.5
Nett Adds
19.2
20.6
13.7
12.5
Growth
41.5%
31.4%
15.9%
12.6%
% Pre-pay
80.5%
80.8%
80.6%
81%
Density
(Cell/100 inhab.)
36.63
46.58
53.24
59.1

 

Could be affected by Vivo, Tim and Claro's behavior:

  • The advantage of Vivo in relation to Tim decreased 6.2 million of cellulars in June/06 to 3.6 million in December/06. Kept these conditions Tim would surpass Vivo in the end of the 1st semester of 2007. Vivo can, however, turn the game with the entrance in operation of its GSM network and the expansion to Minas and Northeast.
  • The doubt in relation to the sale of Tim provoked a reduction of the growth rythm of the operator in the 4Q06. The sale of Tim to Claro will provoke a market consolidation and could reduce the growth projected by Teleco to cellular in 2007 (More details).
  • The aggressiveness marketing, based in a technological and institucional, certainly will be the difference of 2007 impacting the growth of brazilian cellular base. The company has won market share with the evolution of organization.

The probable launching of 3G also could cheer up the market, changing the inclination of the growth curve.

 

You could ask :

  • What will be the cellular growth in 2007? Do you agree with these projections?
  • What could influence the cellular growth in 2007?
  • Why Brazil present a density of cellulars inferior to others Latin America countries, as Chile, Argentina and Colombia?
  • Will Tim surpass Vivo in market share in 2007?
  • Will the operators keep in 2007 the same strategies of 2006?
  • Will appear new players between cellular operators of Brazil in 2007?
  • With the behavior of churn would affect the market of cellulars' devices?

 

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