13/02/2007


Will Vivo lose its leadership in 2007?

 

Vivo is the cellular operator leader in Brazil in cell phones quantity and revenue. It finished 2006 with 752 thousand cell phones, lesser than 2005 and a reduction of 2.8% in its annual revenue. This was a hard year to Vivo that had to make some decisions, for example, the cleaning in its clients base, the adoption of GSM technology and the prices of service plans. Consult (Vivo sets up to come back growing).

 

According to this situation, Vivo has its leadership threatened by Tim and Vivo which reduced the difference that separates it from Vivo in 2006.

 

 

Tim and Claro presented net adds of 5.2 million cellulars in 2006, the difference that separates it from Vivo decreased 3.6 million and 5.2 million cellulars respectively.

 

Keeping the actual situation of operators, the leadership maintenance in cellulars market share in 2007 will depend on the operator. Vivo presented negative growth in 2006 because of the base cleaning, that according to Teleco's estimate, has reached more than 2.5 million cell phones. GSM network is already in operation and the operator is commercializing pre-pay cellulars in the whole country. The sale of pos-pay cellulars should begin in March. The expansion of its network to MG and Northeast can also contribute.

 

 

Revenue

 

Vivo's advantage in revenue is still lesser than market share. By the projections of Teleco, Tim should reach Vivo in net revenue in the 4th quarter of 2006 (4Q06).

 

 

Vivo continues leading but it will be difficult to keep this advantage in 2006.

 

R$ billion
2005
2006
Vivo
11.30
10.93
TIM
8.41
10.10*
Claro
6.55
7.78

 

* Esteem by Teleco

 

It wasn't just the net sales of Vivo's devices that decreased in 2006, but also the services net revenue.

 

 

Vivo's Net Revenue

 

R$ Thousands
2005
2006
Growth
Services Revenue
9,613
9,560
-0.5¨%
Subscriber and Use
4,952
4,793
-3.2%
Network Use
4,122
4,173
1.2%
Other services
539
594
10.2%
Devices Revenue
1,641
1,376
-16.1%

 

Net Revenue of services presented a reduction of 0.5% even though the revenue of interconnection ( network use) has grown with the application of Bill & Keep since June/06. The decrease of 3.2% in the revenue of subscriber and use is an indicator that Vivo hasn't lost in 2006 lony inactive clients, but clients that generate revenue.

 

Income

 

Three operators had presented progress in 2006 looking for bigger income.

 

Vivo had lost of R$ 594 million in 2005, net income of R$ 16,3 million in 2006. This result was gotten through credit activations in the net income R$ 740 million, done with the joint venture of operational companies (joint venture restructure)

 

Tim should present EBTIDA margin bigger than 20% in 2006 superior to the 18.2% of 2005. Claro had negative EBITDA in 2005 but now has positive (13.3%) in 2006. EBIT is negative.

 

You could ask:

 

  • Is Vivo done with the cellular base cleaning? Will the cleaning continue in 2007?

 

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