Will Cellular revenue surpass fixed?
The Gross Revenue of Fixed and Cellular Telephony operators in Brazil was R$ 120 billions in 2006, with a Growth of 6.8% comparing to 2005. Cellular Revenue increased 14.7% and represent 41.1% of the total. Gross Revenue of Fixed Telephony ( including Broad Band) grew 2.0% reaching R$ 70.5 billions against R$ 69.2 billions in 2005. Except Tim, the revenue of cellulars long ditance calls is going to the fixed ones.
Source: Operadoras e Teleco.
The Growth of Cellular operators is one of the reasons of Market Value increase in companies as Tim in Brazil, when compared to other fixed telephony companies. The following charge presents market value (Feb/07) and operator's gross revenue in 2006.
Nota: Market Value in Feb/07 and gross revenue of year 2006.
The Growth of Broad Band and Cellular are reducing Revenue of Fixed Telephony service of concessionaires (Telemar, BrT and Telefonica). In 2006, the Revenue of local service joining all these operators had a decrease of 1.4% and long distance 4.6%. The decrease in the Revenue of these services was compensated by 13.1% growth in the Revenue of communication data including Internet Broad Band access.
The migration from Internet's dialed access to Broad Band and the Growth of Cellular, are decreasing the quantity of fixed accesses in service. This decrease was from 1.8 million accesses in 2006 to concessionaires of local telephony (more details).
Groups as Telefonica and América Móvil already have more than a half of its Revenue coming from Cellulars. In Telefonica, with the acquisition of Grupo O2, Cellular Revenue represent around 57% of group's Revenue in 2006. In América Móvil, that controls Telmex, this percentage was 58%.
You could ask:
- Will cellular's revenue continue increasing? Will it surpass fixed in Brazil? When?
- Will mobility affect Broad Band as already affects fixed telephony?
- How 3G will affect revenue division between fixed and mobile? And what about convergence?
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Commentary of Karel P Coors
Interesting article in your newsletter of today about VIVO registering negative growth in Brazil.
Perhaps the experience in Ecuador can help to explain this:
TELEFÓNICA here operates as MOVISTAR
the big competitor is PORTA a company belonging to AMÉRICA MÓVIL
PORTA outsold MOVISTAR 3 : 1 in 2006 and in my opinion by: friendly customer service, pleasant offering of GSM phones and, once you have the bigger network (5.9 million users over 2.5 million for MOVISTAR) the interconnection charge of 15 cts per minute is a good reason for may users to stay with the bigger network
Within the networks you can pay as low if 5 cents per minute
GDP per capita in Ecuador is about USD 3,300 and although, lowish but has been no reason for slow mobile phone growth
by end February there were 8.7 million users of of population of 13.2 so 66% penetration and growing with about 180k per month
MOVISTAR at end Feb had about the same number of subscribers as in Aug '06--why would that be? During a period in 2006 it actually dropped customers
MOVISTAR last week started with a campaign of 15 cents per minute for calls outside their network, setting a trend attractive for the consumer
Ecuador is supposed to saturate at about 10 million users, so that will be by end '07--time will tell where the ball stops rolling
In the meantime we estimate operators will have to invest in broadband over mobile capacity to be able to offer Internet on the move and content such as TV--great news for consumers.