27/03/2007


In Brazil- Is Cellular decreasing growth because of Vivo?

 

Brazil finished Feb/07 with 101.2 million cellulars and density of 53.8 cell/100 inhab.

 

Net adds in the month were 469 thousand new authorizations, the worse result since April/03 (414 thousand), except June/06, when Vivo finished with more than 1.8 million cellulars.

 

Low growth in Jan-Feb/07 is a consequence of 2006, when Brazil had a growth of 15.9% in the year. Between the main countries of Latin America, Brazil has the lower growth.

 

 

Density superior to 50 cell/100 inhab, the financial situation of the population, has been one of the reasons of cellular's low growth in Brazil. However Brazil had grew lesser than Venezuela, Colombia, Chile and Mexico, and is also the country, with Mexico, that presents lesser density between these countries. The PIB per capita ( power of buying of these countries) is similar, Brazil occupies the 4th position, in front of Colombia and Venezuela.

 

The high density (>100 cell/100 inhab) also didn't stop Russia that has PIB per capita next to Brazil, to have a cellular growth of 21% in 2006,

 

Brazil has some of the characteristics of countries with high density of cellular. Availability of Chip (GSM is the main technology), pre-pay (>80%) and 3 or 4 competitors attending more than 80% of the population.

 

Why does cellular have a low growth in Brazil?

 

One of the reasons is Vivo's low growth, market leader, that presented net adds of -752 thousand cellulars in the year.

 

Note: Net Adds= Gross Adds- cancelled.

 

Teleco esteems that Net Adds of Tim, Claro and Oi have around 43% of the total gross adds. If Vivo also had this performance, Brazil would have net adds of cellulars of 17.8 million in 2006 and not 13.7 million as happened.

 

Vivo in 2006 implanted GSM network, cleaned its clients base and promoted a readjustment of its prices (Vivo sets up to come back growing). The expectation was with the commercialization of GSM cellulars it start to grow over again in 2006, in which hasn't happened in the two first months of the year.

 

 

The behavior in Jan-Feb/07 is an indicator that Vivo must finish the 1st quarter of 2007 (1Q07) with low growth. Tim mus consolidate in the quarter its leadership in revenue (revenue share) and with a distance in relation to Vivo lesser than 3 million cellulars.

 

 

Vivo want to change the situation with the complete activation of its GSM network of the pos and pre-pay services since the end of March. In 03/22/07 the president of Vivo Roberto Lima informed that Vivo had acquired 300 thousand GSM clients in 3 months of its GSM network operation, being 90% new clients. These numbers must increase in April so Vivo will present positive net adds.

 

The behavior of Vivo in the 2Q07, specially April and May (Mother's Day), will be important to avaluate the chances of the operator of keeping the leadership in cellulars market share in Brazil.

 

In contrast to Vivo, Telemig/Amazônia Celular had net adds of 77 thousand cellulars in 2006 and 100 thousand in Jan-Feb/07.

 

You could ask:

  • Will Vivo have positive net adds? Or it will continue losing clients to other operators?
  • Why is cellular growing lesser in Brazil? Is it missing hard pre-pay advertising?
  • What will be cellular growth in Brazil in 2007?

 

 

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