07/10/2007


Would be possible to reduce the price of cell phone calls in Brazil?

 

In July Anatel published the new values of fixed telephony rates. The values of subscribers and minute calls fixed-fixed must be readjusted in percentage lesser than IST (Telecommunication Services Index published by Anatel) which was 2.19%.

Until June/07 the average price of subscriber was R$ 38.2 and the minimum of minute calls fixed-fixed in the basic plan R$ 0.10 (States with 25% ICMS ).

Also must be readjusted the prices of fixed-mobile calls, which haven't been readjusted since 2005. A fixed-mobile call costs average R$ 0.71, seven times more than fixed-fixed.

Almost there are 3 times more cellulars than fixed telephones in Brazil, the cost of cell phone calls represent an important steak of the telephonic bill.

If the cost of fixed-mobile call is high, even bigger is the price charged per minute of calls from pre-paid cell phones, around R$ 1.20.

 

The high price of pre-paid minutes in Brazil have as consequence lesser cell phone use, as examplified in the following graphic which has MOU (Minutes of Use) and average price of pre-paid minute for América Móvil operators in the main countries of Latin America. The percentage of pre-paid is superior to 78% in all of these countries.

 

Note: América Móvil operators in these countries Q1 07.

 

The main component of cost of fixed-mobile or mobile-mobile calls between different operators are taxes and VUM, value paid for the network use (interconnection) where the call is ended.

 

Taxes, 40% of the telephonic bill value, has been discussed with the authorities for almost ten years, without positive evolution.

 

The main argument is: with the reduction of taxes the volume of traffic would increase and would also increase the income. Many studies confirm this theory. Beyond that, the users would be benefited.

 

Average value of VUM in Brazil is R$ 0.40 per minute (without taxes). With no VUM, the calls between pos-paid cellulars from the same operator use to be cheaper.

Peru is an example of politics of incentive use, country in which the price of pre-paid minute and MOU are similar to Brazil, and decided to reduce interconnection values. VUM from Claro in Peru will decrease from R$ 0.35 in 2006 to R$ 0.21 in 2009.

 

With the end of bill and keep partial in Brazil, the operators of mobile telephony started over getting revenues from pre-paid clients on received calls. So the offer of devices and pre-paid have been extended in 2007 and growth of installed base have been retaken.

 

You could ask :

  • Would 20% taxes decrease, increase traffic and clients base resulting more income ?
  • The reduction of VUM in Brazil similar to Peru?
  • What balance values to taxes and VUM?
  • What else could the operators do to increase traffic?

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