09/24/07


Will Vivo succeed as 4th operator in Northeastern Brazil ?

 

Tim won't be the only operator in all brazilian States.

 

Soon Vivo and Claro should acquire (SMP or 3G licitations) frequencies to implant networks in the areas where they don't operate: Vivo in the area 10 (Northeast) and Claro in the area 8 (North).

 

National coverage has been an important difference of Tim, specially in the corporative market where many companies work in different States of Brazil. The price of the service in roaming is cheaper when is done inside of the network from same operator.

 

The revenues of roaming won't be enough to make good profit because Vivo and Claro will just start operations in these new areas. They will have to fit their strategies and get part of the existing market.

 

The following graphic present the evolution of operators market share in Brazil per order of entrance in the market.

 

 

Band A operators were the first ones to get in the market. Most of the operators were stablished from concessionaires of local fixed privatized telephony, and they still are leaders in market share in 8 of 10 areas in which was divided cell phone service provider in 1998. These operators lost market share with the entrance of new competitors, they have 38% of Brazil's cell phones (Aug/07). These data confirm the advantage of being the first operators in the market.

 

Vivo joins most of the cell phone operators of Band A, stronger presence with the acquisition of Telemig and Amazônia Celular. Tim has Band A of the area 5 (PR/SC) and area 10 (Northeast). Still present in the Band A CTBC and Sercomtel.

 

Cellulars Market Share in the Band

 

Note: Vivo including Telemig and Amazônia Celular.

 

Band B operators were the second to arrive in the market. They started their operations in 1997/1998 and had 29% of market share in Aug/07. Claro has most part of its operations in this band.

 

Band D operators were the third operators to arrive in the market. They started their operations in 2002, with Oi, and had 23% of the market participation on Aug/07.

 

Cellulars Market Share in the Band

 

 

The set formed for the fourth operators to arrive in the market (Band E) is having a slower growth, because they are not in all the markets.

 

Although the operators that arrived first in the market have an advantage in relation to the others, this doesn't mean that this advantage is definitive. Oi, for example, got leadership in area 9 (BA/SE) even being the 3rd operator to arrive in the market. Tim, fourth operator to initiate its operations in area 8 (North), nowadays is market leader in this region.

 

Cell phone operators in Brazil, except Tim, still have most of its operations really homogeneous in relation to “timing” of entrance in the market (Band).

 

Distribution of cell phones of the Operator per Band

 

%
Band A
Band B
Band D
Band E
Vivo*
87.2%
12.2%
0.0%
0.6%
Tim
34.7%
18.2%
33.1%
14.0%
Claro
0.0%
83.0%
6.0%
11.0%

* including Telemig and Amazônia Celular

 

Vivo (including Telemig and Amaz) has 87.2% of its cell phones in the Band A and Claro 83% in the Band B. Tim has bigger balance of cell phones in the bands. Other operators have 100% of its cell phones in the same Band: Oi (Band D), BrT (Band E) and CTBC and Sercomtel (Band A).

 

The entrance of Vivo as 4th operator in the northeastern Brazil will place Vivo in a very diverse leader position as it's used to be. If Vivo conquer a slice of the market will have to be more aggressive in the promotions as it has been in other regions of the country. The challenge is placed.

 

Apesar de ter um menor poder aquisitivo que outras áreas do país, o Nordeste é uma das regiões em que o celular tem apresentado maior crescimento. Desafio similar se apresenta para a Claro na Região Norte onde a terceira entrante (Tim) é a líder.

 

Although having lesser purchasing power than other areas of the country, Northeastern is one of the regions where cell phone has presented bigger growth. Similar challenge of Claro in the Region North where the third incoming (Tim) is the leader.

 

You could ask :

  • Will Vivo dispute the market of area 10 (Northeastern)? Will Vivo suceed?
  • How will be the space of regional operators as Oi and BrT with Vivo, Tim and Claro having national coverage?
  • Is there space to 5th operator in each region of Brazil?
  • Will more competition bring coverage to not covered cities ?
  • How will 3G affect cell phone market share in Brazil?

 

 

 

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