09/15/2008


What changes in São Paulo with "aeiou"?

 

 

 

In 09/08/08, “aeiou” (Unicel) started officially its commercial operation in the metropolitan region of São Paulo (Capital, Osasco, Guarulhos, Santo André, São Bernardo do Campo, São Caetano, Diadema and vicinity), the objective is to conquer 500 thousand clients in one year.

 

If the company reaches the target, aeiou might get about 2% of market share in July/09. To do so, it will have to conquer about 42 thousand cellphones per month, in a market that presented an average of 285 thousand cellulars in monthly net adds in the last 12 months. In other words, if cellular growth doesn’t increase, "aeiou" will get 14,6% in share of monthly net adds.

 

The aeiou's strategy to reach its goal is based on the offer of cheaper prices for minute used and SMS.

 

Note: pre-paid cellulars

 

 

Pre-paid Price R$)
Intra-net (minute)
Other operator (minute)
Intra SMS
Other SMS
Vivo
1.29
1.49
0.36
0.36
Tim
1.36
1.36
0.39
0.39
Claro
1.39
1.39
030
0.30
Average (up 3)
1,35
1,41
0,35
0,35
aeiou
0.14
0.63
0.07
0.14
Discount regarding the average
89.6%
55.4%
80.0%
60.0%

 

 

“Aeiou” is presenting it self as an low cost operator, which won’t subsidize terminals neither spend big amounts of money in marketing campaign. The company bets that its lower prices offer will spread to market sectors through Word-of-mounth (viral marketing). For the launching, aeiou released a video in the Youtube. ( see aeiou's launching video).

 

It’s important to remember, however, that aeiou’s price advantage isn’t to big if considered the operators promotions. For example:

  • Tim’s intra-net minute price falls to R$ 0,12 in the promotion. To each R$ 6 spent in calls, the client wins R$ 60 to intra-net calls.
  • Claro’s SMS price falls to R$ 0,11 if the customer buys a package with 100 torpedos.

Aeiou will be a small operator, which has got the same strategy adopted by virtual mobile operators (MVNOs) focusing on the marketing sectors, getting to reduce the client cost acquisition. So, aeiou won’t be a competitor as big as Vivo, Claro and Tim.

 

Nevertheless, aeiou will be an instrument of pressure on the prices charged by the operators in São Paulo, historically the most expensive in the country. This tendency might be intensified by Oi’s entrance, planned to October/08.

 

Vivo lost 2,2 percentage points of market share in São Paulo (SP11) in the last 12 months, while Claro and Tim are nearly in a tie in the second position. The trend is that by the "aeiou" and Oi’s operation starts, all these 3 operators will lose market share.

 

 

 

 

The growth of competition may accelerate the cellphone increasing in SP11, which index has followed the Brazilian average. SP11 might win positions in the density ranking. In July/08, SP11 was the 11th local area counting 84.25 cellulars per 100 inhabitans, behind metropolitan regions such as Salvador, Brasília, Belo Horizonte, Porto Alegre and Rio de Janeiro.

 

By the beginning of Oi’s operation, the metropolitan area of São Paulo (SP11) will be the first in Brazil to have 5 operators, after being for years the only and major capital holding 3 competitors.

 

You could ask:

  • Will "aeiou" reach its target of 500 thousand cellphones in 12 months?
  • Who is going to lose more space by the beginning of aeiou and Oi’s operation in São Paulo?
  • What will be Oi’s strategy in São Paulo?
  • Will the current operators change their growth strategies? What about the Christmans period?
  • Will the basic pre-paid minute price change by aeiou’s entrance?
  • What’s the future of VU-M (Value of Mobile Net Use)?

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