07/14/2010


Is cellular price in Brazil one of the most expensive of the world?

 

Brazil has appeared among the countries that hold the highest price for cellular service in the world according to surveys carried out by UIT and "Diálogo Regional sobre la Sociedad de la Información" (DIRC), which compares the ppots paid prices in Latin American countries.

 

To make this comparison between countries, these surveys used a month package of minute consumption and SMS. The cost is, however, much higher than the Brazilian monthly average spending on cell phone.

 

 

 

 

Mobile carriers' average bill in Brazil in 4Q09 reached R$ 34.7 (ARPU + taxes) and accounts for an average consumption of 105 minutes per month (MOU). This value is next to the Barzilian family monthly average spending on cell phone according to IBGE (more details).

 

In other words, the packages used in these surveys doesn't represent the mobile service prices and consumption profile in Brazil.

 

Monthly package for Brazil (2009)
UIT
DIRC
Number of calls*
25
30
Amount of minutes
37
44
Number of SMS
30
33
Price (US$)
US$ 34.6
US$ 45.0
Price R$
R$ 60.3
R$ 78.3

* Distributed into many types (to operator's cell phone, to other operator's cell phone, to fixed telephone, normal price or reduced by the hour)

 

The main cause for this difference is that the prices used in these surveys don't consider the promotions launched in the Brazilian market.

 

The average minute price for pre paid cell phones in São Paulo, not considering bonus and promotions, reaches R$1.40 and R$ 0.30 for SMS. With these values, DIRC's package price would reach, in July 2010, R$ 50.00. This value is next to what was obtained by the survey for 2009 (R$ 78.00).

 

This table changes if we consider the bonus offered by operators for pre paid recharges.

 

Promotions for
São Paulo
Recharge

Free minutes for operator's cell phones

(validity of 30 days)

Vivo
R$ 25.0
330*
Claro
R$ 12.0
250 + 10 SMS
Oi
R$ 15.0
430**

* 10% for fixed ** includes fixed, maximum of 14 minutes by day

 

At Tim, clients pay only the first minute for calls from Tim to Tim (promotional price of R$ 0.25).

 

This offer of free minutes for on-net calls causes the distortion of the calls consumption profile. The package surveyed by UIT considered that 40% of the calls were on-net and for DIRC id reached 48%.


There are reasons why operators don't launch promotions for calls to other carriers. It's not only the tariff which has to be paid for other mobile operators (about R$ 0.40 by minute), but there is also an inclination to promote on-net traffic increasing the sense of being a community inside the operator. It turns out to promote the ownership of one than one chip by user, permitting this user to be part of communities in different carriers.


Other distortion occurs due to the use of SMS in Brazil (13 SMS/cellular/month) is much lower than the figures pointed by UIT (30) and DIRC (33). This low usage decreases the appeal for purchasing packages and promotions with SMS, prevailing the consumption of SMS by unit with average price of R$ 0.37 each. According to UIT and DIRC, spending would reach R$ 11.1 and R$ 12.1 respectively.


To sum up, the figures obtained by UIT and DIRC don't match to what is actually spent by Brazilian citizens on cell phone. Claro, for example, has a pre paid promotion that gives 30 free SMS and hundreds of minutes to call to Claro's cell phones or fixed, if the client pays for R$ 30.0 recharge. This recharge would be enough to make the calls described in DIRC's package which have the same cost of R$ 78.3.


We can't blame, however, the surveys carried out be UIT and DIRC for the results. The bonuses and promotions launched in the Brazilian market make a complex price structure, making it difficult to quantify and compare to other countries. Brazilian mobile price isn't one of the most expensive of the world, but it isn't of the cheapest neither. The fact that Brazil holds one of the highest tax burdens on telecommunication services contributes to it.


However, it's important to recognize that the competition between operators has stimulated the promotions increasing the minutes of use and dropping the revenue per minute. The same must to occur in relation to SMS.

 

Note: revenue per minute resulted from sharing voice ARPU by MOU.

 

Brazil is likely to remain in a bad position on UIT's ranking, which will be held in 2010. The package used by UIT is defined by OCDE and is based on the consumption profile held by member countries. This package was reviewed in 2010, permitting the addition of promotions, raising fro 40% to 55% the importance of on-net calls. The number of SMS increased, however, to 100.

 

You could ask:

  • Is the price of Brazilian cell phone service one of the most expensive in the world?
  • Do carriers offer bonuses instead of cheaper prices per minutes on on-net calls because these companies don't want to be pressed to decrease VU-M (interconnection)?
  • Will operators increase SMS promotions in Brazil?

 

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Click on: teleco@teleco.com.br

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Note: The opinions expressed in the published articles in this section are their authors' responsibility.

 

 

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