05/09/2011


The competition between TIM and Claro for the 2nd position in market share will be decided by the churn

 

TIM and Claro are competing fiercely for the second position in the Brazilian mobile market share ranking. The difference between these two companies fell in 2010 to 610 thousand mobile accesses and fluctuated about this figure along the first quarter of 2011 (1T11).

 

 

 

In 2010, TIM got to decrease the difference that separated it from Claro through the INFINITY plan, adopted for 90% of its prepaid clients, charging R$0,25 by on-net call or long distance. In 2011, Claro launched a similar plan (Fale Mais Brasil).

 

This competition may be conquered by the operator that got better control over its churn (cancellation rate).

 

TIM led gross adds in 1Q11 (8.5 million mobile accesses) but overtook Claro in net adds with only 21 thousand accesses.

 

 

Note: As Vivo hadn't released its monthly churn for 1Q11 when this commentary was written, we adopted the value gotten in 4Q10 (2.7%) to estimate the company's gross additions.

 

 

Oi's net adds leadership in 1Q11 (2.2 million mobile accesses) was reached only because the operator got to reduce its monthly churn mensal to 2.6% in 1Q11. TIM increased to 4.3% and Claro to 3.3%.

 

 

Note: Quarterly churn is calculated by dividing the cancellations gotten in the quarter by the quantity of mobile accesses in the end of the previous quarter. The value found is divided in three in order to get the monthly churn.

 

 

Claro has advantages in the fight for the control of the churn. That's because the company's participation in the prepaid market (79.5%) is smaller than TIM's (85.4%). Prepaid is a stable segment and is dominated by the chips sales. In order to keep prepaid clients it's necessary to promote permanent actions combining aggressive and innovative offers with service quality.

 

The table below presents a comparison between Claro and TIM showing the best performances in blue for each indicator.

 

 

thousands
Claro
TIM
Mobile Accesses
53,438
52,849
Postpaid
10,930
7,702
Prepaid
42,508
45,147
% Prepaid
79.5%
85.4%
3G Mobile Accesses (WCDMA)
7,662
4,505
Data Terminals
1,469
1,773
ARPU
18,0
20,8
MOU
92
126
Churn
3.30%
4.3%
Net Revenue (R$ millions)
2,958
3,752
Coverage (cities)
3,568
3,209
3G Coverage (cities)
409
242

 

 

You could ask:

  • Which company will win the competition between TIM and Claro for the second position in market share?
  • What should carriers do in order to reduce churn?
  • Will Oi keep the low churn in the next quarters?

 

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

 

 

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