06/06/2011


Competition drives to fall in the cost of cellular minutes in Brazil

 

The price paid to talk on cell phones became the main criteria for choosing a mobile carrier. It happens among those clients that have low use of data services, mainly in prepaid.

 

The four main mobile operators in Brazil have national coverage and subsidized handsets are no longer sold for the prepaid segment, by the obligation of selling unlocked cell phones established by Anatel.

 

In face of this scenario, more aggressive promotions in voice service become the main weapon in order to conquer new clients, what provoked in the last 2 year a drop of 43% in the minute average price paid by users to mobile carriers.

 

 

Note: Minute average price in R$ with taxes added dividing voice ARPU by MOU. It’s different of ARPM (average revenue per minute) that doesn’t include taxes.

 

The effects of this war of prices can be illustrated by comparing Vivo and TIM’s performances.

 

 

Note: Price in R$ with taxes added dividing voice ARPU by MOU.

 

Vivo’s minute average price was smaller than TIM’s in 1Q10 what assured bigger net adds. Since 3Q10, TIM started to have smaller prices and it gave TIM an advantage in net adds over Vivo.

 

 

 

TIM launched the Infinity plan (R$ 0.25 for on-net calls) and focused in voice Market. Vivo chose to be less aggressive in voice Market and invest in 3G in order to grow in postpaid segment and data revenue.

 

In fact, comparing 1Q11 with 1Q10, TIM’s mobile base increased 24.7% and Vivo’s 15.0%. On the other hand, Vivo’s services net revenue grew 14.7% and TIM’s 9.0%.

 

 

 

 

This result meant drop of 13.3% in TIM’s ARPU (1Q11/1Q10), while Vivo’s ARPU increased 0.4%.

 

 

 

 

TIM’s competitive prices stimulated users, in 1Q11, to talk more (MOU increased) and spend less (ARPU decreased).

 

 

Note: Oi doesn’t publish its MOU.

 

Comparing TIM’s minute average price with Claro’s also helps to understand why the trend points out that Claro will be overtaken by TIM in mobile market share.

 

 

Note: In order to calculate Claro's voice ARPU we considered that its participation of services data revenue in services revenue is the similiar to TIM's, because Claro doesn't release this indicator.

 

The aggressive plans launched by Claro in 1Q11 don't to have affected mobile users. Claro's ARPU remained stable (R$18) and its MOU dropped to 90 minutes, driving to a growth of the average price by cellular minute. If this trend remains, it's going to be difficult for Claro to overtake TIM in net adds.

 

You could ask:

  • Will Claro overtake TIM in cellular market share?
  • Until when will minute average price of cellular continue to fall?
  • Will data overtake voice as the main reason for choosing a mobile carrier?
  • Will the price of voice minute in cellular network cost the same as the minute price in the fixed telephony network?

 

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

 

 

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