Lost year for Vivo?
Vivo's published results to the 2nd quarter of 2006 ( 2Q06) came up with some news:
With this reduction, Vivo, that had had as marketing goal in the Christmas of 2005, 30 million clients, in June 2006 has 28,525 thousand cellulars, it is close to the number of cellulars in June 2005 which was 28,446 thousand.
Vivo's cellular numbers stopped during the year ( Jun/05 and Jun/06), forgetting the fact that the number in the 2Q05 could also be inflated. So Vivo lost 6 percentual points of Market Share, therefore Brazil grew 16.2 million cellulars inthis period. It was from 75.5 to 91.8 million.
| - | 2Q05 |
2Q06 |
| Cellulars (thousands) | 28,446 |
28,525 |
| Market Share | 37.7% |
31.1% |
| Pre-paid (%) | 80.6% |
81.5% |
| ARPU (R$) | 28.6 |
24.1 |
| MOU | 79 |
66 |
Beyond not growing in number of cellulars, Vivo is also losing its better clients as indicate the numbers of ARPU, MOU and pre-paid (%).
It wasn't only in the Operational Performance that Vivo stopped in this period of one year. The Revenue and Margin EBITDA fell and the lost increased.
| R$ Million | 2Q05 |
2Q06 |
| Gross Revenue | 4,025 |
3,765 |
| Net Revenue | 2,879 |
2,598 |
| EBITDA | 599 |
306 |
| Margin EBITDA | 20.8% |
11.8% |
| Revenue (lost) | 253 |
493 |
This numbers help us to understand the reasons that took Vivo to finally choose the implantation of GSM network and the break up with 1.8 million cellulars.
The reduction of cellular numbers promoted by Vivo affected the total of cellulars in Brazil, because of this showed up fall in the month.
The following table presents a comparison between the total divulgated by Anatel in June/06 ( Preliminary Datas) and a hypothetical total in case of Vivo hasn't done the cellulars breaking up.
| Jun/06 (thousands) | Anatel |
Hypothetical Total |
| Cellulars | 91,760 |
93,583 |
| Revenue Additions | - 617 |
1,206 |
| Density | 49.24 |
50.21 |
The cellular break up promoted by Vivo, is not new in the International panorama. It had happened with many operators, including Telefonica in Latin America. It brings back a discussion about the counting numbers of cellulars by the operators (Check the commentary ( in portuguese): The possible difference in counting numbers of cellulars by operators)
The Regulatory Entity of France (ART), for example, presents the total number of cellulars and the numbers of active cellulars ( 98 and 98.5% of total). It's considered active cellulars that recieved or originated a call in the last 3 months.
Vivo's bad period must continue in the next months until the beggining of GSM network operation, which is foreseen to the end of this year. During this period, Vivo will continue vulnerable and will have to look forward not to keep loosing clients. It's important to say, even with less 1,823 thousand cellulars, Vivo presented an additional reduction of 127 thousand cellulars in June of 2006.
The year of 2006 will be one lost year to Vivo in terms of clients and Revenue growth. It must continue to lose Market Share and Margin EBITDA must continue falling apart to the investments to be done with the new network.The decisions taken by Vivo, however, indicate that the operator is conscientious of this situation and decided to face its problems. 2006 could also be the year where it is being placed the bases of Vivo to retake its trajectory of growth in the next years.
Check Teleco's commentary ( in portuguese): What changes with Vivo's GSM implantation.
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