Cellulars Revenue is almost reaching Fixed Telephones

The Gross Revenue of the cellular operators has been increasing more than fixed telephony operators. The cellulars participation in the total of the operators revenue of fixed telephony and cellular increased 39.0% in the 3rd quarter of 2005 (3Q05) to 43.7% in the 3Q06

Note: Fixed includes Telemar, BrT, Telefonica and Embratel. Cellular doesn't include CTBC and Sercomtel.

The Gross Revenue in the 3Q06 was lesser than 3Q05. The decrease in the revenue is beacuse of the negative readjustments of tariffs in 2006, and the reduction in the traffic and accesses numbers in service. Brasil Telecom, for example, cleaned it base finishing with 667 thousand fixed accesses in the 3Q06 (more details).

The increase in the fixed revenue in the 3Q06 in relation to 3Q05 is because of the increase of the communication datas and to the joint of the Telefonica Companies to Telefonica. The revenue datas of the fixed telephony operators was R$ 2.7 billion.

Cellular Revenue

The revenue growth of the cellular operators has been happening because of the growth of the cellular's base, that reached 96.6 Million in Oct/06. In the 3Q06, however, around 95% of the revenue increased in releation to the 2Q06 was caused by the change in the rules of cellular telephony interconnection promoted by Anatel ( Res.438), finishing with Bill & Keep partial.

Bill&Keep partial was established with SMP and applied itself to calls between cellular operators in the same local areas (VC1). In these cases, the operator was obligated to pay interconnection (VUM), when the traffic between them surpassed 55% of the total. Since 07/14/06 the operators has been full charging the minutes of network use, which increased the revenue and interconnection costs.

With the revenue growth of network use ( interconnection) also increased the services revenue and ARPU. The monthly average revenue per user (ARPU) was from R$ 24.7 in the 2Q06 to R$ 29.0 in the 3Q06.

The revenue of network use increased it participation on the revenue of the cellular operators representing 34.8% of the services gross revenue in the 3Q06.

The revenue of other services, decreased 9.7% of the services gross revenue in the 2Q06 to 8% in the 3Q06.

Tim and BrT GSM were the operators that most increased it participation in the Revenue Share of the cellular operators in the 3Q06.

Participation in the Cellular's Revenue Share

Don't include CTBC and Sercomtel.

Tim is very close to Vivo, that had its revenue growth affected for the adjustment in the prices of it services, ptting them very close to each other in the market. This had a reduction of 40% in the price of SMS. Vivo expect that these price reductions increase it traffic.

According to the table above you could ask:

• Will the cellular operators revenue surpass fixed telephony? When?
• Will Tim surpass Vivo in revenue in the 4Q06?

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