What are Claro's targets for 2010?
Claro in 2009
Claro is the second mobile operator in Brazil, closing 2009 with 44.4 million mobile accesses and market share of 25.5%. In 2009, the company presented smaller growth in its cellular base and in its revenue if compared with the two previous years.
Claro led mobile growth in net adds in 2007 and 2008, but the its growth was smaller than the Brazilian average in 2009 (15.5%). However, this growth was enough to consolidate Claro's second position in the market share ranking amplifying in 1 million mobile accesses its advantage in relation to Tim which is in the third position.
The low growth of 4.2% presented by Claro in its net revenue in 2009 shows how revenue growth is each time more separated from the growth in cellular base. By the competition among the four operators which hold national coverage, what leads to a drop in voice revenue, and Brazil reaching density of more than 100 cell/100 inhab., the simple growth in the cellular base doesn't guarantee growth in the operator's revenue anymore.
Note that, in 2009, Claro gave up searching for accelerated growth in its cellular base and focused in the promotion of the growth of its data revenue betting in 3G and value added services. It wasn't enough, however, to prevent Claro's ARPU from dropping.
On the other hand, in 2009, Claro presented growth of EBITDA in higher rate than its net revenue. Claro's EBITDA margin grew from 23.6% in 2008 to 24.2% in 2009.
To analyze Claro's target for 2010, it's important to understand what the company represents to its controller, América Móvil.
Claro Brazil is the second carrier of the Group, with 22.1% of the mobile accesses and 21.3% of the revenue. Claro is behind Telcel México, with 29.4% and 35.8%. Telcel, however, accounts for 49.4% of the EBITDA and Claro for 12.8%.
Target for 2010
Considering this scenario, we analyze, in the following, Claro's possible targets for 2010:
1) Conquer the 1st position in market share overcoming Vivo
In 2010, Claro may decrease the difference of 7.3 million mobile accesses that separates the company from Vivo, but will hardly conquer the first position in 2010. It doesn't seem reasonable to suppose that Claro will present promotions much more aggressive than other operators in order to reach this goal.
One option for Claro would be to get better control over churn, which was the reason why the company distanced from Vivo in the second semester of 2009.
Note: 4Q09 for Vivo was estimated by Teleco
If Claro's monthly churn was the same as Vivo's in 2009, Claro would have increased its net adds in the year in 1 million mobile accesses, closing the period practically even with Vivo in net adds.
2) Improve profitability
In order to improve profitability, promoting the growth of its EBITDA margin, Claro will need to increase its data revenue growing in 3G and value added services. The improvement in quality rates, allied with good communication, can also help Claro to conquer clients who hold higher ARPU.
These incremental improvements aren't enough, however, to lead Claro's EBITDA margin to a level superior than 30%. This may be one of the reasons that led Carlos Slim to announce the merger of Telmex International (Embratel's controller) by América Móvil. In Brazil, the consolidation of Claro, Embratel and Net in one single company may generate the savings necessary to improve the profitability of these companies. That could optimize also Claro's investments in backhaul to offer 3G with better quality.
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