Brazil's Mobile Cos Look To Prepaid To Bolster Revenue
22 Juni 2009 - 5:26PM
Dow Jones News
Brazilian cellphone operators are seeking to boost value-added
service sales to prepaid customers as a means of reversing the
recent decline in revenues.
"With competition fierce for the small postpaid segment, the
operators are now looking to squeeze the prepaid base," said
Luciana Leocadio, telecom analyst at the Ativa brokerage in Rio de
Janeiro.
Traditionally, players such as Vivo Participacoes (VIV), TIM
Participacoes (TSU) and Claro, the local unit of America Movil
(AMX), focused little on how often their prepaid clients sent
texts, as the real money was to be made in postpaid phones with a
richer clientele.
But while cellphone ownership has doubled in the last four years
to reach 158 million users in May, only 18% of those users have
postpaid contracts, according to figures released by government
regulator Anatel.
That has led to intense competition for a select group of
clients, contributing to a decline in average revenues.
Average revenue per user, or Arpu, for the four largest
operators dropped to 25.10 Brazilian reals ($12.72) per month from
BRL27.50 in the first quarter of 2008, according to a survey by the
Teleco consulting group.
As a result, operators are now taking another look at their vast
prepaid base and trying to sell text packages, downloads and
internet services to the higher income customers within that
sphere.
"When you see that over 80% of Brazilian cellphone lines are
prepaid, it is obvious that use isn't restricted to lower income
families and some of these clients have elevated spending power,"
said Leocadio.
TIM, the Brazilian unit of Telecom Italia S.A. (TI), was one of
the first companies to renew its focus on this segment, offering
high-speed internet services to prepaid clients.
Meanwhile, Vivo, which is jointly owned by Spain's Telefonica
(TEF) and Portugal Telecom (PT), is offering special deals on
texting and other value-added services as a means of increasing
revenues.
"Texting is one area where Brazil is light years behind other
parts of Latin America and the rest of the world. Brazilian text
traffic is a fraction of that in other parts of the world," said
Eduardo Tude, an analyst at Teleco.
Brazilian operators courted prepaid clients in the first half of
the decade, despite lower Arpus, as they sought to create client
loyalty in a young market.
However, the continued heavy sales, despite lower incentives,
have made it clear that many of the new lines are second lines used
for a variety of ends.
"As data transfer becomes more important to the cellphone
industry in the coming years, operators have to develop this
channel," said Tude.
Cellphone operators are in the middle of erecting their 3G
networks, collectively spending more than BRL10 billion this
year.
-By Alastair Stewart, Dow Jones Newswires; 5511 2847-4520;
alastair.stewart@dowjones.com