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After reaching the second position in the Brazilian mobile market last August, TIM Brasil reached another milestone in April. For the first time, the operator has beaten out its competitor Vivo in the metropolitan region of São Paulo.
In April, TIM Brasil reached 31.8% market share in the 11 code area, while its rival Vivo accounted for 30.9%. The achievement is significant given that the São Paulo metropolitan region has approximately 20 million inhabitants and accounts for the highest GPD in the country.
The success of TIM Brasil can be attributed to its portfolio of new plans launched in 2009, dubbed Infinity and TIM Liberty, which had a remarkably positive impact on the operator’s financial results and market share. Infinity is a prepaid plan, which charges only a call’s first minute to TIM’s numbers, both fixed and mobile, while TIM Liberty is aimed at postpaid customers and offers unlimited on-net calls. In addition, TIM Brasil has an attractive data plan portfolio, starting from BRL0.50 (U.S.$0.25) per day.
Undoubtedly, the results achieved by TIM Brasil are very impressive. However, it is important to note that mobile market growth is only sustainable if it is followed by network investments.
TIM Brasil, which grew its subscription base by 25.6% from 2010 to 2011, is already struggling to continue such expansion without compromising its network quality. Recently, the Brazilian Federal Court prevented TIM Brasil from selling new mobile lines in the state of Pernambuco and Ceara because of network quality issues.
Attractive and competitive offers do help in the short term to add new customers, but in the long run, the operator will need to do more to retain customers. Providing high-quality and reliable mobile services is fundamental to maintaining the operator’s consistent growth. Vivo, by investing heavily in network expansion and upgrades has been able to attract high-end users (22% of postpaid users, in contrast with 14.4% from TIM Brasil), and maintain market leadership with a 29.8% share and a higher ARPU (average revenue per user) than TIM Brasil (see fig. 1).
Source: Informa Telecoms & Media
Vivo made significant investments in 3G since its launch at the end of 2008. It upgraded 100% of its 3G network to HSPA (high speed packet access) in 2010, and then in 2011, it launched HSPA+ in the São Paulo metropolitan region. TIM Brasil has not sustained its 3G deployment in a similar fashion.
In April this year, TIM’s 3G network coverage represented only 20% of Vivo’s coverage, the latter extending its signal to 2,727 cities. As a consequence, TIM Brasil has not been able to take full advantage of the country’s strong demand for data services.
Despite increasing its customer base significantly, including mobile broadband users, TIM’s data revenues were still 48.7% in 1Q12, lower compared to Vivo, while the difference in market share by subscriptions is only 2.87 percentage points (see fig. 2).
Source: Informa Telecoms & Media
The upcoming LTE spectrum auction in June represents an opportunity for TIM Brasil to improve the quality of its mobile broadband experience for its customers. The technology will enable the operator to offer higher speed rates, targeting those high-end users who most value service quality.
TIM Brasil could also use LTE for network offloading, improving 3G services quality as well. Should TIM Brasil not acquire 4G licenses, it will be left behind, considering the limited amount of spectrum available for 3G networks. The demand for mobile broadband is booming in Brazil, and TIM Brasil must be able to provide high quality services if it wants to continue growing, not only in terms of subscriptions but also in terms of revenues.
Marceli Passoni is research analyst at Informa Telecoms & Media.