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08/08/2016 - 03:00 PM

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Brazilian Telecommunications Sector

According to Anatel, the Brazilian mobile market reached 257.8 million lines nationwide at the end of 2015, corresponding to a penetration ratio of 125.7%, compared to 138.0% in 2014, for an annual contraction rate of 8.2%, compared to a 3.6% growth rate in 2014.

Brazil is the fifth largest mobile telephony market in the world, and telephony is currently the most common means of communication in Brazilian households among all social classes. Although the Brazilian telecommunications market’s prepaid customer base has contracted by 13.3% (or 28.39 million lines) over the course of 2015, to 184.5 million lines, it still continues to represent the market’s largest component, constituting 71.6% of total subscriber base as of December 31, 2015 as compared to 75.8% as of December 31, 2014.

The significant reduction in the overall number of prepaid users is mainly due to macroeconomic pressures, acceleration in users consolidating multiple SIM cards to a single one, high penetration of mobile service and the rapid substitution of voice for data usage, resulting in a decrease in the so-called “community effect” where consumers value a telecommunications system more as more users adopt it. The postpaid business, however, reached 73.2 million lines in 2015, a 8.0% increase over 2014.

Market characteristics

The Brazilian mobile telecommunications market has in recent years been characterized by the expansion of the number of subscribers, investment in network infrastructure and subsidies to attract and retain customers.

These expenditures have resulted in a significant increase in mobile penetration, revenue generation and competition for customers. In 2015, a tougher macroeconomic environment affected the telecommunications industry as a whole, and contributed to the first year of overall customer base reduction.

As of December 31, 2015, there were approximately 257.8 million mobile lines, representing approximately 125.7% of the population, compared to approximately 280.7 and 271.1 million mobile lines representing approximately 138.0% and 134.3% of the population in 2014 and 2013. As is the case throughout most of Latin America, the Brazilian mobile telecommunications market is characterized by a large number of prepaid customers, but as previously mentioned, this trend is changing as a result of macroeconomic pressures, an acceleration in users consolidating multiple SIM cards to a single one, a high penetration of mobile service and the rapid substitution of voice for data usage, resulting in an overall reduction in the total number of prepaid base users and a decrease in the so-called “community effect” where consumers value a telecommunications system more as more users adopt it.

According to Anatel, at the end of 2013, 2014 and 2015, approximately 71.6%, 80.5% and 78.0%, respectively, of mobile lines were prepaid and 28.4%, 19.5% and 22.0%, respectively, were postpaid. The postpaid business reached 73.2 million lines in 2015, a 8.0% increase over 2014.

TIM Brasil

As of December 31, 2015 TIM Brasil is the second largest provider of mobile telecommunication services in Brazil based on the number of phone lines, with 66.2 million lines and a market share of 25.7% in 2015, as compared to 75.7 million lines and market share of 26.9% in 2014, based on data from Anatel.

In the year ended December 31, 2015, TIM Brasil lost 9,486 million net lines, compared to a net addition of 2,289 million lines in the year ended December 31, 2014. Through its subsidiaries in various telecommunications markets throughout Brazil, TIM operate mobile, fixed and long distance telephony, data transmission and ultra-broadband (speeds of more than 34 MB per second, or Mbps) services. For the year ended December 31, 2015, the  gross service revenue was R$23.1 billion, a 5.8% decrease from the year ended December 31, 2014, in comparison to a 2.1% decrease in gross service revenue from 2013 to 2014.

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