The Growth of the Brazilian MVNO Market
Date: August 27, 2010 | No Comments
The Brazilian mobile market is not just one of the world’s largest, with a population of almost 200 million people, but also a market where operators are struggling due to low margins. The margin pressure is driven by a combination of high subscriber acquisition costs (SAC) and a low ARPU. The Brazilian mobile market is dominated by four major players (Vivo, TIM, Claro and OI) and each of them needs to increase their customer base and revenue. OI’s acquisition of Brazil Telecom is an example of industry consolidation in the country, which is a primary means by which some operators have attempted to drive growth.
Brazil’s combination of powerful retailers, how these retailers do business, and the fact that it will soon become possible to launch MVNOs in the country, will likely cause other operators to examine how they can use MVNOs as an active part of their distribution strategy. The big question is how each individual operator will implement their MVNO strategy and the significance this will have on the Brazilian market in the short, medium and long term. Brazilian operators are likely to employ one of two strategies: a segmentation approach, where an operator will only sign-on with MVNOs who do business in market areas where the operator is not well represented; or a more open approach, where an operator will welcome everyone onto their network, similar to the approach used by E-Plus (Germany).
Tarifica’s Take:
Tarifica has studied the strategies and development of European operators, and among the most successful are those with the most aggressive MVNO strategy. There are several mobile operators that have used MVNOs in combination with effective cost-reduction programs as a way to increase their profitability. One of the best examples is E-Plus in Germany, who reduced their SAC by 56% and increased their EBITDA from 22% to 37% in just 12 months. Today, three years later, their EBITDA is 40%, while margins in Germany for Vodafone and T Mobile have decreased to around 30%.
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