re: EMC on Brazil's Region 3 (Rio de Janeiro and Espirito Santo) - Telefonica & ATL
Although this article is primarily about Telefonica & ATL I find the comments about TIM and Telemar the most interesting:
The situation will surely change when TIM and Telemar launch GSM services (scheduled for Q1 2002) ...
... Few details have been released by either TIM or Telemar with regard to their GSM operations, though both must be targeting significant market shares ...
and this is interesting too:
Telefonica Celular is talking to Gemplus and Schlumberger about the possibility of placing SIM cards in CDMA handsets, shows that there is concern over the market entrance of the GSM operators.
>> ATL And Telefonica Celular Follow Diverging Strategies As GSM Rivals Draw Near
Paul Mitchell
EMC Cellular
January 9, 2000
Brazil's cellular region 3 comprises the states of Rio de Janeiro and Espirito Santo. The area is served by two operators; regional player Algar Telecom Leste (ATL) and Telefonica Celular, a subsidiary of Spain's Telefonica. ATL has operated a TDMA-800 network since December 1998 and had a subscriber base of 1,831,170 at the end of September 2001, equating to a market share of 39%. Telefonica Celular, which has offered AMPS services in Rio de Janeiro since November 1990 together with AMPS services in Espirito Santo since November 1993 as well as also bringing CDMA-800 to market in November 1998 (Rio de Janeiro) and June 1999 (Espirito Santo), reported 2,859,000 subscribers at the end of Q3 2001, giving it a market share of 61%.
Both operators have enjoyed sustained subscriber growth since Q1 1999 (the first quarter ATL reported figures) and Telefonica Celular has consistently maintained its market lead.
The majority of both operators' subscriber bases is prepaid. ATL reported that 84% of its subscribers were on prepaid services at the end of September 2001, compared to Telefonica Celular's 71%.
A look at net additions for each operator reveals that though ATL had its strongest growth during its first few months of operation, Telefonica Celular was growing much more strongly during that period. It was not until March 2000 that ATL was able to report more quarterly net adds than its rival though it only managed to maintain this for just one quarter before slipping behind again. However, ATL's shortlived higher growth was a sign that it had closed the gap and it has subsequently managed to record better growth than Telefonica Celular on two subsequent occasions (Q4 2000 and Q3 2001). Whilst not being outpaced, Telefonica now has a serious rival in its concession area, though its position is secure thanks to the subscriber base it built up in the period before ATL entered the market.
Different Approaches
ATL and Telefonica Celular are differentiated by several key characteristics. Firstly there is the difference in subscriber numbers and technology detailed above. Secondly ATL is a local company, concentrating solely on the cellular market in Brazil's region 3. This is a clear contrast to Telefonica Celular, which is part of the multinational player Telefonica, meaning that it is affected by international strategies and decisions made by the head office in Spain. What makes the situation far more interesting is the different stances the two companies are taking with regard to data services.
ATL has told EMC that it has room to expand the use of data but that 'it is not relevant in our portfolio at present.' The company believes that voice services and SMS are able to meet all of its subscribers' current demands. Its targets for 2002 are twofold: the development of SMS and the development of a voice portal service, with the emphasis placed on the latter. ATL has experimented with the provision of voice commentary on goals scored in football matches, and the popularity of the service has convinced the company to develop this product in collaboration with a voice portal service, through which subscribers will be able to listen to content (be it sport, news, weather or other information).
In contrast to this strategy, Telefonica Celular is looking for text-based data services to stimulate usage and increase ARPU. It already has inter-operator SMS in place (with Telesp) and is looking to bring SMS Chat and VAS SMS (built on location-based services) to its subscribers. Furthermore, Telefonica Celular is planning to have a 1x RTT network up and running in Q1 2002, which is almost certainly to be provided by Lucent. It may or may not cover the entire concession area, but is a clear sign that Telefonica Celular believes that advanced data services will be attractive to Brazilian cellular users and that money can be made from the scheme. In conversation with EMC, Telefonica Celular stated that transmission speeds of 153.6Kbps had been achieved in field tests. 1x handsets will be supplied by Samsung, Ericsson and LG. The operator is also aware of EMS and MMS but is waiting for appropriate CDMA handsets before launching this technology.
The Advent of GSM
In the light the differences outlined above, Telefonica Celular claims that ATL is not well positioned. Not only does it use a technology, TDMA, which is set to be superseded, but it places a greater emphasis on the lower end of the market (the C and D social classes) - probably because Telefonica Celular had already grabbed the majority of the higher end classes before ATL even entered the market. The fact that ATL is not yet working towards 2.5G or 3G further diminishes the operator in the eyes of its rival. In Telefonica Celular's opinion new entrants TIM and Telemar pose a greater short term threat.
ATL agrees that the new GSM players will make the market more competitive, but it does not agree with Telefonica Celular's opinion that data services must be pushed now nor does it concur with the notion that definite plans must be made for 3G. Whereas Telefonica Celular is attempting to seize the initiative, ATL is prepared to sit and wait. It does not believe 3G will become a reality in Brazil for two or two and a half years (dependent on handsets), it also claims that subscriber education is needed and rapidly promoting the new technology will not pay off. In addition, ATL stated to EMC that it is not leaning towards either GSM or CDMA. Again, it is prepared to play the waiting game. For the moment, it believes it can offer everything its clients desire.
The situation will surely change when TIM and Telemar launch GSM services (scheduled for Q1 2002). The fact that GSM offers SIM cards, a greater choice of handsets and the facility to roam across wide areas of the globe are big advantages, but a lot will depend on how aggressively the new operators enter the market. Telefonica Celular and ATL will be able to offer subscribers better coverage during GSM's first year of operation, but the fact that Telefonica Celular is talking to Gemplus and Schlumberger about the possibility of placing SIM cards in CDMA handsets, shows that there is concern over the market entrance of the GSM operators.
Few details have been released by either TIM or Telemar with regard to their GSM operations, though both must be targeting significant market shares in order to gain returns on the investments made so far. Nokia will be supplying Telemar with GPRS capability and TIM is sure to offer 2.5G services as well, which raises the possibility that ATL will be left behind - but only if that company's perception of the market proves to be flawed. 2002 looks set to be a significant year for the cellular market in Rio de Janeiro and Espirito Santo, not only are existing operators ATL and Telefonica Celular setting off on different strategies, but Brazil's first GSM operators are set to enter the market too. <<
- Eric - |
