mavam brasil 062011 ok ing

MAVAMAcision Monitor for Mobile VAS

8th EDITION

© Copyright Acision June 2011

Prepared by

BRAZIL

MAVAM | Acision Monitor for Mobile VAS

Eighteen months ago Acision launched MAVAM to furnish the industry with a periodic tool on

the evolution of the value added industry in Brazil. Notwithstanding that, the initiative hasrecently extended further to include more Latin American countries. We currently have MAVAMArgentina and MAVAM Mexico, which will be presenting its second edition next week.

Over the last few years, MAVAM has come a long way, both by adding countries and byexpanding the size of the sample of surveys conducted, and even more by generating data which

make it possible to compare the similarities and differences in the demand for value addedservices. Each edition reinforces MAVAM’s commitment with a higher understanding of theuser’s behavior and with providing more information on the volume of value added businesses.

However, it is important to highlight a few key events of the last two years. Brazil exceeded

100% penetration; value added services grew by almost 60% in contribution to the operator’s

revenues, and they currently amount to 18% of the net sales of mobile services.

The SMS market increased from 10 SMS per user to 22 SMS per user in average in the firstquarter of 2011. It is estimated that this market will keep on growing as a result of the efforts

made by the operators which are active as to the generation of attractive offers to foster theimplementation of this service, which is almost as massive as the voice service in many countries.

Mobile Internet amounts to 48% of the net revenues from VAS en Brazil; a particular case inthe region where, except for Chile and Colombia, the highest contribution from VAS arisesout of messaging services (SMS + MMS). The volume of net Internet VAS sales in the first

quarter was equal to USD 615 million, thus placing Brazil as the country accountable for 45%of the mobile Internet business in Latin America. In Brazil, out of the 6.8 million mini-modems currently in existence, 4.8 million are 3G modems. These figures place Brazil as thecountry accountable for 47% of the mini-modem industry in Latin America. In addition tothat, the growth in the sales of smartphones which arrive at the market at prices that are

increasingly accessible for consumers, together with the data packages offered by the operatorshave turned Brazil into the most important market for the development of mobile broadband,

and that is the reason why mobile Broadband is the special topic of this edition.

At Acision, we are very pleased to make this tool available to get people to know value addedusers deeper and to help accelerate the evolution of value added services. If the current growthtrends continue, value added services may amount to 50% of the sales of Latin Americanoperators by 2015.

Have a nice reading!

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Editorial

Rafael Steinhauser

Acision

President Latin America


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2 Editorial

5 1. Introduction

6 1.1. Value added services in the world

10 1.2. Value Added Services in Latin America

14 1.3. Value Added Services in Brazil

20 2. MAVAM (Acision Monitor for Mobile VASl)

22 3. Special Topic: Mobile Broadband

23 3.1. Mobile broadband in Brazil

26 3.2. Mobile Internet (via telephone)

29 3.3. Mobile Broadband (through dongleto connect netbook/laptop and/or using the phone as a modem)

31 3.4. Conclusions

32 4. MAVAM Brazil

32 4.1. Message services33 4.1.1. SMS 35 4.1.2. MMS 37 4.1.3. Instant Messages (IM) 38 4.1.4. Voice Mail39 4.1.5. e-mail

Index


39 4.2. Entertainment 41 4.2.1. Games (Use and downloads) 42 4.2.2. Music (downloads) 43 4.2.3. Ringtones (downloads) 44 4.2.4. Images (downloads) 45 4.2.5. Video (downloads) 45 4.2.6. Mobile TV (visualization)

46 4.3. Social networking

48 4.4 Mobile Marketing

49 4.5 Mobile Banking

49 4.6 GPS e Maps

50 5. Final conclusions

51 6. Glossary

54 7. Methodology

55 8. Team

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By the closing of the first quarter of 2011, there were 5,6 billons1 connections in the world,out of which 581.52 million were in Latin America. There are still people in the world to beconnected to the mobile phone service; market players ensure that by 2015 there will be oneterminal per inhabitant.

Notwithstanding that, mobile broadband is becoming increasingly important. At the closingof this study, Wireless Intelligence assessed that by June 2011, the HSPA (3G) connections

would exceed 500 million and that the LTE connections, after a year from the launching ofthe first business networks it has already reached a million connections.

At the same time, IDC assessed that terminal manufacturers will distribute 472 million Smartphones in the world this year (54%more than in 2010). The same consulting firm assesses that 1 thousand million smartphones a year will be delivered worldwide by the

end 2015. Smartphones represent about 26% of phone devices sold in the world, and in the first quarter of 2011 there were more

sales of smartphones than of computers.

In parallel with the growth of terminals and data connections, there is also an increase in the VAS contribution percentage to the totalrevenues of the operator. It is estimated that such percentage is currently 29%3 worldwide; for some operators, such as NTT Docomo

with 54% of VAS contribution to its revenues.

The increase in data connections, in addition to the operators’ need to increase the risks posed by the value added services, is speeding

the discussions and processes up for new spectrum allocations, practically in the whole world. In addition to that, the governmentalauthorities speed the plans up to reduce the digital gap, including mobile networks as relevant infrastructure to meet their objectives.

Tablets burst into the market and the market is expectant to see which will be the actual use ofthese devices, which will be the demand they will eventually meet. There is no doubt thattablets are new devices whose uses may not be similar to any of the uses we already know.

To all these positive facts which forecast an increase in value added services and data

consumption, it must be added the HTML 5 that will facilitate the creation of applications.Also the interest of other industries in mobile services is growing fast; such as the financial

industry, which analyzes mobile services as a tool to include more people in the financial

system, the healthcare industry thinking of mobility solutions which may help improve thepatients’ quality of life, to prevent and diagnose remotely, thus reaching zones that arecurrently unattended, the energy industry including chips in the meters to manageconsumption, among others.

As a conclusion, the industry is already in the path of value added growth, adding more

people, increasing the use of VAS and adding new connected devices.

MAVAM | 1. Introduction

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Introduction 1

1 Source: Wireless Intelligence

2 Source: Convergencia Research. Includes

South America, Central America, Caribbean.

3 Source: Pyramid Research – Data for 2010.

In order to analyze the global impact of value added services on the mobile business, a

sample of seven operators in different countries was selected (See chart 2). Changes in totalrevenue and in Value Added Services (VAS) revenue between Q1 2010 and Q1 2011 wereanalyzed for each company.

Value added services (VAS) mainly comprise: SMS and MMS (messaging), music, videos,games, ringtones (entertainment), payments and mobile money transactions (mobile

Money), broadband and mobile Internet, social networks and mobilemarketing/advertising.

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1. Value added services in the world1

Chart 1.

Operators Analyzed• América Móvil - Latin America

• AT&T - United States

• France Telecom

France Telecom France

• NTT Docomo - Japan

• Telefónica

Telefónica Spain

Telefónica Ireland

Telefónica Latin America

• Verizon – United States

• Vodafone

Vodafone Great Britain

Vodafone Germany

Vodafone India


Variation in Voice revenue contribution vs. VAS revenuecontribution

In Q1 2011, a downward trend in voice services contribution to total services´ revenue andan upward trend in value added services revenue contribution were identified among theanalyzed operators. Within this sample, voice services reduced their contribution tooperators’ total Average Revenue per User (ARPU) from 19% (in Telefónica Ireland) to 2%

(in Verizon USA). Vodafone India was the only exception with an increase of 3% in VoiceService´s contribution. This is consistent with a market that has a 60% penetration ofmobile lines on a population that still has a margin for growth in subscribers.

In some cases, VAS revenue already makes up for the drop in voice services revenues. For

instance, Vodafone´s balance sheet stresses that this is the first time that data revenueincrease exceeds voice revenue decline4.

In more mature markets (European Union, the United States and Japan), operators showedgrowth in value added services contribution below 5% compared to Q1 2010. In the casesof América Móvil and Telefónica (Movistar) Latin America these services increased its

contribution by 8% and 7%, respectively.

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Chart 2.

Variation Voice and VASrevenue contribution

to ARPU Q1 2010 - Q1 2011

Source: Convergencia Research on

the basis of the financial reports

of the operators.


4 Vodafone Preliminary Results 31/1/2011

page 9: ¨ First year that Group data revenue

increase exceeds voice revenue decline.

SMSs are important within VAS for emerging and developing countries operators, while, in

developed countries, where smartphones penetration is much higher5 than in the former,SMSs are losing ground to other data services.

In this operators sample, value added services vary between 13% and 54%. As regards NTTDocomo (Japan), value added services already represent 54% of the operator’s revenue. InEuropean Union countries, valueadded services vary between 25%

(Telefónica Spain) and 45%(Vodafone Great Britain), while in

the United States, value added

services represent 38.3% of Verizon´srevenue.

Value added services already represent25% of total revenue in the cases ofAmérica Móvil and Telefónica (Latin

America) and China likewise.

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Chart 3.

Total ARPU vs. MobilePenetetration

Source: Convergencia Research


S

5 One example of smartphones penetration

growth is the following: in Q1 2011, 32% of

Verizon Wireless´s post-paid customer phone

base were smartphones; up 4% from 2010.

Verizon Q1 Highlights Page 5. ¨At the end

of Q1, 32% of Verizon Wireless’ retail post-

paid customer phone base were smartphones,

up from 28% at the end of Q4 2010”.

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In developed countries,mobile operators’ ARPUgrowth opportunities arealmost exclusively based onstate-of-the-art VAS (thoserelated to the use of mobile

Internet) and it is throughthese services thatcompanies expect to recover

voice losses.

As regards European Union

and United States operators,it is worth mentioning thattheir ARPU is clearly higherthan that of other operatorsworldwide, enabling them tointroduce new and moresophisticated VAS faster and

giving rise to more revenue generation opportunities. The quick adoption of advancedmobile devices6, Smartphones and tablets, is fundamental to the introduction of these newvalue added services.

Operators in emerging and developing countries are focused on sustaining revenue byincreasing voice service penetration and introducing mobile phones that would enableoperators to deliver more and better value added services. Since ARPU in these countries islower (USD 10-15 approximately), the challenge is having both smartphones and other

phones that, despite not being smartphones, have friendly interfaces and features tostimulate value added use.

Value-added services expected to continue to grow in all markets thanks to the promotion ofservices and the introduction of new billable services to keep the business vitality.

In the coming years, mobile operators will have to change their business structure tomaintain VAS contribution to their revenue. Much of their future will depend on how thechanges are made and how these changes will, in business terms, be applied to customers.

3 A good example is that of AT&T, that, in

the first quarter of the year sold more than

5.5 million smartphones, thus reaching the

third-highest growth quarter. AT&T Investor

Briefing Q1 2011 Page 3. ¨THIRD-

HIGHEST SMARTPHONE SALES

QUARTER EVER: AT&T had another

strong quarter of Smartphone sales.

(Smartphones are voice and data devices

with an advanced operating system to better

manage data and Internet access.) More than

5.5 million Smartphone were sold in Q1, the

third-highest quarter ever.

Source: Convergencia Research on the

basis of operators’ balance sheets.

Chart 4.

Analysis of VAS contribution to mobile ARPUDecember 2010

By the closing of Q1 2011, Latin America had 581.5 million Mobile Phone customers7

which amount to a 98% penetration on the people of the region8, 9 percentage points inrespect of the penetration registered in March 2010, when there were about 9 lines perinhabitant. These data show that over the 12-month period from March 2010 to March2011, 50.2 million new lines were introduced, which amount to 137 thousand netregistrations per day.

19% of the lines in the region operate under the Postpayment method. Despite the factthat, in most countries, the percentage of postpaid lines is not far from such 19%, there arealso particular markets, such as Puerto Rico, where postpaid lines (based on agreements),

amount to 76.6% or Jamaica, where these lines amount to just 3.5% of the total customers.

The pobile phone services business receives revenues which may be grouped under four big

items: Voice services, such as the traffic of minutes, Value Added Services, which includeInternet, messaging and other VAS (content, applications and voice VAS), the revenues fromthe sales of terminals and accessories, and other general revenues9.

Over the first three months of 2011, the mobile phone industry in Latin America10

generated revenues for USD 21,475 million. The voice services11 contributed USD 14,832million (69%), the VAS USD 4,973 million (23%), and the sale of terminals the remaining

USD 1,670 million (8%). The growth of the industry, as compared to the first quarter of2010, when total invoicing reached USD 19,440 million, was equal to 10%. VAS are theservices which best explain the variation in the revenues obtained from the industry, which

experienced a 33%-increase over the last 12 months. Just below the VAS, there is anotherfactor: technological change supporting the VAS represented by the terminals, and whichregistered an 18%-increase.

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2. Value Added Services in Latin America1


7 Estimation made by Convergencia Research

on the basis of the Balance sheets drafted by

Operators, Regulators, Institutions of

Statistics, Related Ministries and of its own

information. This figure does not include

Nextel’s Trunking customers in Argentina,

Brazil, Chile, Mexico and Peru, or Avantel’s

customers in Colombia, which amount to

9.5 million customers.

8 Source: ECLAC – The Economic

Commission for Latin America and the

Caribbean www.eclac.org. Population in

Latin America: 594 million inhabitants

(including all the countries and all the

islands of the Caribbean).

9 The other revenues from mobile phone

services are lower in proportion and as they

are generally in comprised in the revenues

from voice serveces, we have decided to

group them the same way in this report.

10 Estimation made by Convergencia Research

on the basis of the Balance sheets drafted by

Operators,, Regulators, Institutions of

Statistics, Related Ministries and of its own

information. This figure does not include

Nextel’s Trunking customers in Argentina,

Brazil, Chile, Mexico and Peru, or Avantel’s

customers in Colombia, which amount to

USD 1.500 million.

11 Includes the “Other revenues” item.


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Chart 6.

Variation in the revenuesobtained from

the mobile services in Latin America

From Q1 2010 and Q1 2011

In million USD

Chart 5.

Increase in the revenuesfrom mobile services

in Latin AmericaFrom Q1 2010 and Q1 2011


Value Added Services are the main characters of this report and of the current condition of

mobile services both in our region and in the entire world. We can see, on a daily basis,how the offers of most of the operators are increasingly focused on fostering the use ofthese new services. These offers are always based on two sales arguments; the product withits packaged services and the accompanying Smartphone12, thus increasing the exposition ofthese phone devices.

During the first quarter of 2011, the use of Value Added Services by mobile subscribersgenerated revenues of USD 4,973 million in Latin America, which is 33% higher than theUSD 3,743 million of the first quarter of the previous year. Of the USD 4,973 million

invoiced during the first quarter, SMS and MSS contributed USD 3,024 million (61%),Internet USD 1.371 (28%) and Others USD 578 (12%).

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6 Os telefones inteligentes ou smartphones,

entre outras características, são os que

dispõem de algum tipo de conectividade, seja

por GPRS, 2G ou 3G e/ou Wi-Fi.

Chart 7.

Distribution of mobileservices ´revenue in

Latin America

As of Q1 2011 in million USD


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Chart 8.

Services ARPU13: VAS vs Voice Service ARPU in Latin America As of the first quarter of 2011 in USD.

13 Services ARPU do not include device´s sales, therefore it is lower than total ARPU. Total ARPU is the ARPU

reported by operators´ in their financial statements.

Costa Rica has the highest ARPU inUSD in the context of the othercountries in the region, in spite of thefact that its position as far as mobileservice penetration is concerned ispractically the opposite (57%). This ismainly the consequence of the fact thatthis market has not adopted the prepaidmethod until 2010, and at the sametime, there is just one operator (ICE),although Claro and Movistar will also be

operating by the end of 2011.

As regards the relative value of VAS ARPUin respect of service total ARPU, Argentinais the leading country in the region witha 42% contirbution. Panama is at thebottom of this comparison with a VAS

ARPU equal to 12% of its service ARPU.

Chart 9.

VAS ARPU and evolution in the region As of the first quarter of 2011.

In this edition, we have introduced some modifications to sales figures, focusing our analysis

on the revenues from sales for services net of taxes (liquid sales from services) in order tomake comparisons with the rest of the Latin American countries. In addition to that, we areusing figures denominated in Brazilian Reales and their equivalent in US dollars, for thesame purpose of making comparisons among countries easier.

At the closing of the first quarter, Brazil had more than 208,714 million mobile lines(108.4% penetration). Measured in number of lines, the Brazilian market is equivalent to36% of the total of Latin America15. Prepaid users represent 82.13% of the total ofsubscribers; such values are aligned with the prepaid average in Latin America.

The total average ARPU16 of Brazil, during the first quarter was equal to R$ 21.2 (US$ 12.7).

Measured in dollars, the ARPU is slightly above the regional average. In spite of the fact

that there was a 7.4% fall in the total ARPU in Reales, with respect to the ARPU for thefirst quarter of 2010, in dollars the values remained almost unaltered due to the exchangerate. The service ARPU17 (without considering the sale of terminals) was equal to R$19.4(US$ 11.4).

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3. Value Added Services in Brazil1


Chart 10.

Mobile phone lines per operator As of Q1 2010 and Q1 2011.

14 Source: Operator´s Financial Statements.

Numbers have small difference with Anatel

number which is 210 millions subscribers.

Convergencia Reseach prefers to use balance

sheets in order to maintain consistency with

other indicators such is income and ARPU.

15 Latin America: This MAVAM edition

comprises all the South American countries,

the countries of Central America, Mexico

and the Caribbean, including Puerto Rico,

Cuba and the islands of the Caribbean,

which do not speak Spanish.

16 Total ARPU: Includes data and voice services

and the sale of terminals. Source: Balance

sheets of operators

17 Service ARPU: net sales for voice services +

net sales for data services. Source:

Convergencia Research on the basis of the

data obtained from the balance sheet and of

its own information. The service ARPU

constitutes the basis to assess the volume of

value added sales; therefore, the

differentiation thereof is relevant.

The sales for services (net of taxes) of the first quarter amounted to R$ 12,979.5 million(US$ 7,635 million), and they represent 35% of the total of the mobile business in the region.The increase in the sales net of taxes for mobile services, as measured in US$ volume, ascompared to the first quarter of 2010 amounted to 16% (6 percentage points above theaverage increase of the business in Latin America). The increase in dollars is affected by theexchange rate.

With a 33% market share, Vivo is still the el operator with the highest number of lines inBrazil, even though the number of lines has been reduced by 2.8%. TIM was the operator

with the highest growth (25%), followed by Claro (17%) and Oí (13%).

Over the 12-month period from March 2010 to March 2011, the market shares of theoperators suffered significant alterations. Claro currently has a 26% share, and thereby itlowered the 7 percentage points that separated it from Vivo to 3 percentage points. If thistrend goes on, it is possible that by the closing of the first quarter of 2012 there may be anequal share in the market between those operators (or maybe even before). Given suchpossibility, the piece of information to be taken into account shall be each company’s ARPU.

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Chart 11.

Market share in number of lines

Q1 2010 Q1 2011


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At the closing of the first quarter of 2011, all the operators had their total ARPU reduced.Vivo was the operator with the lowest reduction in the total ARPU total (-1%). Vivo´s

customer also has the highest ARPU of Brazil with USD 14.7 (R$ 24.60). Claro, which

follows it in rank in number of customers, has a total ARPU which is 37% lower than Vivo’stotal ARPU, which is also the lowest ARPU in the market, equal to R$ 18.00 (USD 10.8).

The mobile phone business in Brazil generated revenues net of taxes for USD 7,63518

million (R$ 12,750million). The sale of terminals represent 7% of the revenues, with USD511 million (R$ 853 million). The remaining USD 7,124 million (R$ 11,897 million)

pertain to the VAS and to the voice services.

18 Estimate made by Convergencia Research

on the basis of the Balance Sheets of the

Operators, ANATEL, and of its own

information. Liquid revenues, net of taxes.

This figure does not include the revenues

from Nextel Trunking equal to USD 780

million (R$ 1,302.60 million).

Chart 12.

Total ARPU of the main operators At the closing of Q1 of 2010 and of Q1 of 2011, in USD.

USD R$


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Chart 13. Gross revenues vs. net revenues for services At the closing of Q1 of 2010 and of Q1 of 2011, in USD and R$.

The net sales for value added services (assessed in US$) were the highest-growing items (41%)19, followed by the sales of terminals (32%). They are

both related because the operators are focusing onthe sale of smart devices which, in addition to beingmore expensive, are the engine fostering the mostadvanced value added services.

The revenues from VAS in Brazil represent 18% of the

net invoicing for services. Such value Is 5 percentage

points below the average regional contribution

In the first quarter of 2010, the VAS amounted to15% of the net invoicing for services, and in thefirst quarter of 2009, such percentage was equal to12%. This means that the VAS share in the business

was increased by almost 60% in 2 years.

Chart 14.

VAS revenue as percentage oftotal services net revenues Q1 2009-Q1 2011.

Source: 2009-Q32010, MAVAM Teleco – Q42010 and Q12011 Convergencia Research

USD R$

19 31% of growth in Brazilean reales.


As regards the share in the revenues from VAS with respect to the total invoicing forservices, Vivo is the leader again with 22%, although as compared to the previous quarter, it

had a 1 percentage point reduction. Then, TIM and Oi, show the same 15% distribution.They both grew as a result of VAS contribution to the total revenues, but TIM grew by 1percentage point and Oi by 3 percentage points. The share of the VAS for Claro is assessed

in values around 15% of its net sales for services.

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Chart 15.

Sales of VAS as apercentage of netservices revenue20

Chart 16.

Distribution of TM’srevenues from services

in Brazil As of Q1 11 in million USD.

20 Source: 2009-Q32010, MAVAM Teleco –

Q42010 and Q12011 Convergencia Research

on the basis of the balance sheets of operators.

Claro is not included because it does not break

the information down in the balance sheet. Its

share is estimated.


Practically in opposition to what is going on in the other Latin American countries (except

for Chile and Colombia), 48% of the revenues from VAS arise out of the Internet item and41% of the messaging services; the remainder consists of other revenues from VAS.Internet keeps the growing trend in its contribution to VAS and places Brazil as thecountry responsible for the 45% of the net sales for mobile Internet services in the region.

Given the fact that the contribution from VAS is still lower than 20%, it is important to

keep on monitoring some indicators of the Voice business. The net sales from voiceservices grew by 11% (in US$) and from the three major operators of the country, twooperators had their MOUs21 increased (Vivo and TIM), and Claro had a slight reduction.

The voice indicators show that such question is still the main focus of the competitionamong companies.

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Chart 18. Net sales VAS

Chart 17.

Operator´s averageminutes of use per user(MOU)

21 MOUs = Minutes of Use. They represent the

amount of minutes per month used in

average for each line.

MAVAM | 2. MAVAM (Acision Monitor for Mobile VAS)

MAVAM aims at analyzing the trends of value-added services in Latin America. Since 2009,this study is carried out in Brazil. In 2010 Acision launched its Mobile Value Added Servicein Mexico, while, in 2011, the survey started in Argentina.

This new Brazil’s MAVAM edition methodologically differs from previous editions in that:

a. The number of respondents increased and 1,494people were actually surveyed; 1,294 ofthese respondents were contacted through Computer-Assisted Web Interviewing (CAWI)and 200 through Computer-assisted telephones interviewing (CATI).

b. An extensive geographical area was covered to include all the regions of Brazil. The sample

was selected by weighting the number of inhabitants, their level of income and the use of the

Internet (the survey is taken over the Internet) to enhance the country’s representation.

c. Data collection was changed. The survey was taken over the Internet (CAWI) followingthe Income Level, Age and Sex categories that keep the existing proportions among the

Brazilian population.

As the number of Web users (almost 80 million) is less than the number of mobile users

(208,7 million), the change in data collection means that the surveyed population is familiarwith technology. This means thatsome data can be applicable to allmobile users while other cannot.We explain, in each case, where thedata only represent this sample and wherethey represent all mobile users in Brazil.

d. Internet-based surveys weresupplemented by phone surveys (CATI) to

have a data control and comparison

group.

e. The data collection survey hasalso been changed to allownewmeasuring and analysismethods other than thoseused in prior editions.

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MAVAM (Acision Monitor for Mobile VAS)

2

Brazilian regions

North 3%

North East 18%

South East 56%

South 16%

Center West 8%

Brazil: Geographicalregions

1 Convergencia Research com base em World

Stats e NIC.br. A diferença com os 60

milhões de usuários da edição anterior não

significa crescimento e sim correção do dado.

MAVAM | 2. MAVAM (Acision Monitor for Mobile VAS)

f. The services analyzed in this edition include:

• Messages • SMS • MMS • E-mail • Instant messages

• Voice mail

• Entertainment

• Musica • Images

• Games • Ringtones• TV • Video

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• Internet access (Special topic)• Social networking• Application download (new topic)• Location Based Services (LBS)• Payments and banking

• Marketing (Special topic)

This This edition was prepared byConvergencia Research and QuantiPesquisa de Mercado between Februaryand May.

MAVAM | 3. Mobile Broadband

In Latin America, with the launch of 3G networks in 2007, the industry has discussed

which is the role played by mobile broadband; whether its use must be considered to beintended to replace or to supplement fixed broadband or how will these two dataconsumption methods through mobile networks will coexist. The truth is that to date, theoperators and statistics centers pertaining to different countries have not yet come to oneand the same conclusion on how to assess the evolution of mobile broadband.

What has been found out so far is that there are 3different uses of mobile data networks: the usewhich may be carried out through computers

(netbook, notebook), by means of a USB modem orthrough Phone-as-Modem (Tethering), which is

enabled by means of the use of telephones, and ofnew mobile devices such as tablets. In the case ofthe first two types of use, both consumers andoperators have already gone part of the way; in thecase of tablets, the first steps are just being madeand it is important to observe how and for whichpurpose people use these new mobile devices. Suchconsumer devices as, for example, photo cameras,digital portraits and connected industrial devices or

M2M (Machine to Machine), whose business models are still different, though they arecurrently on a growing trend must be added to those three types of devices we alreadyknow today.

At the closing of this study there were 500 million HSPA (3G)1 connections in the world,which amounts to about 10% of the world’s mobile connections.

In this edition we are focusing on the use of the mobile network to connectnetbooks/notebooks by means of USB modems or dongles, and on the use of Internet

services through mobile telephones. Before addressing the information obtained, it is

necessary to make some clarifications about the users surveyed. On the one side, it is worthmentioning that the sample used shows special characteristics, on the grounds that usershave become familiar with the use of such technology and with surfing the Web, since thesurvey is itself conducted on the Internet. On the other side, since the accesses of the typereferred to in this document are not massively used, in some of the analysis conducted, thedata cannot be considered representative, given the reduced number of responses. In those

cases, the possible reading level will be explained.

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Mobile Broadband3SPECIAL TOPIC

N

SO

E

1 Source: Wireless Intelligence.


3.1. Mobile broadband in Brazil

By the end of March 2011 there were 14.49 million fixed broadband accesses in Brazil2,with average speeds around 2Mbps per connection. Pursuant to the estimations made byConvergencia Research in Brazil there were also about 803 million Internet users throughcomputers as of the first quarter.

For the same period, there were 22.9 million4 3G mobile data devices in Brazil. Withinthose connections, 4.8 were 3G minimodems. Although not all 3G devices, such asSmartphones, are tied to Internet browsing plans, it is estimated5 that by March 2011

approximately 50% of those devices had a data plan. Pursuant to the estimations made byConvergencia Research, the current range of USB-modems in Brazil amounts to about 47%

of the total number of mini-modems in Latin America6.

The dramatic rise in the sale of 3G telephones and data terminals (mini-modems) drove anincrease in data traffic, which in the last twelve months has increased between 130% and150% according to different measurements. It is estimated that the growth in data trafficwill be about 140% per year until 2015.

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Chart 19.

Brazil: Access and range of mobile and

fixed broadbandQ1 2011

2 Fixed broadband technologies are: xDSL,

modem cable, wireless/fixed wimax, and

satellite broadband. Source for the number

of accesses: Anatel.

3 Source: Estimated by Convergencia Research

base don Internet World Stats, Nic.br and

others.

4 Source: Anatel and Teleco. Total number of

mobile data devices is 24.4 million, but only

22.9 of them are 3G

5 Source: Convergencia Research based on

enquiries to operators and organizations in

the industry.

6 Source: Convergencia Research, quarterly

follow-up of mobile broadband access.


| 24 |

At the global level, with the expansion of 3G networks and the increase in the range of

available mini-modems, new service quality issues came up because mini-modem usersconsume 10 times more than 3G phone users, and therefore since the end of 2009 westarted noting a trend by operators to foster the use of 3G phones rather than USB

modems. At the same time, the offer of applications and contentsadapted for mobile use was increased, operators startedquestioning flat rates ´business models; and at the same time aspectrum opened in several countries throughout the world to facethe traffic demand of mobile data.

This same trend may be observed in Brazil. For over a year now,the main operators started decreasing their promotional efforts

into the sale of mini-modems and driving resources towards

stimulating growth in the range of available smartphones. Thistendency is confirmed, for instance, by the fact that from March2011 to March 2010, the range of 3G telephones increased by

only by 37.5% while 3G phones grew almost 3 times.

Convergencia Research’s projections indicate that in the next 5 years, fixed broadband inBrazil will grow at annual rates of between 15% and 17%, while the range of mobile

broadband terminals (3G telephones and data devices) will be around 80% per year. In themobile segment, telephones and at a slower rate tablets7, will be the devices with the highestnumber of users; these devices will turn mobile Internet into a ¨Personal Mobile Internet¨,with a different use from the use of computers, and even with use preferences that are stillbeyond our imagination. That is why we think that Internet access through telephonedevices or through Tablets is a phenomenon of a new market and does not amount to asupplement or replacement for access through computers.

At the same time, access through mini-modems will be a supplement for fixed broadbandfor users in large and medium-sized cities and a replacement in areas with low levels of

competition or low coverage of landline services. Part of the growth in the market of mini-

modems in Latin America is tied to governmental plans for the reduction of the gap whichinclude the distribution of netbooks and mini-modems for students and/or areas with lowfinancial resources or areas with no effective competition.

In the case of Brazil, the next football world cup evidenced the importance of granting anew spectrum and accelerated discussions about future bidding processes to meet the peak

demand triggered by that event. For illustration purposes, in the last similar world events

Chart 20.

Composition of therange of terminals

in Brazil Q1 2011

7 Since the last quarter of 2010, adds

promoting the launching of tablets were

published in most markets in Latin America.

The biggest brands accelerated their launches

starting in March 2011 and the most

advanced markets such as Argentina, Chile,

Brazil and Mexico already have offers in their

points of sale from brands that are not so

well known or brands produced locally,

although not all of them with access through

cellular networks.


| 25 |

voice traffic in the places where they were held increased by 200%, while the volume of

SMS grew 30 times more than usual and the data traffic recorded peaks of up to 500%above normal levels.

Revenues from mobile data (mobile broadband and/or Internet) in the first quarteramounted to approximately US$ 615, equivalent to almost 8% of net sales for services ofmobile companies. Net sales for Internet and mobile data services in Brazil represent 45% of

the mobile Internet industry in Latin America.

It is interesting to look at current mobile broadband offers of the main operators. For

instance, Claro has several plans offering from 250 Mb to 10 Gb, with speeds of 1Mbps andcosts ranging from US$ 30.5 to US$ 122.2 per month. In addition to that, in order to

promote the use of mobile broadband services, it launched a weekly subscription plan for

the sale of mobile content last April. In this case, the plan has been specifically designed forgames, with a price below the market’s average price. The weekly cost of this “games club"is US$ 2.43, and provides the right to download one cell phone game per week. It must beconsidered that, pursuant to MAVAM, games are the contents for which there is a higher

tendency to pay and for which there is a greater awareness of price by users.

In turn, Vivo also expects to be the leader in the mobile broadband market. In this

scenario, the operator recently launched a post-paid mobile broadband plan for Desktopsand Laptops at a monthly rate of US$ 17 - a price similar to that the government intendsto set for the National Broadband Plan. The plan provides the user a plan to browse at amaximum speed of 1 Mbps up to a total of 150 Mb traffic. When this maximum isrunning out, the customer will be notified and will have the option to reduce the access

speed (to 32 Kbps), or continue at the same speed by paying an extra US$ 0.2 per Mbexceeding the maximum limit.

TIM was the first operator that decided to prioritize the commercialization of mobilebroadband, launching a plan for US$ 0.30 per day for access, regardless of the browsing

time at a speed of 300 Kbps, considered ideal for browsing through contents adapted for

cell phones. This operator was also the first operator to launch hourly mobile broadbandplans, ranging from 20-hour plans (10 free hours) for US$ 20.11 up to 120 hours forUS$ 61.08.

In the case of Oi, the operator has a wide range of plans, one of which stands out,offering 30 Mb of data for US$ 12.1, up to 20 Gb.

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3.2. Mobile Internet (via telephone)

72% of the total number of users surveyed stated that their devices are mobile Internet-enabled. This information is significant because it means that users have incorporated intheir minds the concept that mobile telephones enable Internet access. The interpretation ofthis figure is relevant to acknowledge that the range of Internet-enabled devices is far higherthan the range of those not providing such access. This is so partly due to the service's

demand and price, and partly due to the fact that most of these devices are not user friendlyor do not make browsing easier, and there are devices which are rather old (for instance, theso called feature phones which operate with 2G technology). Notwithstanding the fact that

such factors are taken into account, the number of Internet-enabled terminals has increasedby 15%, as compared to MAVAM’s seventh edition.

Out of the 72% users claiming to have Internet-enabled devices, only 35.4% has accessed theInternet over the last three months, another 16.7%has used the Internet via their cell phones but notduring the last three months and the rest has never

used the Internet through their mobiles. The dataabove show that 25% of respondents have usedmobile Internet over the last three months. The values

are slightly high for Brazil, where only 8% of usershave 35 devices and an estimated of around 15% havesmartphones or phones with advanced technology(the total of 2G and 3G telephone devices and thosefeature phones positioned in the use of mobile data),that is to say those we can considered as devicesenabled for the use of mobile Internet.

MAVAM shows that 13% of the respondents areactive mobile internet users, because they access more

than once a week.

Respondents who own a mobile Internet-enableddevice but who have not used it over the last threemonths mentioned that they had no need to use thatservice as the main barrier and price as the secondbarrier. The lack of need for a service is an issue in

terms of demand. For instance, in other studies of

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Chart 21.

Internet use and devices that allows access to Internet


Convergencia Research in several countries in the region, when users who own a computer

and/or fixed broadband and do not use it were asked about the reasons for not using it, themost frequent response is also the lack of need.

The creation of the need can be stimulated through digital alphabetization, both in the case oftelephones as in the case of computers, but it is also very related to obtaining a critical mass ofusers (network economies) which will create or force the need for use among those who have

not found it yet.

Those not using mobile Internet but owning an Internet-enabled device were consulted on

their opinions regarding use in the following 12 months. Opportunities come from those

responses. 25% think they need more information before making a decision, which tells usabout the importance of working on stimulating demand and on the communication of theproduct. 8% think they will connect even knowing that the cost will be increased, and thistells us that there is already a group of people wishing to hire the service, leaving price issuesaside. 23% would use the service, if prices were lower. Another 26% may consider hiringthat service after 12 months and 18% think they don't need it.

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Chart 22.

Reasons for not usingthe Internet through a

mobile telephoneBasis: those who own an Internet-

enabled telephone and

have not used it over the last three

months = 36% of the basis.

Multiple choice answers.


Among those who have used mobile Internet in the three months, 76% use more time forpersonal reasons than for professional reasons (24%).

Those who have accessed mobile Internet wereasked to divide use according to the type ofactivities they carried out the most. Thegreatest amount of time is dedicated toaccessing social networks (32%) followed by

Web browsing (19%) and replying e-mails(17%). The responses confirm the trend

towards mobile Internet for personal activities.

31% of the user who accessed mobile Internetrepresented to have used it half an hour a dayin average and a similar percentage (31.6%)between half an hour and one hour. Theaverage time according to this sample is

slightly over one hour per day.

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Chart 24.

Time spent for personal and professional usesBasis: Those who used mobile Internet over the last three months.

Chart 23.

Future behavior of the use of mobile InternetBasis = those who own a device enabled for mobile Internet and have not accessed = 36% of the basis.

Multiple choice answers.


3.3. Mobile Broadband (through dongle to connect netbook/laptopand/or using the phone as a modem)

In order to simplify the consistency of responses, users were shown an image with thedifferent types of wireless and/or mobile connection through a laptop, netbook or Tablet.Afterwards, they were asked their connectivity of choice, allowing them to provide as manyresponses as necessary.

Only 25% of respondents do not own a notebook/netbook or tablet themselves. 57%

uses Wi-Fi connectivity. 19% onlyaccesses the Internet through the fixed

broadband network.

Only 20% connected through a modemusing the operator’s mobile network and3% have used their mobile phones as amodem (Tethering). Values are forreference only and cannot be projected to

the level of total mobile users in Brazil,

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Chart 25.

Time spent on mobileInternet according

to activityBasis = those who accessed the

Internet through their mobile

phone over the last three months.

Fixed wireless broadband Mobile broadband

Wi-Fi 3G Modem Using my mobile device as

a modem (Tethering)


since they are representative only to those who own a notebook/netbook and/or. Even so,

they are only a reference or orientation on how mobile connectivity is being used to accessthrough portable computers.

Among the users who have connected their Notebooks, Netbooks or Tablets to the Internetvia mobile devices (3G), 85% have used a modem, 9.4% have used Tethering and 5% haveused both.

| 30 |

Chart 26.

Users who connect their netbook/laptop or tablet through wirelessand/or mobile networks Basis = Total number of respondents. (Multiple choice).

Chart 27.

Which of the followingalternatives do you use

for your internetconnection? (laptop,

netbook, tablet)


The connection is mainly due to personal reasons (53.2%) more than professional

reasons (46.8%).

On a netbook connected via wireless or mobile, 22.2% of the time is dedicated to replyinge-mails, 20% to Web browsing and 20.2% of the time is spent on social networks. Thesedata shows that the use of mobile broadband for the computer is even more similar to theuse in a desktop computer (reading e-mails/browsing), while for mobile telephones, as

shown in the previous paragraph, social networks account for most of the time (32%).

7.1% of the connection time in average is dedicated to commercial mobile applications,

such as Skype, Shazan or Google Maps, while 6.9% of that time is dedicated to salessoftware, school or university education systems, etc.

3.4. Conclusions

Even with low levels of penetration, there aretwo trends of consumption in mobilebroadband services.

Through mobile telephones, access is mainlymotivated by personal use and socialnetworks account for most of the time of use.With the growth of smartphones and

applications, probably the use of Internet inmobile devices will drift apart from what we

now know as the Internet.

On computers, uses for personal andprofessional reasons are distributed relativelyevenly, although personal use tends to prevail.In this case, most of the time is dedicated toreplying e-mails, but social networks account

for the s2011.

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Chart 28.

Time spenton the InternetBasis: 22.7% of the sample.

Users who use mobile broadband.

Multiple choice questions.

Chart 29.

Time spent on the InternetBasis: 22.7% of the sample. Users who use mobile broadband accesses.

MAVAM | 4. MAVAM Brazil

4.1. Message Services

Short messages, multimedia messages, mobile e-mail and mobile message services can begrouped under the heading “Message Services”. Pursuant to data provided by severalconsultancy agencies1, this group of services represents a global market of between US$ 180thousand million and US$ 200 thousand million sales per year.

Within Message Services, text messaging is the most popular message service. In Brazil, theSMS and MMS (multimedia messages) segment, generated sales for about US$ 526 milliondollars (R$ 889 million) during Q1 2011. As previously stated in prior editions of

MAVAM, the SMS market in Brazil still has a broad margin of growth taking intoconsideration that the global average of SMS is above 100 messages per month per user, and

in Brazil it is around 22 SMS per month per user.

The low usage of SMS in Brazil results from a combination of factors. In general, severalparticipants relieve that the average price of US$ 0.20 – 0.18 per unit is a barrier, especiallyin lower social classes, combined with others such as aggressive voice services offers and the

still low diversity of offers to stimulate use such as unlimited-use packages, among others.

However, since 2010 we started noticing a change in SMS offers available. For instance,

since the end of 2010 TIM, with its Infinity Pre campaign, provides the alternative ofsending unlimited SMS at a rate of US$ 0.30 perday. Vivo has also increased its aggressiveapproach in the sale of SMSpackages; in this case we can alsocite as an example the Vivo Oncampaign (www.vivoon.com.br)which is addressed to young users.

With this offer customers have directaccess to social networks free of charge

and unlimited SMS based on the value of

the recharge made. In the case of Claro,the operator offers three SMS packages forprepaid services users, at different discountmargins: 20 SMS for US$ 2.30 (R$ 3.90),equivalent to a 35% discount; 40 SMS for US$3.27 (R$ 6.90), a 43% discount; or 80 SMS forUS$ 7.36 (R$ 11.90), a 50% discount.

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MAVAM Brazil4

N

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E

1 Differences vary pursuant to the source and

calculation method used.

4.1.1. SMS

This edition of MAVAM shows that almost 90% of users have used SMS over the last 3months. These values are 2 percentage points (p.p) above those obtained throughMAVAM’s research in the prior edition, where 88% of respondents had used SMS services.

The percentage of those sending more than one SMS per day increased from 35.9% to

46.2%, thus confirming the upward trend in the frequency of use of SMS in MAVAM’sprior edition. This increase in use reduced the percentage of respondents rarely using SMS(27.4%) and also of those using SMS only once a day (26.4%).


| 33 |

Chart 30.

Used SMS in the last 3 monthsBasis: Those who use the service.

Frequency of use of SMSBasis: Those who use SMS.

Reasons why respondentsdon’t use SMS

Basis: Those who make little or

no use of SMS.


Among those who “Rarely use SMS” and those who do not use the service at all, there is a

higher percentage of answers evidencing a lack of interest in the service or a preference formaking phone calls (81.4%). These barriers are followed by the cost of the service, with12.1% of the answers provided by this group, both because they think that the value of eachSMS is expensive in itself and because they think it is expensive compared to the cost of aphone call plan.

Regarding future use of SMS, 51.4% of the sample thinks that an increase is possible. Only14.3% of respondents said that the use of this service will decrease. The figures confirm anupwards trend in the use of SMS observed for the prior quarter.

Pursuant to the sample studied in this research, users send an average of 62 SMS per month,almost 50% of the 41 SMS average per month obtained for surveys in the prior edition. Aspreviously stated in the prior edition of MAVAM, respondents are more familiar with thetechnology and therefore the use of SMS has increased in our sample in relation to generalestimates for the total in Brazil and is around 22 SMS per month per user.

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Chart 31.

Future use of SMS - Momentum


If we analyze the frequency of use for respondents surveyed by MAVAM, we observe four

large groups. The greatest part is concentrated in those sending 1 SMS per day (36%), thefollowing Group, with 14% sending an average of 5 SMS per day and lastly 10% forthose sending an average of 3 SMS per day and the same percentage (10%) for thosesending 10 SMS per day. Statistically the values are only a reference and can be applied tothe total in Brazil, but are a good indicator on how use is increasing, with 30 SMS per

month as the figure that could be reached before year-end.

To sum up, the results of MAVAM show an increase inthe use of SMS in Brazil partly as a consequence of

new offers made available by operators.

However, to understand the current status of the SMS

segment we need to go beyond the individu8als (alsoknown as peer to peer, or P2P communication). InBrazil, as in other parts of the world, SMS is starting to

spread within the entrepreneurial world applications in

segments such as banks, energy, transportation,government, etc. by enabling, for instance, transactionssuch as for taxi-cab fare payment, for vehicle fleets, to

confirm services registrations, for use by health-careentities to confirm appointments, among many otheruses linked to the increase in productivity.

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4.1.2. MMS

70% of respondents have MMS-enabled phones. However, only 21.7% use MMS. In

MAVAM’s edition for March 2011, the percentage of users who have sent MMS was

17%, and the figures in this edition show an increase for those sending MMS during thelast three months of almost 5 percentage points, that is to say almost 42%.

However, half of those using MMS only use this service sporadically. Figures are similarto those for the prior quarter. However, the number of respondents who send more thanone MMS per week has tripled, and the number of those sending one MMS per week

has increased by 30%.


When it comes to MMS, it is important to take into consideration that users who are not

familiar with the technology jargon, that is to say, those who do not necessarily knowif they are sending an MMS, do know that they areexchanging pictures and multimedia

messages with other users, that is to saythat some may be considering uploading aphoto to Facebook via their mobile deviceas MMS. When reading results, theimportant thing is that the number of users

exchanging images and multimedia viatheir Mobile phone is increasing rapidly.

From the perspective of the alternativesavailable for the user when consumingMMS, we start to notice offers such as in thecase of Vivo, that packages multimediamessages with SMS, and therefore groupingmessages as a service including more than text.

| 36 |

Chart 32.

Use of MMS


4.1.3. Instant Messages (IM)

55% of respondents said they have a phone through which they can access instantmessaging. 27.7% of users have used instant messaging services over the last 3 months. Thisrepresents an increase of 42% as compared to the prior edition of MAVAM, in which only19.5% of users had used the instant messaging service. These values are only for referencepurposes; that is to say, they imply that the use of instant messaging is accelerating for the

group of users under analysis, although the increase for the whole market may have differentrates than those for users that are more familiarized with the technology, the values are agood statistical indicator of the current trend.

For instant messaging services, MAVAM defines active users as those users accessing instant

messaging on a daily basis, several times or at least once a week. The frequency of use is

important because the volume in the segment increases if both the number of uses and theuse increase.

For this research, those that can be considered active users of the service represent 18.2% of

respondents; that is to say almost 25% more users than in MAVAM's prior edition (14.5%).The increase confirms what has been pointed out in the prior report on the potentialincentive in the demand of this service.

Among active users, men (36%) tend to use instant messaging more than women (30%).As regards ages, the group that most uses the service is the age group ranging from 25 to 34

years old (37%) followed by individuals between 18 and 24 years old (36%).

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Chart 33.

Frequency of use ofInstant Messages


The percentage of users is similar for those who have post-paid plans and those who have

pre-paid plans, although daily use is higher for post-paid plans. The fact that the percentage ofactive users is identical for pre-paid and post-paid services may be indicating a high potentialfor spreading; spreading will depend on the models to be implemented by operators.

4.1.4. Voice Mail

Out of the surveyed users, 66% used the voice mail service over the last three months,representing a 12%-increase in relation to MAVAM’s prior edition. On average, these

users receive between one and two messages per week. 40.7% of those who have thisservice do not pay for it (because it is free or because it is not discriminated in the plan

and therefore users tend to think of it as a free service), while 39.4% say they don't know

the cost of the service. The use and expense figures are similar to those in the seventhedition of MAVAM (data for the fourth quarter of 2010).

Use percentages are slightly higher in the case of men (67%) as compared to women(65%). In terms of age groups, the use of voice mail services has increased to 69% forusers between 25 and 45 years of age. The use of voice mail services tends to be higher

for post-paid service users (77%).

| 38 |

Chart 34.

Instant messaging usersprofile by plan, age

and genderBasis: Total sample.


4.1.5. e-mail

In this survey, 61.8% of users have cellphones enabled to receive e-mails but only39.2% have set up an e-mail account.Slightly less than half of those users havepush-type connectivity (43.9%).

If we take into account the total number ofrespondents, push e-mail is being used by

10.5%, while 13.6% of respondents use abrowser to receive e-mails. Figures are stable

with respect to MAVAM’s prior Edition.

4.2. Entertainment

As clarified in the prior Edition, given that respondents are more familiarized with thistechnology, access to entertainment via mobile phones is usually higher than in the case of

those who do not use the Internet frequently.

During the first quarter, 21.6% of respondents have at least once downloaded some kind of

entertainment feature over the last three months. Music and images downloading are stillleading the list of preferences when compared with the prior edition of this study.

| 39 |

Chart 35.

Use of e-mail in cell phone

Chart 36.

Mobile entertainment (Download)


The trend for downloading free entertainment features remains stable, and this is achallenge for operators' models and content producers. Game downloading appears notonly as the leading entertainment content in the segment of paid downloads, but also as

the segment for which users are most aware of costs.

Given the small number of users who consume paid entertainment, the data fordownloading costs and number of downloads are for illustration purposes only and cannotbe considered as representative of the total for Brazil. However, results are consistent withthe results for the prior study, with 3 to 6 downloads per month. The amounts paid forpaid downloads have increased in the case of Ringtones, video and images. The variability inthese data is affected by the small number of users downloading paid downloadable items

and who are capable of remembering or estimating the price paid for those downloads.

| 40 |

Chart 37.

Entertainment: Free downloads vs.

paid downloads

Music Ringtones Games Video Images

Frequency of downloads per month 6 4 3 5 5

Average download price 2 R$ 4.4 R$ 4.5 R$ 1.9 R$ 6 R$ 6.6

2 Dado o baixo número de usuários que

consomem entretenimento pago, os dados

relativos ao custo de downloads e o número

de downloads são meramente ilustrativos, e

não podem ser consideradas representativos

da amostra total.


| 41 |

4.2.1. Games (use and downloads)

88% of respondents know they can access games through their mobile phones, but only59% of respondents use the games installed in their cell phones. The numbers indicatethat there is a wide range of gaming-enabled cell phones with users who have not beeninterested in using that service yet.

For the use of games, MAVAM defines active users as those users who do not use theservice daily and/or several times a week, and we found that 44.9% of users fall into thatgroup. The average use of preloaded games is once every three days, equivalent to at least

10 times a month.

The use of games is higher among men than among women and almost non-existentamong users older than 45. When analyzed by type of plan there are almost no differencesamong pre-paid and post-paid users.

As regards downloading of games, 12% of the sample said they have performed at least onedownload over the last 3 months, representing a figure similar to the figure in the prioredition. However, 44% of those users download less than one item per month, and thefigure goes down to 5.7% if we only take into consideration those who have downloaded anaverage of between one and 10 games per month (active users). 73.9% of those who

downloaded games only download games once a month.

Chart 38.

Mobile games:Frequency of use

Basis: Users of games pre-loaded

on the phone. (59% of total

sample).


Two out of three of average downloads per month were free downloads. The average cost of

each game was R$ 1.9 per download. Games are also the entertainment content for whichusers are most aware of number of downloads and price (only 3.9% of those who downloadare not aware of the value of those downloads), and this information can influence thedecision to download and must be taken into consideration when preparing paid gamesdownloading proposals.

4.2.2. Music (downloads)

Mobile music and radio results from the wide range of MP3 and radio enabled devices. Thus,

78.9% of respondents indicate that they can hear the radio in their devices, and 71.6% statedthey can play MP3 audio files.

Music is the leader as regards preference for the type of downloaded contents, representing21.6% of the total sample. However, those who are not active (download on a daily basis,

several times a week or once a week) represent only 8% of the total number of respondents.Even if the numbers have decreased compared to the prior quarter, the variation is notstatistically significant since the number of users downloading music is still low in relation

to the total study.

| 42 |

Chart 39.

Mobile music:Download frequency

Basis: 21.6% of the sample

(those who downloaded music

over the last three months)


Downloading consists mainly in searching for free music contents (57.1%), with 12.1% of

total users for whom the download implied some kind of expense, which amounted to anaverage R$ 4.4 per downloaded unit.

Users who download music (21.6%) download contents 7 times per month on average,which is equivalent to about once every 4 days. Music downloading tends to concentratein two groups: active users (48%) and users who download only once per month or less

(45%).

Music downloading tends to be higher for pre-paid than for post-paid users (remember that

downloads are mainly free downloads) and it is focused on the age group of users between25 and 44 years old.

4.2.3. Ringtones

(downloads)

10.2% of respondents remembered havingdownloaded at least one Ringtone over thelast 3 months. Of such 10.2%, half did itonce a month on average. This content ismainly free and only 19.6% of those whodownloaded ringtones have paid for them,which represents the second highestpercentage of paid downloading of the

sample. Compared with the prior quarter,the numbers remain constant.

| 43 |


4.2.4. Images (downloads)

21% of respondents downloaded images over the last three months, together with musicthis is the most popular type of mobile content or entertainment in Brazil. Of the totalsample, 7.8% of active users who download images (daily, several times a week or at leastonce a week).

There was an average of five downloads per month. In 57.8% of the cases, downloads arefree downloads and 37.1% does not know the cost. Those who paid for downloadingimages remember an average cost of R$ 6.6 (figures are only for reference because 5.1% of

respondents who download music remember the average cost).

As in the case of music downloading, the frequency of images downloading is dividedamong active users (37%) and those who rarely download (44%).

| 44 |

Chart 40.

Images & Pictures:Download frequency

Basis: 21% of the sample

(those who downloaded images

over the last three months)


4.2.5. Video (downloads)

Those who remember having downloaded videos over the last 3 months represent 12% ofthe total sample. Now, those who download actively (daily, several times a week or once a

week) represent only 5% of the number of respondents. Compared withthe prior quarter, the numbers remain constant.

Respondents have downloaded 5 videos per month on average, and in56.7% of the cases they downloaded free content. Only 8.9% of those whodownload video can remember an average price for downloading, for which

the amount received is R$ 6.

As a reference, we can cite that men (15%) download more video contents

than women (9%) and the age group with more downloads is the group ofthose between 25 and 34 years of age (14%). Video downloading is higherfor post-paid services users (14%) than for pre-paid services users (11%).

4.2.6. Mobile TV (Visualization)

In this edition of MAVAM we improved the method to ask about mobile TV in order tohelp users identify the service and differentiate it from video downloads. Based on theexperience of Convergencia Research for MAVAM and for other studies, it is important tonote that users do not differentiate consumption of a video from what in technologicalterms we may consider a mobile TV transmission. This is why the results of all those surveysattempting to investigate the use of Mobile TV must be reviewed carefully. In our case,

when changing the question the results cannot be compared with MAVAM’s prior edition.

Pursuant to this Edition of MAVAM, about 15% of users have devices enabled to tune open

digital TV. Almost all respondents stated they have watched mobile TV over the lastquarter. Active users (those who watch TV on their mobiles daily or at least once a week)represent about 9%.

They watch TV contents in their mobile phones once every three days on average,equivalent to about 10 times a month. TV consumption for this sample is focused on news

and information (25%) and soap operas (19.5%).

| 45 |

Chart 41.

Use of social networks


4.3. Social networks

To contextualize the relevance of the mobile social networking market in Brazil, it isimportant to remember that pursuant to the last report issued by Comscore, in March2010 social networks accounted for 25 thousand million web page views and that almost99% of the on-line population (Internet users) use social networks. On average, pursuantto the same study, Brazilians visit social network sites 30.6 times. Figures place Brazil as

the third most important audience in the world for social networks.

29.4% of respondents accessed a social network through their cell phones over the last

three months. The numbers obtained represent a 39%-increase compared to the fourthquarter of 2010, when only 22% of respondents had used social networks in their

mobile phones.

Since our survey is carried out via the Internet, we make calculations and estimates (SeeTechnical Data Sheet – Methodology) to avoid methodological bias and set forthsuggested values of the percentage of social networks’ users over the total of mobile users.

Convergencia Research estimates that about 12% of mobile users in Brazil use socialnetworks in their mobiles.

Given the intensive use of social networks through computers, it is interesting to look atoffers by mobile operators to capture the demand of access to social networks in mobiledevices and incorporating the combination of access to the network with the use of SMS.

For instance, Claro offers access to Twitter via SMS for R$ 2.99 per week, and access toFacebook for R$ 0.29 via SMS, R$ 0.60 via MMS, or from the portal in the cell phonebrowser for R$ 9 per MB, or other cost depending on the data plan hired. In turn, Timlaunched in 2010 the Twitter SMS, Facebook SMS, o.facebook.com, Orkut SMS services,

as an attempt to simplify access to social networks. In addition, it has a social networkintegrator, the “TIM Social Box” package,

for R$ 0.31 plus taxes per day. “Posts” are

charged at the same rate, and replycomments or posts are received via SMS.The sending of images or videos via MMScosts R$ 0.49. In the case of Vivo, allphones have access to social networks andthis service can be charged based on data

traffic or packages.

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Back to our survey, in 82.2% of the cases Orkut is the social network with the most visits,

followed by Facebook and Twitter, with 75.4 and 57.2% of the total sample, respectively.Compared with the last quarter of 2010, we note a 9%- increase in access to Facebook and a7% fall in access to Twitter and Orkut.

Facebook is the network with most frequency of access (45% access daily) and Linked In isthe network with the less frequency, with users accessing once every three days on average.

Orkut and Twitter have a frequency of access of once every two days on average.

In 43% of the cases, users stated to have dedicated about half an hour a day interacting in

social networks through their mobile phones. The number is somehow high, and it must beinterpreted as the user's perception of the time invested. Probably 30 minutes is the total

time dedicated in general to social networks, that is to say both in the computer and themobile phone.

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Chart 42.

Mostly used social networksBasis: Social networks users (29.4%).

Multiple option.


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4.4. Mobile marketing

91.2% of respondents received at least one SMS or MMS with promotional content to theircell phones, almost three percentage points above the figures recorded by the end of 2010.

Messages received in general are to promote the operator hired itself. This is true in55.5% of the cases. As the main minorities, theanswers that relate SMS or MMS received to aservice-rendering company (8.2%) or to a companyadvertising consumer products (9.8%) appear.

Chart 43.

Issuer of mobile marketing/ advertising


4.5. Mobile banking

6.9% of respondents use their mobile phones to access a bank or financial system. The leadinguse is to consult bank balances, with 6.5% of respondents, followed by transfers (4.5%) andfor the payment of bills (3.8%).

4.6. GPS e Maps

9.6% of the total number of respondents said they have used GPS services on their cellphones over the last three months. They used it 6 times a month on average. Taking intoconsideration that 18% of the sample stated that their phones were GPS-enabled, the

percentage of users is relatively low.

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Chart 44.

Use of mobile bankingservices

This MAVAM edition ratifies the progress of value added in Brazil.

Value added services during the first quarter of 2011 amounted to 18% of the net sales forthe operators’ services. The volume of net sales of VAS was equal to R$ 1,282 million,which amounts to 33% above the figure pertaining to the first quarter of 2011.

Mobile Internet represents 48% of the sales for value added services in Brazil. The Brazilian

market of mobile Internet amounts to 45% of the total market in Latin America.

By the end of the first quarter, the range of data devices, phone devices and mini-modems was

equal to 24.4 million; mostly 3G (22.9 million). Mini-modems reached 6.8 million (out ofwhich 4.8 are 3G) amounting to 47% in Brazil of the range of mini-modems de Latin America.

Mobile Internet on the phone is mostly used for personal purposes (76%). The most time-insuming activity on the Internet, as accessed via cell phone is the visit to social networks (32%).

Mobile broadband through computers is used in almost equal proportions for personal or

professional purposes; notwithstanding that, the use for personal purposes prevails. Most ofthe time it is used to answer e-mails (22.2%), and there are other activities that are

equivalent as to the use of time, which are surfing the Web and visiting social networks (20% each). The uses of mobile

connection in netbooks tend to reply the use of computers on the fixed broadband.

The use of SMS grows as the offers from operators grow in this type of services. It is estimated that average users send 22 SMS per

month. The revenues from SMS and MMS amount to 41% of the revenues from VAS, equivalent to USD 523 million. Brazil hasa 17% share in the SMS business in Latin America.

The use of MMS shows a trend toward an increase in picture exchange.

Downloads related to entertainment still rank music and picture downloading first in the listof preferences. The demand is focused on the age group of users between 25 and 44 years old.

Downloading of games is the service with the highest percentage of paid downloads, and itis the entertainment content for which users are most aware of the price paid for the service.Notwithstanding that, the downloading percentages are still low.

The number of user which received promotional content to their cell phones via SMS or MMSwas increased by two percentage points, and the operator is still the main generator of

promotional messages (mobile marketing).

MAVAM | 5. Final Conclusions

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Final Conclusions5

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MAVAM | 6. Glossary

The description of the services presented in this report is presented in the following sections.

Messages The services in this category can be defined as:

SMS (Short Message Services): sends short text messages.

MMS (Multimedia Message Service): sends short text messages with image, photo,or video.

E-mail: receives or sends emails via cell phone. Receiving or sending can be donemanually, in other words by user’s initiative, or can be activated through the push

mechanism, which periodically and automatically receives and sends mail.

Instant Messages: service which permits access to instant messaging systems like MSNor Yahoo.

Answering Machine or Voice Messaging: gives access to the automatic messagesrecording service offered by the carrier, in case of receiving calls that can’t be answered.

Entertainment The services in this category can be defined as:

Music: service which provides the download of songs to be played in the cell phone. Thehandset must be able to play several music formats such as MP3, AAC, MP4, WAV,among others.

Ringtone: service which provides the download of ringtones to be used in the handset.The cell phone must be able to play multiple formats of ringtones, such as MIDI, AAC,MP3, MP4, WAV, among others.

Images: service which provides the download of images and photos to be displayed onthe cell phone. The handset must be able to display several formats of pictures and imagessuch as JPEG, GIF, among others.

Games: service which provides the download of games to be played on the cell phone,

individually, or through internet or Bluetooth connections, in groups. The cell phone must

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Glossary6

MAVAM | 6. Glossary

be able to run the games available in the device and also the downloaded ones, and additionally

provide Bluetooth or data connectivity for internet access (eg.: EDGE, EVDO, or 3G).

Video: service which provides the download of videos or video streaming to be played oncell phone. The handset must be able to play downloaded videos or received video streaming.The cell phone must be able to play videos in 3GP, MP4, WMV, AVI, among others.

Open TV: This feature is present in some cell phones and permits user to watch free TVprograms with the handset acting as an analogue or digital TV receptor and capturingcontents through the same signals (frequencies) received by traditional TV’s at home.

Internet and Location The services in this category can be defined as:

Internet Access: service which provides broadband access to the Internet via cell phoneor modem. In both cases users must have a data plan contract with the mobile operator.

This service has the following characteristics:

Cell phone: the internet access from cell phone can be done in thefollowing ways: 1. Using a browser to access the same websites accessed by fixedinternet through a computer. Examples of browsers: the onesoffered by the cell phone or smartphone (Internet Explorer

Mobile, for Windows Mobile), or alternative browsers such asSkyfire or Opera. 2. Accessing the WAP websites inside the Carrier network

through WAP browser. 3. Through specific programs installed in the handset (Widget, Web-App) provided by

companies like Yahoo Mobile.

Modem: devices which can be connected to desktop computers or notebooks. ProvidesInternet broadband connection using a computer browser (Internet Explorer, Firefox,and others).

Social Networks: service which includes all the necessary elements to provide access to

social networks such as Orkut, Twitter, Facebook, and others. This access can be done

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MAVAM | 6. Glossary

through browser and internet access, both present on cell phones, or through a specific

application provided by mobile operators or other companies.

Payments and Banking: usually offered by banks or other credit institutions, whichallows the access to users accounts in these institutions. These services can range fromsimple balance consults to the payment of bills or conclusion of investment transactions.

Location Based Services: service which provides users’ geographic location. Theseservices have the following characteristics:

Location: can be provided as the following: 1. Through a process of triangulation using information from cell sites and application

systems provided by the operator for this purpose;

2. Through the GPS installed in the cell phone.

Offered Services: 1. Location: service usually offered by the mobile operator which allows informing the

geographic location of a particular subscriber. Eg.: service hired by parents to monitortheir children’s habits, or with the purpose of promoting safety. 2. Maps: service offered by other companies providing maps on cell phones, usually to locate

addresses, and also permits to locate users in the map if their handsets have a built-in GPS. 3. Contextual Filter: permits the mobile operator, or other service providers, to offeraddresses or other types of promotions at stores, restaurants, movies, among others, basedon the instant location of users.

Mobile MarketingThe services in this category can be defined as:

Mobile Marketing: these services are implemented by mobile operators, to advertise the

operator itself or other companies for the subscriber base. Usually these ads are sent via

SMS. The advertisements can also be sent directly by competitor carriers or othercompanies, again using SMS messages.

Mobile Advertising: similar to Mobile Marketing, Mobile Advertising is also anadvertising service implemented by mobile operators or other companies. If the subscribersagree to receive it they can participate of promotions such as free minutes, free SMS

packages, and others, as a reward for receiving advertisements.

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MAVAM | 7. Methodology

To asses evolution of value added services in Latin America (Brazil, Mexico, and Argentina).

Carried out via Web (CAWI) with SEL, age and sex shares. IPC of Brazil's geographic regions.

1,494 interviews = 1,294 CAWI + and 200 CATI.

Statistics error margin: ± 2.5 p.p.

May 13 to May 30. (Results on Q1 11 – MAVAM 8th Edition).

Both sexes, between 18 and 65 years old. Class status A/B/C (Critério Brasil), mobilephone users.People mostly related to technology. Therefore, some results of this study are expected to behigher than those found out in the common population in general.

People registered in the access panel of Quanti Pesquisa de Mercado.

Objective

Data collection method

Sample

Data collection period

Target

Sample frame

*Source: IPC-Target

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Methodology7

mavam brasil 062011 ok ing

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