Mavam brasil 032011 oking

MAVAMAcision Monitor for Mobile VAS

7˚ EDITION

© Copyright Acision March 2011

Prepared by

BRAZIL

MAVAM | Acision Monitor for Mobile VAS

We have reached 205.15 million Mobile telephone subscribers in Brazil, with a 105.74

handset density every 100 inhabitants in early 2011. It is worth mentioning that thelocal market evolution is being driven by several social and economic factors, especiallyby the effort made by mobile phone operators when offering innovating servicealternatives to the consumers.

TIM, for instance, posted growth in its users’ base in 2010, standing only 0.2% below

Claro, second in the national ranking. TIM obtained important incomes in 2010, beingdriven, among other factors, by the offer of voice service packs.

Vivo, market leading operator, encourages a statement consisting in increasing itsinvestment in data networks thus enlarging its 3G base coverage, which has already

reached more than 1050 districts. Claro, Oi, TIM and Algar follow the same path, which

consists in increasing their investments in 3G networks and enlarging their coverage toallow the use of the network in 85% of the districts of the wide and complex Brazilianterritory.

In this seventh edition of MAVAM, as our special topic, we will be looking at MobileMarketing opportunities and advances, a product still little exploited in Brazil and with agreat growth potential due to the easy service and product offer customization. In the

study we identify that there is space for growth and development of campaigns which arerelevant to consumers, respecting the privacy and segmentation criteria of the offeraligned with the user’s profile.

Acision, keeping its commitment to offer relevant information for the mobile phonemarket, has remodeled this study with a bigger number of interviewees, new approachesand a new presentation format. It has also spread the study coverage in Latin America,presenting Argentina and Mexico’s MAVAM editions, covering the three main markets in

the region.

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Editorial

Rafael Steinhauser

Acision

Presidente para América Latina


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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

11 1.3. Value Added Services (VAS) in Brazil

15 2. MAVAM (Acision Monitor for Mobile VAS)

17 3. Special topic: Mobile Marketing and Mobile Advertising

17 3.1. Mobile Marketing & Advertising current penetration

18 3.2. Issuing party

18 3.3. Content

20 3.4. Privacy and consent

21 3.5. Receptivity21 3.5.1. Discounts 21 3.5.2. Prizes 22 3.5.3. Free SMS and voice minutes22 3.5.4. Proximity23 3.5.5. Perceived behavior

24 3.6. Mobile MarketingConclusions

Index


25 4. MAVAM Brazil

25 4.1. Message services25 4.1.1. SMS 27 4.1.2. MMS 28 4.1.3. Instant Messages (IM) 28 4.1.4. Voice mail29 4.1.5. E-mail

29 4.2. Entertainment 30 4.2.1. Games (use and downloads)31 4.2.2. Music (Downloads) 32 4.2.3. Ringtones (Downloads) 32 4.2.4. Images (Downloads) 32 4.2.5. Video (Downloads) and Mobile TV (watching)

33 4.3. Mobile Internet34 4.3.1. Social networking 35 4.3.2. Applications36 4.3.3. Mobile Banking 36 4.3.4. GPS and Maps

37 5. Final conclusions

38 6. Glossary

41 7. Methodology

42 8. Team

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MAVAM | 1. Introduction

By the end of the year 2010, there were 5.41 billion service subscribers worldwide, out of the

6.92 billion total inhabitants, which means a penetration of 78 cell phones every 100inhabitants. Pursuant to the estimations made by Convergencia Research América Latina3,by the end of 2010 there were 559.74 million mobile subscribers equivalent to 10.37% ofthe total global lines. The average penetration in the region is 96 lines every 100inhabitants; and between 2011 and 2012 every country, except for Cuba and Nicaragua,will exceed 100% penetration.

In 2010 the global revenue generated by mobile phone services was equal to around 800billion Dollars5, which is equivalent to 1.3% of the Gross World Product (GWP). Pursuant

to the estimations made by Convergencia Research, the revenue derived from mobile phoneservices in Latin America in 2010 was about 81 billion Dollars, which amounts to 8.5% of

the global business of mobile services.

Latin America is not an exception to the transformation of the mobile services industry,which is taking place globally: saturation of penetration rates, new devices, and increase inthe data traffic, among others. Notwithstanding that, the economic projections made by

most countries with their gross domestic products growing above 4%, generate conditionswhich are more than optimistic to face this transformation process in which value addedservices (VAS) will play a key role.

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Introduction1

1 Source: Report by Telecoms & Media

WCIS+, 4G Américas’ Web site

2 Source: Estimations made by the World Bank.

3 Includes Latin America, Caribbean, Central

America and Mexico.

4 Data assessed on the basis of balance sheets,

regulators and own estimations.

5 Source: Estimations made by Convergencia

Research.

Graphic 1.

Mobile Subscribers 2010 Total world as of Q4 2010: 5400 Million

Mobile Revenues 2010Total world 2010: 796 billion

Source: Convergencia Research based on the balance of the operators, local regulators and the Internacional

Telecommunication Union (ITU).

In order to show the global impact of VAS on the business of mobile phone services, a

sample was selected which includes seven companies with presence in different countries(See graphic 2). At each company, an analysis was conducted of the total revenue evolutionfrom December 2009 to December 2010, and the evolution of the participation of therevenues obtained from VAS in relation to each company’s total sales.

VAS services basically include: SMS and MMS (messaging service), music, videos, games,

ringtones (entertainment), mobile banking and payments, mobile broadband, socialnetworks, and marketing / mobile advertising.

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1. Value Added Services in the World 1

Graphic 2.

Operators Analyzed

1. AT&T - Unites States of America

2. China Mobile - China

3. France Telecom

4. América Móvil Latin America

5. Telefónica

5.1. Telefónica Spain

5.2. Telefónica Ireland

5.3. Telefónica Latin America

6. Vodafone

6.1. Vodafone United Kingdom

6.2. Vodafone Germany

6.3. Vodafone India

7. NTT Docomo Japan

8. SKTelecom Korea


Variation in the revenues obtained from the Voice Servicesvs. VAS

The mobile voice business faces a generalized downward trend (See graphic 3). In this sampleof countries, which is varied as to geography and typology, there have been up to 12%yearly falls, except for such countries as China (+ 6%) and India (+21). These countries areundergoing pure expansion processes, with a mobile phone penetration rate below the global

mean (77 %) and with 3G technology which is just taking off. In the particular case ofChina, with almost 860 million mobile subscribers by the end of 2010, only 25 million(3%) use 3G technology services and Vodafone India, with 124 million mobile customers

aims at launching mobile broadband services through 3G technology on the January-Marchquarter of 2011. There are currently almost no 3G services in India.

In the particular case of the VAS business, there is a general 2-digit increase, highlighting

Telefónica Latinoamérica (Telefónica Latin America) (+ 43%), Vodafone India (59%), andAmérica Móvil (40,4%).

It may be further observed that the gap –between countries with higher and lower economicdevelopment– in VAS use and market penetration ratios is increasingly reduced as lessdeveloped countries introduce more customers and as the counties with more developed

economies enter a phase of solely vegetative growth.

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Graphic 3.

Variation in the revenuesobtained from Voice

Services vs. VASDecember 2009 vs. December 2010

Source: Convergencia Research on

the basis of the financial reports

of the operators.


The countries with lowest mobile phone penetration

rates are undergoing a natural evolution stage, which hasalready been undergone by those countries with higherpenetration rates. This evolution path ranges from thoseVAS mainly based on SMS (a feature which is operationalon almost all the telephones) to those VAS based onmobile Internet (in developed countries with more

sophisticated devices).

Not only is the annual growth of mobile VAS important in

absolute values, but its increasing contribution to the mobileARPU is also relevant. On many occasions, not only does it

compensate the losses in the voice business but it also makesit possible to increase the total ARPU. A good example ofsuch situation is Telefónica Latinoamérica, where in spite of a6%-yearly fall in the voice business as a consequence of the

increase in the use of VAS, the total ARPU has also been increased by almost 2% (-0,2% in

constant currency).

Considering the development of more mature countries such as the United States, Germany,

and the United Kingdom, this contribution figure exceeds 35% with a clear upward trend.In particular, in Japan the revenues obtained from voice services have just been put in thesame level with the revenues from VAS.

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Graphic 4.

Analysis of VAScontribution to the

mobile ARPUDecember 2010

Source: Convergencia Research on the

basis of operators’ balance sheets


S

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Source: Convergencia Research on the

basis of the operators’ balance sheets,

local regulators and International

Telecommunication Union (ITU).

Graphic 5.

ARPU fluctuation: Total vs. Voice. vs. Service Penetration and Data

December 2009 vs. December 2010


1.2. Value Added Services in Latin America

By the end of 2010, the nucleus of mobile subscribers in Latin America consisted of83% prepaid and 17% postpaid. The high prepayment level has not constituted arestriction on the growth of revenues for value added services (VAS), which representbetween 15% and 25% of the operators’ revenues, and may even reach values between35% and 40% in some cases.

By the end of December, the average ARPU in the region was closet to USD 11,28. TheARPU values in Dollars have remained almost unaltered over the last three years as a

result of a combination of effects which are related both by the value proposals and bythe ARPU’s own increases in local currency, depending on the operator’s country. In

most cases, except in the case of Brazil, the main value added component is the one

generated by SMS.

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Graphic 6.

VAS by componentAverage Total Region 2010

Source: Estimations Convergencia

Research

Graphic 7.

ARPU Voice vs. Data in Latin America per country

Source: Convergencia Research

1.3. Value Added Services (VAS) in Brazil

In October 2010, Brazil exceeded the 100 mobile phones every 100 inhabitants. By January2011, pursuant to the data compiled by Anatel, the mobile lines reached 205.15 millionlines. All this in a context in which Brazil becomes the big regional attraction consideringthe good economic perspectives and the general impact on infrastructure that will be causedby the Football World Cup (2014) and the Olympic Games (2016).

This scenario -with a penetration rate above100%- is reached with a prepaid basis

percentage equal to 82.3%, which has beenkept stable over the last 5 quarters, and even

with some operators with postpaid baseswhich were undergoing faster growingprocesses than the prepaids.

Operators’ total gross revenues reached almost

R$ 67.3 billion, and increased by 8.23%between 2009 and 2010.

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Graphic 9.

Mobile Services Grossrevenue

Source: Services Gross Revenue: Vivo, Tim, Oi, Operators´ financial statements; Claro and the rest of market

estimated by Convergencia Research / Net revenue: Vivo, Tim, Oi, Claro operators´ financial statements. Rest

of the market estimated by Convergencia Research.

Graphic 8.

Market Share of mobile linesJanuary 2011

Average weighted ARPU was reduced by8.6% throughout last year and the MOUincreased from 3% to 39%, depending on

the operator, but it registered falls in pricescharged to voice minutes. These two trendshave reinforced the importance of VAS to

increase operators’ revenues.

During the fourth quarter of 2010,revenues for value added services (VAS)reached R$ 3.05 billion, thus amounting to16.99% of gross revenues obtained from

services rendered by mobile phonecompanies.

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Graphic 10.

ARPU’s Growth, Brazil2009-2010

6 Average weighted ARPU including Vivo,

Claro, Tim, Oi, CTBC. Sercomtel and

Aeiou do not available.

7 Source: Q1 2009 to Q3 2010: MAVAM

Acision (Teleco and operators) – T42010

Estimations made by Convergencia

Research. It must be considered that this

value is not precisely comparable to previous

value since assessment methods used by

Convergencia Research differ from the

methods previously used by Teleco.

Note: Only Vivo, Claro, Tim and Oi are

included. Source: Operators´ financial

statements.

Source: Operators´ financial statements.

Oi doesn´t publish MOU

but it has mentioned that 2009/2010

growth was 4%.

MOU 2009 2010 Growth

Vivo 92 116 26.09%

Claro 93 96 3.23%

TIM 83 116 39.76%

Oi nd nd 4.00%

Graphic 11.

VAS Gross revenue as percentage of total Services Gross revenueTotal Brazil


Throughout the year, the VAS reached a gross sales volume equal to R$ 10.93 billion

(Reales), which is 24% above volume reached in 2009 (7.69 billion Reales).

In Brazil, Internet services are the main contributors to the VAS ARPU (47%). This

situation differs from the rest of Latin American countries, where VAS ARPU is stillmainly led by SMS.

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Graphic 12.

Evolution of gross salesVAS Brazil2009 vs. 2010

Graphic 13.

VAS vs. Voice Q4 2010

Source: Estimations made by

Convergencia Research on the basis of

previous MAVAM editions, own

estimates and secondary sources.


Vivo remains as the operator with the highest VAS contribution to its sales. Vivo VAS netrevenue increased 57% during 2010. Mobile Internet acounts for 53% of Vivo´s VAS net

revenue, while SMS+MMS, for 34% and Others, for 13%. Within this operator’s VAS,Internet was the service with the highest growth rates.

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Graphic 14.

Sales of Value addedservices as a

percentage of ServicesGross Revenue

Quarterly Evolution 2009-2010

Graphic 15.

Vivo: VAS Net RevenueEvolution 2009 – 2010

Vivo: VAS Net Revenue by component Vivo: VAS net Revenue

Evolution 2009-2010

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 will focus on Argentina.

This new Brazil’s MAVAM edition methodologically differs from previous editions in that: a. The number of respondents increased and 1,206 people were actually surveyed; 1,072 of

these respondents were contacted through Computer-Assisted Web Interviewing (CAWI)and 134 through Computer-assisted telephones interviewing (CATI).

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

As the number of Web users (almost 60 million) is less than the number of mobile users(200 million), the change in data collection means that the surveyed population is familiar

with technology. This meansthat some data can be applicableto all mobile users while othercannot. We explain, in each case,where the data only represent thissample and where they represent allmobile 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 allow newmeasuring and analysismethods other than thoseused in prior editions.

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MAVAM (Acision Monitor for Mobile VAS)

2

Regiões do Brasil

North 4%

North east 17%

South east 55%

South 16%

Center west 7%

Brazil: GeographicalregionsShare in current sample

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

• Music• Images

• Games • Ringtones• TV • Video

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• Internet access • Social networking• Application download (new topic)• Location Based Services (LBS)

• Payments and banking• Marketing (Special topic)

This edition was prepared by

Convergencia Research and Quanti

Pesquisa de Mercado between Februaryand March 2011.

MAVAM | 3. Mobile Marketing e Mobile Advertising

Mobile marketing and advertising are the special topics in this new MAVAM edition.This sample - as we have already stated - represents the Brazilian population that doesnot only use mobile phones, but also uses the Internet and is applicable at country level.However, it should be noted that the respondent is familiar with technology; thus, somepercentages exceed those expected for people not having access to the Internet but using

a mobile phone.

3.1. Mobile Marketing & Advertising

current penetration

89% of respondents stated that they once received an SMS or MMS with promotions oradvertising. Among those receiving messages with promotions or advertising in their

mobile phone, 31.8% confirm that theyreceive 2 to 5 messages a week.

However, it is worth mentioning that only17.8% confirmed they have registered toreceive advertising messages, which does

not mean that users have not given theircontractual consent to them. However,only some really know they have givenauthorization.

Reading: 53.6% stated they carefully read the messages received in their mobile phones.

Penetration: 52.7% of respondents considered that the receipt of messages withpromotions or advertising in their mobile phones is not limited to those owning modernand expensive mobile phones.

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Mobile Marketing and Mobile

Advertising

3

Graphic 16.

Received advertising intheir cell phones

No11%

Yes89%

SPECIAL TOPIC


3.2. Issuing party

Mobile advertising main issuing party is the operator (78.7%), followed by consumer-products companies (13%) and other service companies (8.8%). 16.8% of respondents donot know which company has sent the SMS/MMS advertising.

3.3. Content

The main issuing party of advertising messages being the same operator, it is natural that,within this sample, 34.7% of messages include advertising of the mobile operator’s

services, while 16.5% of respondents specified that they refer to SMS packages. 13% ofrespondents do not remember the content of the messages received, while 10.7% confirm

that their content was related to launches or presentations.

The following chart shows there are four categories that concentrate 67.9% of theadvertising content sent to mobile phones. These four categories are: advertising of theoperator’s service, free SMS packages, launches and promotions, Promotions and/oradvertising.

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Graphic 17.

Issuer of Mobilemarketing/advertising

Multiple Option

Base: 89% of the sample


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Graphic 18.

Content of theadvertisement received


3.4. Privacy and consent

Over the total number of respondents – including those who have not receivedadvertising – 79.1% consider that companies should ask for consent before sendingadvertising messages and added that they would only receive advertising messages fromcompanies that were previously authorized to send them.

These percentages account for the respect for the right of privacy and the need to clearlycommunicate users when, how and on behalf of whom are they accepting mobileadvertising. Otherwise, the good receptivity to mobile advertising, as described below, will

be lost.

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Graphic 19.

Companies should askfor consent to send

advertising messages

Graphic 20.

I would only like toreceive messages with

promotions fromcompanies I previously

authorized


3.5.1. Discounts

64% of respondents have a positive attitude towards the opportunity given by advertisingmessages to obtain discounts on clothes, events and other products and services. Whenconsidering the growth of the business, it should be taken into account that 37.9% ofrespondents completely agree to accept advertising in exchange for discounts. They arehighly receptive to exchanges. Nevertheless, this question should be analyzed within the

need of consent whereby users can firmly show that they are receptive insofar as the offer isconsistent with their preferences.

3.5.2. Prizes

As usual, the receptivity to messages promoting a prize or a gift is higher. In this case,44.9% of respondents highly agree.

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5. Receptivity3

Graphic 21.

I accept to receiveadvertising messages in

my mobile phone inexchange for discounts

in clothes, events

Graphic 22.

I agree to receiveadvertising messages in

my mobile phone inexchange for prizes

and gifts


3.5.3. Free SMS and voice minutes

In general, it is widely known that people are receptive to advertising in exchange for freeproducts or services they usually have to pay for. Thus, it is reasonable to see highpredisposition towards advertising in exchange for free SMS and voice minutes,particularly in a predominantly prepaid market where the user has the costs under

control. In this case, 49% of users totally agree with receiving advertising in exchange forSMS or voice minutes.

3.5.4. Proximity

In view of the location based advertising business, it is important to understand the user’sreceptivity to it.

61% of users would accept information on events and shows near their geographiclocation.

54% of respondents would accept advertising on stores or other places near theirgeographic location.

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Graphic 23.

I agree to receiveadvertising messages in

my mobile phone inexchange for free SMS

or voice minutes


3.5.5. Perceived behavior

Respondents were provided with the following information: “Advertising in the mobilephone will probably make me test the product or service offered”. They were asked to what

extent they agreed.

Answers were divided. 39% agreed that mobile advertising may make them test the product

offered, while 36% disagreed.

Any way, it is worth taking into account that these answers affect motivation and theopinions the person has on the influence of advertising.

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Graphic 25.

It is probable thatmobile advertising

makes me test the promoted product

or service

Graphic 24.

Location based advertising


3.6. Mobile Marketing final considerations

Users defend their privacy, so they wish to receive on their cell phones marketing oradvertising messages only from the companies they have given their consent to.

Discounts in places where users usually buy(71%) and information about products

usually used (65.3%) are the categorieswith a better level of acceptance among theones analyzed in the survey.

We must notice that those who complete

the interview obtain an incentive for

doing so; that is why this populationgroup also has a higher receptivity levelthan the rest of the market in front ofadvertising messages in their mobile

phones that, in exchange, provide anincentive (an award or gift).

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Graphic 26.

Users are receptive tomobile advertising on....

Iwould be grateful to receive + I would like to receive

MAVAM | 4. MAVAM Brazil

4.1. Message services

Message services, particularly SMS, are the mostly used value-added services. However,Latin American countries show an increasing trend towards the use of instant messages(IM) and email. As regards the latter, it is both stimulated and subject to the growth ofsmartphones and featured phones (sophisticated phones) within the total of currentphones.

4.1.1. SMS

This edition shows that 88% of users have used SMS in the last three months. However,

31.3% of users stated that “they rarely use the service”. This shows that, in Brazil, theuse of SMS is still highly stimulated.

According to estimates arising from this survey, in average users send 41 SMS per

month. It should be noted that, as the survey was taken over the Internet, these users areusually familiar with technology and the frequency of use of SMS is higher than theestimated average market which ranges from 25 to 30 SMS per month.

For those who rarely use SMS or have not used it in the last three months, the mainobstacles are those related to lack of interest in the service (77.8%). Among thosereasons, we can mention the preference to make phone calls, the lack of interest orfunctionality. The price is considered the second most important obstacle (9.5%)

36.5% of respondents consider that the use of SMS will increase in the next 12 months,while 52.5% believe that the use of SMS will remain steady, that is to say, we must be

highly positive when thinking on the evolution in the use of SMS.

If current obstacles and future expectations are analyzed, we can conclude that to

increase the use of SMS it is necessary to overcome cultural obstacles, rather than offeror price related obstacles.

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MAVAM Brazil4


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Graphic 27.

Used SMS in the last 3 months

Frequency of use of SMSObstacles to adopt SMS

Graphic 28.

Future use of SMS - Momemtum


4.1.2. MMS

This MAVAM edition shows particular considerations when understanding MMS users’figures.

17% of the total number of respondents have used MMS in the lastthree months. However, 69.9% thereof rarely use this service. Thus, to

determine the MMS market, it is worth considering those users whoconfirmed they send one or more MMS per week. Based on this lastestimate, 5.2% of respondents are MMS users.

It is interesting to think that if 17% of respondents have rarely used MMS

while only 5.2% permanently do so, then it is currently possible toconvince or persuade 11.9% who already know the service. By the way,when increasing the total number of users (that is to say, 17%), it isworth considering that this sample of 71%8 of respondents confirmedthat their phones can send MMS.

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Graphic 29.

Use of MMS

8 There may exist a greater number of phones

that allow sending MMS but it is

interesting to consider that only 71% of

users know that.


4.1.3. Instant Messages (IM)

According to this sample, 19.5% of respondents have used instant messaging in the lastthree months. However, similarly to MMS, it is important to discount from this percentagethose who rarely use them. If we make this adjustment and only consider as active instantmessages users those who send IM on a daily or weekly basis, then we can conclude that14.5% of the users have turned instant messaging into a habit.

Similarly to MMS, it can be concluded that there is a significant number of users (19.5% -14.5%) that may become active instant messages users in the short term if offers and

attractive incentives are offered for their use.

4.1.4. Voice mail

59% of respondents use voice mail. In average, respondents receivetwo voice mails per week and the service is free for 44% of them.

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Graphic 30.

Frequency of use ofInstant Messaging

N

SO

E


4.1.5. E-mail

Almost 10.2% of respondents actively usePush mail in their mobile phones (on a dailyor weekly basis), while 16.5% use thebrowser to access their emails (on a daily or

weekly basis). As we have alreadymentioned, it should be considered thatunder the Internet-based survey, the

analyzed population represents a type ofuser that is familiar with technology.

4.2. Entertainment

Except for ringtones and for the use of games in the mobile phone, it should be notedthat this MAVAM´s edition, the data of which was collected through the Internet,represents a group of users particularly familiar with technology. This highly affects the

adoption of value-added services and cannot be compared with MAVAM prior editionswhere another data collection method was used and where the number of respondents andthe geographical coverage was smaller.

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Graphic 31.

Use of email in themobile phone

Graphic 32.

Entertainment inmobile phones


It is important to understand that these users mostly download free entertainment

content. Music and games were the most paid downloadable items.

4.2.1. Games (use and downloads)

57.7% of respondents use built-in games 10 times per month. However, only 32% of usersactively play games, that is to say, on a daily or weekly basis.

If we analyze the distribution of the frequency of use among the 57.7% of users playingbuilt-in games, we find there is a difference, as 43% frequently play them, while 28% rarelyuse them (monthly basis).

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Graphic 33.

Entertainment:Free vs. Paid downloads

Music Ringtones Games Video Images

Frequency of downloads per months 8 times 4 times 3 times 6 times per month 6 times per month

Average Price per download R$4 R$3 R$1,50 R$4 R$3


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11.6% of users stated they have downloaded games in the last three months. However, ifwe consider only those who have downloaded between 1 and 10 games per month, theproportion drops to 6%. We consider that these percentages are somehow high for thetotal market but follow the behavior of those who use the Internet and own a mobile

phone. In average, respondents download three games per month and 68% of downloadsare free.

4.2.2. Music (Downloads)

In this sample, 77.2% of the devices include radio and 67.5% MP3. This involves a widerange of devices allowing the use of music.

23.2% of respondents have downloaded songs (without excluding the form of access to

music downloads) during the last three months. However, those who frequentlydownload songs (on a daily or weekly basis) only represent 11% of respondents.

Similarly to the download of built-in games, the percentages are high and are affected by

the users’ knowledge of technology. In average, they download music 8 times per month.

63% of those who have downloaded songs do it for free, while 29% do not rememberhow much they pay for it. Those who have paid to download music (8%), pay, inaverage, R$4 for each downloaded song.

Graphic 34.

Frequency of use ofbuilt-in games


4.2.3. Ringtones (Downloads)

10% of respondents have downloaded a ringtone in the last three months. The downloadaverage is 4 times a month, although 55% of mobile phone subscribers download ringtoneson a monthly basis (low or timely download).

37% of mobile phone subscribers have downloaded ringtones for free, while 18% of them

said to have paid for them. 45% of respondents do not remember how much they havepaid. In average, they spend R$3 per download.

4.2.4. Images (Downloads)

21.1% of respondents have downloaded images in the last three months. However, those whofrequently download images (on a daily basis or several days per week) or make medium

frequency downloads (on a weekly basis) only represent 8.9% of respondents. For this

sample, respondents download images 6 times a month in average.

62.7% of mobile subscribers that download images do it for free; 31.1%

do not remember having paid for them and only 3% stated to rememberhaving incurred in that cost. In average, the latter pay R$3 per download.

4.2.5. Video (downloads) and

Mobile TV (watching)

In average, 12% of respondents have downloaded images in the last three months.

However, those who frequently download them (on a daily basis or several times a week)

or make medium frequency downloads (on a weekly basis) only represent 4.9% ofrespondents. In average, for this sample, users download videos 6 times a month.

71% of those who have downloaded videos have done it for free; only 3% rememberhaving paid for the download and 26% is unable to identify whether they have paid forthem. In average, the fee amounts to $4 per download. Nevertheless, the information

should be construed as reference due to the fact that the number of cases is too small.

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N

S

O

E


3.8% of users have watched TV through their mobile phones in the last three months.

Although the number of cases is low, it is important to mention that the frequency ishigh; 13 times a month in average. Respondents generally choose to watch news.

4.3. Mobile Internet

56.5% of respondents have a terminal whereby they can access the Internet throughWireless Application Protocol (WAP), 3G or Wi-Fi.

32% of respondents stated to have used their mobile phones to access the Internet in the

last three months. The figures are high and in general, based on other studies, users still

find certain limitation to identify the access to the Internet through their mobile phones.According to our estimates, arising from the adjustments and other secondary sources,

9.6% of mobile users access the Internet through their mobile phones, including theaccess through WAP.

This survey is important due to the fact that it shows that the use of mobileservices is affected by the use of the Internet through a computer since users are

familiar with technology. That is to say, there is a chance to increase value-addedservices and, in general, this will bring benefits if the use of fixed Internet is also increased.

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Graphic 35.

Use of the Internet anddevices allowingInternet Access


Those who own a device that allows Internet access but have not used it, consider that price

is the main obstacle – 50% consider it too expensive – together with service knowledge,while 46% of them consider that the obstacles include lack of functionality, interest orpreference of use through computers. These reasons leave a chance in the user’s educationand in the price models that allow the use of the Internet through a mobile phone.

4.3.1. Social networking

22% of respondents accessed a social network in the last three months. The number is toohigh to estimate that the total number of mobile subscribers acts similarly to our sample.Thus, according to our estimates, almost 6.6% of mobile subscribers use social networks. In

average, they access them 16 times per month.

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Graphic 36.

Use of social networks(Percentage for the sample and

total adjusted percentages in Brazil)


4.3.2. Applications

Almost 10% of respondents have downloaded applications in the last 3 months. 27%thereof did not download any application, 28% downloaded one application, while 46%downloaded more than one application.

Although the results are encouraging, we should take into account that it is a specialaudience and cannot be applicable to all the Brazilian market.

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Graphic 38.

Users who accessed an applications store

Graphic 37.

Mostly used socialnetworks

Multiple option on 22% of

respondents who access

social networks

The mostly used social networks include Orkut and Facebook.


4.3.3. Mobile Banking

8.9% of respondents use their mobile phones to access a bank or financial system. It shouldbe noted that the use of mobile banking, based on this sample, is focused on a prepaidsegment. In average, mobile banking services are used 6 to 8 times per month.

4.3.4. GPS and Maps

13.3% of respondents have used GPS and/or maps through their mobile phones in the lastthree months. The figure is too high to consider it valid for all mobile users in Brazil.Therefore, this information is taken as reference and is applicable to those users who own

mobile phones but also use the Internet through desktop computers or notebooks.

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Graphic 39.

Use of mobile banking

N

SO

E

MAVAM | 5. Final conclusions

This MAVAM’s edition shows the VAS important growth in the Brazilian market.

• During 2010, VAS income reached almost 10 trillion Reales, which represents a 42%growth compared to 2009.

• Internet incomes gain share on VAS total gross revenue, and in the fourth quarter of 2010,it already represented 47% of VAS income.

• In the last year, the use of SMS grew to reach 21 SMS per month approximately. Thisservice has a good growth perspective. According to the survey carried out, 36.5% of the

interviewees think that in the next 12 months the SMSuse will increase.

• Users show a bias in favor of the adoption of mobilemarketing and mobile advertising, as long as thecompanies that send advertising have obtained the

subscriber's consent.

• Users are willing to receive information relatedto their own tastes and preferences. This marks

the importance of the user’s customizationand segmentation.

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Final conclusions5

N

SO E

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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Glossary 6

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 inthe following ways: 1. Using a browser to access the same websites accessed by fixedinternet through a computer. Examples of browsers: the ones

offered by the cell phone or smartphone (Internet ExplorerMobile, 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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N

SO

E

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.

1,206 interviews (1,072 CAWI and 134 (CATI (phone service) – Cédula controle).

Statistics error margin: ± 2.8 p.p.

February 9 to February 21. (Results on 4T10 – MAVAM 7th 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 032011 oking

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