Brazil’s Vivo Raised Mobile Plan Rates; Third-Quarter Profits Over R$1 Billion

RIO DE JANEIRO, BRAZIL – Telefônica Brasil, owner of Vivo, disclosed its financial results for the third quarter of 2019 on Monday, November 4th: the operator celebrates the highest revenue growth in the past three years due to increases in consumer prices, both in prepaid and postpaid services.

Meanwhile, fixed Internet recorded a drop in revenues, as the company migrated from old technologies to fiber optics (FTTH).

Net operating revenue grew 2.6 percent and reached R$11.04 billion (US$2.76 billion), driven mainly by mobile services, which totaled R$7.1 billion (+6.6 percent). Landine service revenue totaled R$3.8 billion, down 3.9 percent.

The profit recorded for the third quarter of 2019 was R$1.046 billion. The amount of investments (CAPEX) totaled R$2.4 billion in the same period.

Increase in mobile rates raised average spending

In its presentation to shareholders, Vivo discloses its commercial strategy of introducing readjustments to all customers: price increases reached 25 percent in the prepaid service (Giga Chip), ten percent in Control plans and eight percent in the postpaid service.

The average spending per user (ARPU) grew 6.4 percent in the year, totaling R$29.40. The figure for the postpaid service was R$52.40 (+2.6 percent), while in the prepaid service it corresponds to R$12.70 (+10 percent). The M2M sector, for the internet of things, recorded a 19 percent increase (R$3 per access).

Compared to 2018, the operator saw a reduction of 0.8 percent in the total of mobile accesses: there were 585,000 mobile net additions in the postpaid segment, while the prepaid segment lost 496,000 accesses.

Vivo still controls postpaid services with 57.3 percent of market share, but its participation fell 1.4 percentage points in the period; prepaid services rose 0.5 percentage points (25.8 percent). The competition was fierce with Claro, which leads the ranking of portability, particularly in regard to postpaid plans.

The data segment (mobile internet) and digital services were the most important in the breakdown of mobile net revenue: sales totaled R$6.5 billion, a growth of 4.6 percent. The sale of handsets performed well and yielded R$645 million for Vivo (+31.5 percent). Even voice service recorded a slight increase, totaling R$1.3 billion (+1.2 percent).

The operator closed the quarter with 3,190 cities covered by 4G, reaching 89 percent of the population, while 1,096 of these cities have 4.5G coverage. The company is expecting the completion of a memorandum of understanding with TIM, which provides for the sharing of 2G and 4G networks.

Fixed telecommunications and satellite TV continue declining

The net revenue from landline services fell 3.9 percent and totaled R$3.8 billion. This decline occurs mainly in voice services, broadband xDSL and satellite TV, although the operator is pleased with the fact that the revenues of the growing services (fiber, IPTV and data) are more significant than passed over technologies.

The broadband net revenue was one of the few positive aspects: the segment grew 7.5 percent and represents R$1.4 billion of the total. FTTH, which carries fiber to the users’ home, increased 44.5 percent and accounts for R$531 million, while the other technologies yielded R$901 million (-6.5 percent).

In terms of television, IPTV technology outperforms satellite for the first time: it totaled R$227 million (+27.7 percent) against R$224 million for DTH (-27.7 percent). Vivo has even removed satellite TV service from its product portfolio.

Voice services dropped 18.8 percent, yet these still represent R$1.2 billion in revenues. In corporate data and IT, the operator achieved R$716 million (+12.9 percent).

Vivo has a strategy for fiber expansion

Fiber optics customers’ ARPU (average spending) is 27 percent higher than that of FTTC, a hybrid of fiber and copper; and 36 percent higher than that of xDSL. In order to grow in the fixed services that provide higher revenues, the operator continues to expand its FTTH network.

In the third quarter, fiber reached the cities of Alvorada/RS, Aracaju/SE, Camboriú/SC, Colatina/ES, Contagem/MG, Guaíba/RS, Jaguariúna/SP, Lajeado/RS, Linhares/ES, Mineiros/GO, Paranavaí/PR and Pirassununga/SP. In 2019, there were 33 new cities, more than 30 launched throughout 2018.

Vivo still needs to overlap the hybrid FTTC network to FTTH. A partnership with American Tower will provide the launch of fiber in over 40 cities in Minas Gerais, covering 800,000 homes and reaching four million people.

The model provides that the partner is in charge of the investment, construction and operation of home passed cables, while Vivo invests in equipment with the brand Vivo Fibra. This is not yet very clear, but it seems that Telefônica will “rent” the network from American Tower, as if it were a virtual operator.

In total, Vivo serves 154 cities with fiber, while another 101 cities are using the hybrid network with copper, used mainly in locations served by the former operator GVT. The number of homes with fiber totals 49 percent, while FTTC reaches 51 percent.

In total, the operator covers 10.2 million homes.

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