Mavam brasil 032011 oking

BRAZIL Prepared by

7˚ EDITION

MAVAM Acision Monitor for Mobile VAS

© Copyright Acision March 2011

MAVAM | Acision Monitor for Mobile VAS

Editorial 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 the local market evolution is being driven by several social and economic factors, especially by the effort made by mobile phone operators when offering innovating service alternatives 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, being driven, among other factors, by the offer of voice service packs.

Rafael Steinhauser Acision

Vivo, market leading operator, encourages a statement consisting in increasing its investment 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 to allow the use of the network in 85% of the districts of the wide and complex Brazilian territory.

Presidente para América Latina

In this seventh edition of MAVAM, as our special topic, we will be looking at Mobile Marketing opportunities and advances, a product still little exploited in Brazil and with a great 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 are relevant to consumers, respecting the privacy and segmentation criteria of the offer aligned with the user’s profile.

Acision, keeping its commitment to offer relevant information for the mobile phone market, has remodeled this study with a bigger number of interviewees, new approaches and 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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MAVAM | Acision Monitor for Mobile VAS

Index 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 21 21 22 22 23

3.5. Receptivity 3.5.1. Discounts 3.5.2. Prizes 3.5.3. Free SMS and voice minutes 3.5.4. Proximity 3.5.5. Perceived behavior

24

3.6. Mobile Marketing Conclusions

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MAVAM | Acision Monitor for Mobile VAS

25

4. MAVAM Brazil

25 25 27 28 28 29

4.1. Message services 4.1.1. SMS 4.1.2. MMS 4.1.3. Instant Messages (IM) 4.1.4. Voice mail 4.1.5. E-mail

29 30 31 32 32 32

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

33 34 35 36 36

4.3. Mobile Internet 4.3.1. Social networking 4.3.2. Applications 4.3.3. Mobile Banking 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

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 100 inhabitants. 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% of the total global lines. The average penetration in the region is 96 lines every 100 inhabitants; 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 800 billion 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 phone services 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 in the data traffic, among others. Notwithstanding that, the economic projections made by most countries with their gross domestic products growing above 4%, generate conditions which are more than optimistic to face this transformation process in which value added services (VAS) will play a key role.

Graphic 1.

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

Mobile Revenues 2010 Total world 2010: 796 billion

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.

Source: Convergencia Research based on the balance of the operators, local regulators and the Internacional Telecommunication Union (ITU).

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MAVAM | 1. Introduction

1

1. Value Added Services in the World 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 evolution from December 2009 to December 2010, and the evolution of the participation of the revenues 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, social networks, and marketing / mobile advertising.

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

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MAVAM | 1. Introduction

Variation in the revenues obtained from the Voice Services vs. VAS The mobile voice business faces a generalized downward trend (See graphic 3). In this sample of 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 are undergoing 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 of China, 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-March quarter of 2011. There are currently almost no 3G services in India.

Graphic 3.

Variation in the revenues obtained from Voice Services vs. VAS December 2009 vs. December 2010

Source: Convergencia Research on the basis of the financial reports of the operators.

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%), and América Móvil (40,4%).

It may be further observed that the gap –between countries with higher and lower economic development– in VAS use and market penetration ratios is increasingly reduced as less developed countries introduce more customers and as the counties with more developed economies enter a phase of solely vegetative growth.

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MAVAM | 1. Introduction

S

The countries with lowest mobile phone penetration rates are undergoing a natural evolution stage, which has already been undergone by those countries with higher penetration rates. This evolution path ranges from those VAS mainly based on SMS (a feature which is operational on almost all the telephones) to those VAS based on mobile 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 mobile ARPU is also relevant. On many occasions, not only does it compensate the losses in the voice business but it also makes it possible to increase the total ARPU. A good example of such situation is Telefónica Latinoamérica, where in spite of a 6%-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 the same level with the revenues from VAS.

Graphic 4.

Analysis of VAS contribution to the mobile ARPU December 2010

Source: Convergencia Research on the basis of operators’ balance sheets

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MAVAM | 1. Introduction

Graphic 5.

ARPU fluctuation: Total vs. Voice. vs. Service Penetration and Data December 2009 vs. December 2010

Source: Convergencia Research on the basis of the operators’ balance sheets, local regulators and International Telecommunication Union (ITU).

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MAVAM | 1. Introduction

1.2. Value Added Services in Latin America By the end of 2010, the nucleus of mobile subscribers in Latin America consisted of 83% prepaid and 17% postpaid. The high prepayment level has not constituted a restriction on the growth of revenues for value added services (VAS), which represent between 15% and 25% of the operators’ revenues, and may even reach values between 35% and 40% in some cases.

Graphic 6.

VAS by component Average Total Region 2010

By the end of December, the average ARPU in the region was closet to USD 11,28. The ARPU 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 by the 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.

Graphic 7.

ARPU Voice vs. Data in Latin America per country

Source: Estimations Convergencia

Source: Convergencia Research

Research

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MAVAM | 1. Introduction

1.3. Value Added Services (VAS) in Brazil In October 2010, Brazil exceeded the 100 mobile phones every 100 inhabitants. By January 2011, pursuant to the data compiled by Anatel, the mobile lines reached 205.15 million lines. All this in a context in which Brazil becomes the big regional attraction considering the good economic perspectives and the general impact on infrastructure that will be caused by the Football World Cup (2014) and the Olympic Games (2016).

Graphic 8.

Market Share of mobile lines January 2011

This scenario -with a penetration rate above 100%- is reached with a prepaid basis percentage equal to 82.3%, which has been kept stable over the last 5 quarters, and even with some operators with postpaid bases which were undergoing faster growing processes than the prepaids.

Operators’ total gross revenues reached almost R$ 67.3 billion, and increased by 8.23% between 2009 and 2010.

Graphic 9.

Mobile Services Gross revenue

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.

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MAVAM | 1. Introduction

Graphic 10.

ARPU’s Growth, Brazil 2009-2010 Average weighted ARPU was reduced by 8.6% throughout last year and the MOU increased from 3% to 39%, depending on the operator, but it registered falls in prices charged to voice minutes. These two trends have reinforced the importance of VAS to increase operators’ revenues.

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%

During the fourth quarter of 2010, revenues for value added services (VAS) reached R$ 3.05 billion, thus amounting to 16.99% of gross revenues obtained from services rendered by mobile phone companies.

Graphic 11.

VAS Gross revenue as percentage of total Services Gross revenue Total Brazil

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.

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MAVAM | 1. Introduction

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).

Graphic 12.

Evolution of gross sales VAS Brazil 2009 vs. 2010

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 still mainly led by SMS.

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.

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MAVAM | 1. Introduction

Graphic 14.

Sales of Value added services as a percentage of Services Gross Revenue Quarterly Evolution 2009-2010

Vivo remains as the operator with the highest VAS contribution to its sales. Vivo VAS net revenue 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.

Vivo: VAS Net Revenue by component

Vivo: VAS net Revenue Evolution 2009-2010

Graphic 15.

Vivo: VAS Net Revenue Evolution 2009 – 2010

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

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 Service in 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).

Brazil: Geographical regions Share in current sample

Regiões do Brasil North North east

4% 17%

South east

55%

South

16%

Center west

7%

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) following the Income Level, Age and Sex categories that keep the existing proportions among the Brazilian 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 means that some data can be applicable to all mobile users while other cannot. We explain, in each case, where the data only represent this sample and where they represent all mobile users in Brazil. d. Internet-based surveys were supplemented by phone surveys (CATI) to have a data control and comparison group. e. The data collection survey has also been changed to allow new measuring and analysis methods other than those used in prior editions.

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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

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

• Entertainment • Music • Images • Games • Ringtones • TV • Video

This edition was prepared by Convergencia Research and Quanti Pesquisa de Mercado between February and March 2011.

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MAVAM | 3. Mobile Marketing e Mobile Advertising

3 SPECIAL TOPIC

Mobile Marketing and 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 does not 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, some percentages exceed those expected for people not having access to the Internet but using a mobile phone.

3.1. Mobile Marketing & Advertising current penetration

Graphic 16.

Received advertising in their cell phones

89% of respondents stated that they once received an SMS or MMS with promotions or advertising. Among those receiving messages with promotions or advertising in their mobile phone, 31.8% confirm that they receive 2 to 5 messages a week.

No 11% However, it is worth mentioning that only 17.8% confirmed they have registered to receive advertising messages, which does not mean that users have not given their contractual consent to them. However, Yes 89% only some really know they have given authorization.

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 with promotions or advertising in their mobile phones is not limited to those owning modern and expensive mobile phones.

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MAVAM | 3. Mobile Marketing e Mobile Advertising

3.2. Issuing party Mobile advertising main issuing party is the operator (78.7%), followed by consumerproducts companies (13%) and other service companies (8.8%). 16.8% of respondents do not know which company has sent the SMS/MMS advertising.

Graphic 17.

Issuer of Mobile marketing/advertising Multiple Option Base: 89% of the sample

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% of respondents 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 the advertising content sent to mobile phones. These four categories are: advertising of the operator’s service, free SMS packages, launches and promotions, Promotions and/or advertising.

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MAVAM | 3. Mobile Marketing e Mobile Advertising

Graphic 18.

Content of the advertisement received

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MAVAM | 3. Mobile Marketing e Mobile Advertising

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

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

Graphic 19.

Companies should ask for consent to send advertising messages

Graphic 20.

I would only like to receive messages with promotions from companies I previously authorized

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MAVAM | 3. Mobile Marketing e Mobile Advertising

3

5. Receptivity 3.5.1. Discounts 64% of respondents have a positive attitude towards the opportunity given by advertising messages to obtain discounts on clothes, events and other products and services. When considering the growth of the business, it should be taken into account that 37.9% of respondents completely agree to accept advertising in exchange for discounts. They are highly 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 is consistent with their preferences.

Graphic 21.

I accept to receive advertising messages in my mobile phone in exchange for discounts in clothes, events

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.

Graphic 22.

I agree to receive advertising messages in my mobile phone in exchange for prizes and gifts

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MAVAM | 3. Mobile Marketing e Mobile Advertising

3.5.3. Free SMS and voice minutes In general, it is widely known that people are receptive to advertising in exchange for free products or services they usually have to pay for. Thus, it is reasonable to see high predisposition 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 for SMS or voice minutes.

Graphic 23.

I agree to receive advertising messages in my mobile phone in exchange for free SMS or voice minutes

3.5.4. Proximity In view of the location based advertising business, it is important to understand the user’s receptivity to it.

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

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

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MAVAM | 3. Mobile Marketing e Mobile Advertising

Graphic 24.

Location based advertising

3.5.5. Perceived behavior Respondents were provided with the following information: “Advertising in the mobile phone 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 the opinions the person has on the influence of advertising.

Graphic 25.

It is probable that mobile advertising makes me test the promoted product or service

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MAVAM | 3. Mobile Marketing e Mobile Advertising

3.6. Mobile Marketing final considerations Users defend their privacy, so they wish to receive on their cell phones marketing or advertising 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 categories with a better level of acceptance among the ones analyzed in the survey.

We must notice that those who complete the interview obtain an incentive for doing so; that is why this population group also has a higher receptivity level than the rest of the market in front of advertising messages in their mobile phones that, in exchange, provide an incentive (an award or gift).

Iwould be grateful to receive + I would like to receive Graphic 26.

Users are receptive to mobile advertising on....

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MAVAM | 4. MAVAM Brazil

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 of smartphones and featured phones (sophisticated phones) within the total of current phones.

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, the use 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 are usually familiar with technology and the frequency of use of SMS is higher than the estimated 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 main obstacles are those related to lack of interest in the service (77.8%). Among those reasons, we can mention the preference to make phone calls, the lack of interest or functionality. 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 offer or price related obstacles.

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MAVAM | 4. MAVAM Brazil

Graphic 27.

Used SMS in the last 3 months

Obstacles to adopt SMS

Frequency of use of SMS

Graphic 28.

Future use of SMS - Momemtum

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MAVAM | 4. MAVAM Brazil

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 last three months. However, 69.9% thereof rarely use this service. Thus, to determine the MMS market, it is worth considering those users who confirmed they send one or more MMS per week. Based on this last estimate, 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 to convince 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 is worth considering that this sample of 71%8 of respondents confirmed that their phones can send MMS.

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.

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MAVAM | 4. MAVAM Brazil

4.1.3. Instant Messages (IM) According to this sample, 19.5% of respondents have used instant messaging in the last three months. However, similarly to MMS, it is important to discount from this percentage those who rarely use them. If we make this adjustment and only consider as active instant messages users those who send IM on a daily or weekly basis, then we can conclude that 14.5% 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.

Graphic 30.

Frequency of use of Instant Messaging

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

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MAVAM | 4. MAVAM Brazil

4.1.5. E-mail Almost 10.2% of respondents actively use Push mail in their mobile phones (on a daily or weekly basis), while 16.5% use the browser to access their emails (on a daily or weekly basis). As we have already mentioned, it should be considered that under the Internet-based survey, the analyzed population represents a type of user that is familiar with technology.

Graphic 31.

Use of email in the mobile phone

4.2. Entertainment Except for ringtones and for the use of games in the mobile phone, it should be noted that 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 editions where another data collection method was used and where the number of respondents and the geographical coverage was smaller.

Graphic 32.

Entertainment in mobile phones

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MAVAM | 4. MAVAM Brazil

It is important to understand that these users mostly download free entertainment content. Music and games were the most paid downloadable items.

Graphic 33.

Entertainment: Free vs. Paid downloads

Music

Ringtones

Games

Video

Frequency of downloads per months 8 times

4 times

3 times

6 times per month 6 times per month

Average Price per download

R$3

R$1,50

R$4

R$4

Images R$3

4.2.1. Games (use and downloads) 57.7% of respondents use built-in games 10 times per month. However, only 32% of users actively 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 playing built-in games, we find there is a difference, as 43% frequently play them, while 28% rarely use them (monthly basis).

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MAVAM | 4. MAVAM Brazil

Graphic 34.

Frequency of use of built-in games

11.6% of users stated they have downloaded games in the last three months. However, if we consider only those who have downloaded between 1 and 10 games per month, the proportion drops to 6%. We consider that these percentages are somehow high for the total 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 downloads are free.

4.2.2. Music (Downloads) In this sample, 77.2% of the devices include radio and 67.5% MP3. This involves a wide range 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 frequently download 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 remember how much they pay for it. Those who have paid to download music (8%), pay, in average, R$4 for each downloaded song.

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MAVAM | 4. MAVAM Brazil

4.2.3. Ringtones (Downloads) 10% of respondents have downloaded a ringtone in the last three months. The download average is 4 times a month, although 55% of mobile phone subscribers download ringtones on 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 have paid. In average, they spend R$3 per download.

4.2.4. Images (Downloads) N E O S

21.1% of respondents have downloaded images in the last three months. However, those who frequently 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 remember having 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% of respondents. 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% remember having paid for the download and 26% is unable to identify whether they have paid for them. 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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MAVAM | 4. MAVAM Brazil

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 is high; 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 through Wireless 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 the access through WAP. This survey is important due to the fact that it shows that the use of mobile services 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-added services and, in general, this will bring benefits if the use of fixed Internet is also increased.

Graphic 35.

Use of the Internet and devices allowing Internet Access

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MAVAM | 4. MAVAM Brazil

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 or preference of use through computers. These reasons leave a chance in the user’s education and 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 too high 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.

Graphic 36.

Use of social networks (Percentage for the sample and total adjusted percentages in Brazil)

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MAVAM | 4. MAVAM Brazil

The mostly used social networks include Orkut and Facebook.

Graphic 37.

Mostly used social networks Multiple option on 22% of respondents who access social networks

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 special audience and cannot be applicable to all the Brazilian market.

Graphic 38.

Users who accessed an applications store

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MAVAM | 4. MAVAM Brazil

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

Graphic 39.

Use of mobile banking

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4.3.4. GPS and Maps 13.3% of respondents have used GPS and/or maps through their mobile phones in the last three 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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MAVAM | 5. Final conclusions

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. This service has a good growth perspective. According to the survey carried out, 36.5% of the interviewees think that in the next 12 months the SMS use will increase.

• Users show a bias in favor of the adoption of mobile marketing and mobile advertising, as long as the companies that send advertising have obtained the subscriber's consent.

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• Users are willing to receive information related to their own tastes and preferences. This marks the importance of the user’s customization and segmentation.

MAVAM | 6. Glossary

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 done manually, 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 MSN or Yahoo.

Answering Machine or Voice Messaging: gives access to the automatic messages recording 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. The handset 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 on the cell phone. The handset must be able to display several formats of pictures and images such 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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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 on cell 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 TV programs with the handset acting as an analogue or digital TV receptor and capturing contents 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 phone or 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 the following ways: 1. Using a browser to access the same websites accessed by fixed internet through a computer. Examples of browsers: the ones offered by the cell phone or smartphone (Internet Explorer Mobile, for Windows Mobile), or alternative browsers such as Skyfire 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. Provides Internet 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, which allows the access to users accounts in these institutions. These services can range from simple balance consults to the payment of bills or conclusion of investment transactions.

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Location Based Services: service which provides users’ geographic location. These services 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 monitor their 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 offer addresses or other types of promotions at stores, restaurants, movies, among others, based on the instant location of users.

Mobile Marketing The 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 other companies, again using SMS messages.

Mobile Advertising: similar to Mobile Marketing, Mobile Advertising is also an advertising service implemented by mobile operators or other companies. If the subscribers agree 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

7 Objective

Data collection method

Sample

Data collection period

Target

Sample frame

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), mobile phone users.

People mostly related to technology. Therefore, some results of this study are expected to be higher than those found out in the common population in general. people registered in the access panel of Quanti Pesquisa de Mercado.

*Source: IPC-Target

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MAVAM | 8.Team

8

Team Rafael Steinhauser | President Latin America Jorge Leonel | VP Marketing and Business Development Edson Melo | Marketing Manager Latam

Mariana Rodriguez Zani | Diretor Ines Leopoldo | External International Advisor Matías Guardiola | Research Manager Lina Rivero | Analyst Mónica Perez Serantes | Designer

Humberto Perissé | Director José Vasquez Fernandez | Statistics Zil Neumann | Commercial

Fabio Cardo Antonio Costa Filho

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