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Vivo Discontinues Purchase of CDMA Handsets
14 Apr 08
Brazil's largest mobile player, Vivo, has discontinued the purchase of CDMA handsets due to a lack of demand.
Global Insight Perspective | | Significance | Vivo has seen a significant drop in demand for CDMA handsets and will discontinue sales and availability in retail outlets once current stocks are depleted. | Implications | Much of the operator's 2008 capex will be used to enhance and expand its GSM network capacity and quality, alongside other loans achieved for this scope. | Outlook | This recent development is set to intensify the operator's marketing campaign to promote GSM-backed services and increase the migration rate of old CDMA users to the new standard. |
Vivo has announced that it is discontinuing the sale of CDMA handsets due to a lack of consumer interest, reports local daily Jornal do Commércio do Rio de Janeiro. The jointly-owned unit announced that future demand will be covered by existing stock and that the decision does not translate to shutting down its CDMA network. According to data referring to the end of 2007, the company has Brazil's largest handset distribution network, with more than 8,000 points of sale and 366,000 points of sale for recharges. Outlook and Implications Since the launch of GSM offerings in the first quarter of 2007, Vivo has seen a steady decline in the number of CDMA users to now claim 60% of the company's total subscriber base. According to Anatel's latest market data release, dating back to the end of February 2008, Vivo totalled some 19.39 million CDMA users out of 33.91 million clients, which represents a 7.1% year-on-year (y/y) decline. This is due to a considerably higher number of line activations of GSM/EDGE technology. In particular, net additions in the fourth quarter of 2007 reached 2.16 million, with those on the GSM protocol representing 84.7% of the total. As a result, GSM operations experienced a 65.8% growth over the previous quarter. The higher demand for GSM handsets—the reason behind Vivo's latest decision—is also reflected in the operator's capital expenditure plans for 2008. The firm has recently announced 6.07 billion Brazilian reais (US$3.51 billion) in investment for 2008, which is three times higher than last year's 1.92 billion reais injection and higher than that announced by its main competitors, Telecom Italia-owned TIM and América Móvil's Claro. Most of this year's capex will be used to enhance and expand its GSM network capacity and quality, particularly after the successful participation in the September 2007 2G spectrum auction in the 900-MHz and 1800-MHz frequency bands, which granted Vivo nationwide coverage and will allow it to compete more effectively in a highly aggressive market. Alongside this, the firm will invest in deploying its third-generation (3G) network, making the newly acquired Telemig Celular unit its first 3G deployment in the country. The clear preference of new subscribers for handsets backed by GSM has fuelled the race that began last year, aiming to quickly proceed with the rolling-out of GSM services and catch up with rival networks' progress, as this has been often cited as behind Vivo's declining market shares over the last few quarters. After receiving funding of 1.5 billion reais (US$772 million) in May 2007 from the Brazilian Banco Nacional de Desenvolvimento Econômico e Social to cover part of the estimated 2 billion reais cost to deploy a GSM overlay network, Vivo received a 250 million euro (US$394.3 million) loan from the European Investment Bank last month as part of a strategy to encourage adoption of GSM technology and a broader programme to finance operations supporting "development and co-operation programmes and instruments" in Latin America.
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