Analyst Commentary

• In Brazil new mobile line activations registered an expansion of only 0.11% in July, compared to the previous month.
• According to data released from Anatel, July was one of the weakest months registered for the mobile telephony sector.

Today we focus on two developments:

• Consequences of Sale Suspension: Anatel banned new sales in the country from July 23 to August 2, affecting TIM, Claro and Oi, but sparing Vivo. Consequently, Brazil ended the second quarter of 2012 with 256 million mobile lines, 209 million of which were prepaid (81.4%) and 47.4mn postpaid (18.5%). New mobile line activations registered growth of only 0.11% in July, compared to June.
• Paraguay Telecom Sector is Growing Rapidly: According to Paraguay Economy Minister, Mobile operators in the country totalled USD454 million (2.06 bln guaranties) in the first half of the year, an increase of 19.5% compared to 1.73 billion guaraníes in the first half of 2011. Mobile telephony revenues grew 12.4% y/y. The ministry added that mobile telephony revenues are growing due to several factors including higher consumption and conspicuous investments made by operators.
• Virgin to Invest More Capital Across Chile and Latin America: According to Virgin Mobile Chile, Mobile virtual network operator (MVNO) Virgin Mobile has obtained an USD11mn loan from the International Finance Corporation, the private sector arm of the World Bank, to help finance continued growth in the country.

Our Take

Brazil's operators TIM, Claro. and Oi were banned from performing new sales in the country for customer complaints over spotty coverage and poor quality service, affecting growth in the sector. Vivo, which wasn’t ban from sales, held a dominant position in the sector with 76.1million subscribers a 0.2% increase from June and a 29.7% market share. TIM lost some 100,000 subscribers last month after been banned from 17 states and the Federal District, reaching 68.6 million subscribers and a 26.7% market share, down 0.1% points over May. Claro and Oi ended the second quarter of 2012 respectively with 24.6% share of the market, up 0.1% point over previous month and with 18.5%, down 0.1%. Mobile penetration stalled at 130% in the country.