Falling multi-SIM use influences Brazil market contraction

The number of mobile connections in Brazil decreased by more than 9% during 2015 to reach 248.2 million connections (excluding cellular M2M) at year-end – the first time Brazil has ended a year with lower connections than the previous year. Although much of this can be attributed to the economic crisis, the average number of SIM cards owned per person is also falling. Together with changes in market structure, this is driving operators to focus more on customer relationships. 

Figure 1: Brazil: total connections, unique subscribers and SIMs per subscriber

Source: GSMA Intelligence

Economic crisis only partly explains decline in connections

During 2015, Brazil’s GDP contracted by 3.9% and its currency suffered a devaluation of 47%. Meanwhile, unemployment increased from 6.8% in 2014 to 7.1% (source: International Labour Organization), driving many Brazilians to reduce their spending. Although the economic downturn has affected the number of mobile connections (SIM cards) in the market, there has been less of an impact on the number of actual subscribers (people). Our research shows that much of the fall in connections is due to the loss of second and third SIM cards, with the average number of SIMs per user in Brazil falling from 2.13 at the end of 2014 to 1.88 in Q1 2016 – the steepest drop of any major market in the world.

There are several reasons for this. Firstly, the incentive to keep multiple prepaid SIM cards to contact people on other networks and thus avoid interconnection fees is diminishing. In February 2016, interconnection fees were reduced from BRL0.16 ($0.05) to BRL0.10 per minute, and will fall to BRL0.05 by 2017. Secondly, operators have moved quickly to disconnect inactive prepaid lines to avoid paying fees to the Telecommunications Inspection Fund (Fistel). As a result, prepaid connections in Brazil declined by 13.3% during 2015.

Another key driver of the decline in multi-SIM usage is the growing popularity of messaging apps such as WhatsApp, driven by widespread smartphone ownership. At more than one hour per day, Brazilians on average spend more time using WhatsApp than any other nationality (data provided by SimilarWeb; see Global cellular market trends and insight – Q2 2016 for more information). Meanwhile, at 61% of total connections in Q2 2016, Brazil has the highest level of smartphone adoption in Latin America. This equates to more than 150 million smartphones, and WhatsApp is likely to be the main communications channel for the users of many of the devices, reducing the need to own multiple SIM cards to call and text across networks or take advantage of better network coverage when travelling. As reported by O Globo newspaper in December 2015, Bernardo Winik, Retail Director of fourth-largest operator Oi, claims: “There is a new generation which prefers to chat [via messaging apps] rather than talk”.

Focus intensifies on contract segment and churn reduction

As prepaid connections fell away during 2015, the contract segment grew by 3 million connections. Operators in Brazil will need to continue to drive this increase in contract connections by offering services that reduce subscriber churn, particularly as revenue opportunities from the prepaid voice and SMS centric model decline due to competition from messaging apps. As Rodrigo Abreu, former CEO of TIM Brasil, claimed in the operator’s Q3 2015 report, “Operators are entering a new scenario where a closer relationship with the customer becomes crucial to ensure data and voice revenues”.