Feature Story

Brazil Mobile Market Poised for Explosive Growth

by Mary Ann Azevedo

The percentage of Internet pages consumed on mobile devices in Brazil is predicted to at least double by May 2013.

Brazilians' consumption of the Internet on mobile devices, including cellular phones and tablets, is extremely low compared to other large countries. And that might not be such a bad thing - at least when it comes to the potential of the market. In May 2011, the percentage of overall Internet pages that were consumed from devices other than personal computers or laptops in South America's largest country was a mere .6 percent, according to data by research firm Comscore Inc. By May 2012, that number had surged to 2.4 percent – still relatively low compared to the United States' 10.9 percent and the United Kingdom's 13 percent. However, the figure represented significant growth in twelve months' time.

Alex Banks, managing director of Comscore's Brazilian operations and vice president of its Latin America unit, said the numbers spell great potential for the mobile market in the world's fifth largest country.

"You have to keep in mind that Brazil is huge and the majority of Internet consumption is today happening in Sao Paulo and Rio (de Janeiro)," Banks said. "In the grand scheme of things, though, the growth has been pretty explosive."

He predicts that the percentage of Internet pages consumed on mobile devices in Brazil will at least double to 5 or 6 percent by May 2013. Research conducted by eMarketer had similar findings. The number of mobile internet users in Brazil totaled about 8 million in 2010. By 2011 the number of users had jumped 214 percent to 25.3 million. The dominance of the mobile internet is expected to continue in Brazil over the next four years – according to eMarketer estimates, the number of mobile Internet users will reach 96.4 million by 2016. In 2011, the number of people accessing the mobile internet in Brazil actually exceeded those with fixed household access – a first for Brazil, said eMarketer. One factor that could be contributing to the increases is that Latin Americans, including Brazilians in particular, have been shown to be voracious consumers of social media, according to Forrester Research Inc.

In a March 2012 report titled "Understanding The Changing Needs Of Online Consumers In Latin America," Forrester found that Latin Americans don't restrict their social media access to personal computers or laptops.  The report found that 38 percent of online metropolitan Brazilians regularly connect with others via social networks like Facebook and Orkut on the mobile phone. The need to connect and engage with others anytime, anywhere is a daily activity of 11 percent of online metropolitan Brazilians, according to a March 14, 2012, blog by Forrester analyst Roxana Strohmenger  called,  "Latin American's Love Affair with Social Extends to Mobile Phones."

Indeed, Facebook Inc. confirms that the number of monthly active users in Brazil surged to 61 million in October 2012 compared to 25 million in August 2011. And a ComScore/Facebook survey found that more than one-third of Facebook users – about 37 percent - were accessing the site via their smartphones as of August 2012. The same survey also found that about 15 percent of users were visiting the site from their tablet or e-Reader. One thing is clear. It's not that Brazilians don't want to access the Internet via mobile devices, most point to cost as being a significant barrier, among other factors. Daniel Andrade, a 24-year-old student in Recife, said he used to access the Internet via his cell phone but decided to discontinue the service due to cost, access limitations and lack of convenience.

"It's faster at home," he said. "But another problem with having Internet on a cell phone is that it's much more expensive proportionally."

Andrade points out that while the cost per month to access the Internet on his cell phone might have been less than the approximately 100 Reais (US$ 47 ) he pays to have unlimited access at home, it wasn't worth it to him.

"We still usually have limited access (with cell phones) so even if the cost per month is lower it is proportionally more expensive due to the circumstances of having lower speed, limited access and not being able to access it everywhere," he said.

Andrade, for one, said he would welcome a reasonably priced unlimited data plan – but only if service improved. Unlimited data plans that are affordably priced and rampant in the U.S. are much more costly in Brazil, notes Banks. As such, few people can afford to have them.

"It's very different in Brazil where people are oftentimes reluctant to even send text messages because once you get to a certain amount, you have to pay extra," Banks said. "It's still an emerging market and consuming content through your telecom operator is very expensive."

But that could be changing. It's no secret that Brazil's mobile sector is in need of reform.  Regulators are increasingly putting pressure on telecom providers to both lower costs and boost service. A recent Businessweek article pointed to Emilia Ribeiro, commissioner of Brazil's telecommunications regulator, known as Anatel, as saying that fees charged by Brazil's mobile carriers may decrease by nearly 80 percent through 2018.

Brazil's mobile interconnection fee is reportedly close to about U.S. 22 to 25 cents per minute – behind only Nigeria and South Africa and nearly four times more than the average fee of 6.2 cents a minute in 33 members of the Organization for Economic Cooperation and Development (OECD). Meanwhile, mobile users in the U.S., Mexico, Israel, Turkey, Korea and Portugal pay less than 5 cents per minute, according to OECD data cited by Businessweek. If rates in Brazil indeed drop by nearly 80 percent, they would be in line with the current average fee of 33 OECD members.

Observers on the ground in Brazil believe another factor that could be putting pressure on Brazil's mobile operators is the increasing number of people connecting to Wi-Fi networks at public places such as cafes or bars with their smartphones and tablets. With the usage of mobile devices becoming less dependent on the mobile operator and Wi-Fi service becoming a valuable service for merchants,it's possible that mobile operators will feel the heat and lower prices.

In general, increased purchasing power, improved telecommunications infrastructure and lower prices have helped Internet penetration grow quickly in Brazil. eMarketer estimates that 86.4 million internet users, or 42 percent of Brazil's population, will be online in 2012. Pressure from hosting the 2014 World Cup and the 2016 Summer Olympics is spurring advances in the country's telecommunications infrastructure as well, eMarketer points out.

And according to eMarketer and ComScore, mobile is where it's at. Says eMarketer: "While the Brazilian government pushes to make fixed broadband more widely available, consumers in the country are tapping the mobile internet in large numbers."

To Banks, much of future consumption will ultimately boil down to accessibility for a wider range of Brazilians.

"It is fair to say that more affordable unlimited data plans will significantly increase the amount of Internet content consumed via wireless operators on existing smartphones and future generations of smartphones."


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