MAVAM Acision Monitor for Mobile VAS

March 24, 2010 2010 Teleco. All rights reserved

MAVAM Acision Monitor for Mobile VAS

Table of Contents

1. 2. 3. 4. 5. 5.1

INTRODUCTION VALUE-ADDED SERVICES (VAS) REVENUE SPECIAL THEME: PAYMENTS AND BANKING WHAT THE MARKET SAYS ABOUT USING THE PHONE FOR FINANCIAL TRANSACTIONS ACISION MONITOR FOR MOBILE VAS MAVAM Message Services

6 7 10 11 14 14 15 17 17 20 20 21 21 21 21 22

5.1.1 SMS and MMS 5.1.2 E-mail and Instant message 5.2 5.3 Entertainment (Music, Ringtone, Images, Games, TV and Video) Internet Access and Broadband

5.3.1 Internet Access and Broadband 5.3.2 Location Based Services 5.4 5.5 5.6 6. Social Networks Payments and Banking Mobile Marketing FINAL CONSIDERATIONS

ANEXO 1. ANEXO 2.

MAVAM SUMMARY TABLES SERVICE DESCRIPTION

24 28

MAVAM Acision Monitor for Mobile VAS

Editorial - MAVAM 3*
Today, Acision, a leader in mobile data, is very aware of changes and evolution of the telecommunications market. As such, it has been observing that the drop in voice revenues has driven mobile operators to increase their offer of valueadded services to guarantee income. This can be seen in the results of the third edition of MAVAM - Acision Monitor of Mobile VAS. According to the study, income from Value Added Services (VAS) for cell phone operators in Brazil has been growing every quarter, and last year it totalled R$ 2.4 billion.

Gross Income VAS US$ Billion

1.6 1.7 1.8 2.4 2.0

1.2

1.4

1.5

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

One of the areas that has been growing in popularity is Mobile Money and all its variables - Mobile Banking, Mobile Payment, Mobile Ticketing and Mobile Charging. This is why it is the focus of the third edition of MAVAM - Acision Monitor of Mobile VAS. This are of the mobile industry has seen great acceptance in emerging markets like Africa and Asia, as well as countries where most of the population does not have a bank account. But what are the reasons that these services have never taken off in Latin America, especially Brazil, where there are more than 170 million cell phones and preference for the mobile handset over the fixed line is clear? Only 5% of the users of mobile handsets in Brazil have made payments by cell phone and 7% have accessed a bank using it. Resistance could be explained from two angles. From the operators perspective, there are doubts as to whether they will become financial institutions; if they will need to create a chamber of custody, or even if they will need to associate with banks to carry out such transactions. Government entities have also not defined a clear policy or rules for this matter and no one knows how revenues from such services will be divided. From the users perspective, the greatest inhibitor is fear related to safety. Fifty-nine percent of those interviewed do not trust or do not feel safe using the cell phone to make payments or conduct bank operations. Another 15% are afraid the handset could be cloned and there are those who believe they will spend more if they use the handset for this. In order to reverse this situation, the government must define the rules; there must be interaction and agreement between all companies involved in the value chain; and most of all, users need more information, highlighting the 4

benefits and advantages of using the cell phone to carry out payment operations. All this effort is more than valid because, although the phone is rarely used for financial activity, MAVAMs study shows there is great acceptance: 71% of those interviewed said they would use the cell phone as a credit or debit card and 66% would use the handset to consult bank account balances or conduct transactions. Furthermore, the cell phone penetrates lower income populations and thus is the ideal way to expand bank automation. According to Informa Telecoms & Media, the cell phone is another means for banks to offer their services in developing markets, not only for their clients, but also for the bankless. It is projected that by 2013 there will be 977 million users of mobile bank services throughout the world, a considerable increase when compared to the nearly 67 million at the end of 2008. Thus, only small adjustments are needed to change this situation. The cell phone has already proven to be convenient and practical: it is always readily available and thus can be accessed at any time, from anywhere. Furthermore, the main barrier for adherence to these new services has already been overcome: usability. Today, especially after mass adoption of Smartphones, there are no more difficulties in cell phone typing. Therefore, Mobile Money can no longer wait to become indispensable. There are plenty of examples of acceptance. Convergence is a reality and it has been gaining strength in emerging countries where it can also contribute towards growth in poorer economies. Everyone in this service and technology supply chain has already noticed that, and once again MAVAMs results point to this evolution. *RAFAEL STEINHAUSER President of Acision Latin America

MAVAM Acision Monitor for Mobile VAS

1. INTRODUCTION
The drop in voice revenue, promoted by competition and market maturity, has stimulated mobile operators to search for new revenue resources amplifying their range of services. The main mobile carriers in the world presented strong growth in their VAS revenue in 2009.

Growth of VAS Revenue in 2009

Telefonica AL

38%

AT&T

26%

Verizon

21%

Vodafone

20%

NTT DoCoMO

18%

SK Telecom

10%

Source: Operators. Growth 4Q09/4Q08 to AT&T and Verizon. In Latin America, VAS services also presented strong growth in 2009. Telefonicas mobile VAS revenue in Latin America increased 38% in 2009, about 2.2 billion Euros. This growth occurred mainly in Telefonicas operators in Brazil (41%), Argentina (38%), Chile (28%) and Venezuela (52%).

2. VALUE-ADDED SERVICES (VAS) REVENUE

The Value-Added Services (VAS) revenue of mobile operators in Brazil has grown quarter upon quarter.

VAS Gross Revenue US$ Billion

1.6 1.7 1.8 2.4 2.0

1.2

1.4

1.5

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

Source: Operators and Teleco In 2009 mobile VAS revenue in Brazil reached R$ 8 billions, with annual growth of 40%, conquering an increasing participation in the mobile operators services revenue.

VAS Participation in Mobile Carriers Gross Revenue

12.4% 12.0% 11.3% 9.5% 8.7% 9.8% 9.3%

14.2%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

This participation of VAS in the total services revenue is still small if compared with other countries like the United States, where it was bigger than 25% in the first semester of 2009, with growth of 31% over 2008. In Japan it reached more than 40%. 7

MAVAM Acision Monitor for Mobile VAS

VAS Participation in Services Revenue

NTT DoCoMO

43%

H3G

36%

Verizon

30%

AT&T

29%

Telecom Itlia (Italy)

24%

SKT

22%

Vodafone

19%

Telkefonica AL

18%

The following image shows this participation for the main mobile carriers in Brazil.

Gross Data Revenue as % of the Gross Service Revenue

13.1% 11.3% 10.3% 9.8% 11.2% 13.7% 12.3% 10.9% 9.5% 10.9% 10.8% 8.7% 6.8% 5.6% 14.8%

17.7%

12.6% 12.0% 11.3%

9.2%

8.4% 6.3% 6.4%

6.1%

1Q08

1Q08

3Q08 Oi

4Q08 Tim

1Q09

2Q09 Vivo

3Q09

4Q09

In 2009, VAS revenue represented 12.5% of the Brazilian mobile operators service revenue. Message services (SMS/ MMS) had the biggest participation, representing 50% of operators VAS revenue.

Mobile Service Revenue in Brasil (4Q09)

Internet
36%

Voice
86%

VAS
14%

Outros
14%

Messages
50%

This distribution of Mobile VAS revenues is in line with what is happening in the world (53% Messages, 35% Internet and 12% other services). In the United States, where SMS is widely used, message services represented 64% of the VAS revenue in 2008. The following table shows the distribution of Vivos VAS net revenue.

VIVO SMS+MMS Vivo Internet Others VAS Net Revenue (R$ millions)

2008 50.5% 35.2% 14.3% 1,439

2009 47.9% 43.9% 8.2% 2,035

MAVAM Acision Monitor for Mobile VAS

3. SPECIAL THEME: PAYMENTS AND BANKING

The use of cell phones to make payments or access banking services is one VAS area with great potential for growth in the world. The table below demonstrates the main categories of these services. MOBILE PAYMENTS MOBILE TICKETING MOBILE BANKING MOBILE MONEY TRANSFER Paying for goods & services from vending machines instead of using cash/card With on-phone storage of ticket Bank account access, bill payment, top-ups Mobile to mobile

These services are having quicker adoption in African and Asian countries by people who have cell phones but dont have bank accounts. For example, Safaricoms M-PESA service in Kenya reached 8.5 million users in 3 years. In Brazil, the survey carried out in February 2010 to MAVAM shows the following order of interest in the use of these services: 1. 2. 3. 4. Mobile Payments (2.24) Mobile Ticketing (2.34) Mobile Banking (2.44) Mobile Money Transfer (2.87)

The use of these services in Brazil is still low. Over the last 3 months: 5% have made a payment through cell phone, with a frequency of 0.4 times a week. 7% accessed any bank through cell phone, with a frequency of 0.7 times a week. However, the acceptance is great: 71% used the cell phone as a credit or debit card. 66% used the cell phone to check the bank balance or to manipulate the bank account. Security was pointed as the main reason for not using these services. People who dont use cell phone to check the bank balance / manipulate the bank account presented the following reasons: 59% - Dont trust service / Service isnt safe. 15% - Risk of being cloned. 12% - Dont have bank account. 11% - Are afraid of being robbed and have their password in the cell phone discovered. 8% - It will increase the cell phone bill / spend credits. 7% - Prefer to go directly to the bank. Same reasons for not using cell phone as credit or debit card: 53% - Dont think its safe. 15% - It will increase the theft of cell phones. 10% - In case of theft / robbery, dont not know if the lock would be immediate 9% - Dont have bank account. 7% - It will increase the cell phone bill / spend credits. 6% - Prefer to go directly to the bank. 6% - Use the cell phone only for communication

10

4. WHAT THE MARKET SAYS ABOUT USING THE PHONE FOR FINANCIAL TRANSACTIONS
Mobile Money: When analyzing the development of the market for transferring money by cell phone (mobile money), Informa Telecoms & Media believes that in 2013, almost 424 million customers will send more than 157 billion dollars of personal funds through the cell phones in the internal market, while another 73 million will send 48 billion dollars of funds through cell phones internationally. According to Reuters, in Japan, a pioneer in this type of technology, there are about 55 million cell phones acting as electronic wallet, and the market for mobile money grows about 70% per year. It is estimated that in 2012, 190 million people will be users of this system. Mobile Payment: Informa Telecoms & Media predicts service revenues of over USD 10 billion from mobile payments and banking in 2013. Informa forecasts that in this year almost 300 billion transactions, worth more than US$860 billion, will be conducted using a mobile phone - a twelve-fold increase in gross global transaction values in just five years. The mobile payments and banking market has evolved considerably over the last two years. Major industry initiatives led by the GSMA and significant commitments to the market from major financial services and telecoms leaders have changed the dynamics of this market, says John Darnbrough, Associate, Informa Telecoms & Media and author of the Mobile Payments and Banking report. At last there is real evidence of demand for these services, some from the unlikeliest of places such as the emerging markets of Africa and Asia. The prospects for growth and the emergence of new opportunities in mobile financial services are encouraging more players to enter the market. Informa predicts that by 2013, over 445 million mobile subscribers will be regularly using their mobile phone to purchase physical goods and services remotely. Furthermore, Informa estimates that of the total value of mobile payments and transactions in 2008 - around US$71 billion - approximately a third was spent on purchases of mobile digital content such as ringtones, games and music tracks, but by 2013 over 95% of mobile transactions will be for physical goods and services. Mobile Banking: Informa Telecoms & Media examines the trend of banks in developed markets utilizing the mobile phone as another channel to market for their existing services and the emergence of mobile enabled branchless banking services for unbanked consumers in developing markets. It forecasts that by 2013 there will be 977 million users of mobile banking services worldwide a dramatic increase from approximately 67 million at the end of 2008. A research by Juniper Research says that the number of people who will use mobile banking in 2011 will reach 816 million. This is due to the fact that banks invest in improvements to its use in the large network, with innovations in the security area so that transactions can be done with ease. Another study released by Javelin Strategy & Research says that half of iPhones users today already use mobile banking services. According to the research, by 2014 almost 50% of all cell phone users will be part of that group. This means that, in the United States alone, 99 million adults will carry out at least one mobile banking transaction per year. According to the GSM Association, the banking services by cell phone - or mobile banking - began to emerge six years ago in the Philippines and South Africa, where 8.5 million and 4.5 million people, respectively, use this resource. Today, 40 million people around the world are customers and the GSMA expects that the number should increase. Africa and Asia are the most active regions at the moment. We hope that Latin America will become frequent users later this year. There are 18 thousand new users of mobile banking per day in Uganda, in Tanzania there are 15 thousand and also 11 thousand in Kenya.

11

MAVAM Acision Monitor for Mobile VAS

Some applications Mobile Money

1. Mobile electronic wallet Safaricom, the largest mobile phone company in Kenya, developed the M-Pesa, which currently has over 8 million users. M-Pesa makes agencies available in various parts of the cities. Its users make a kind of cash deposit, which is converted into mobile money and made available in your cell phone bill. As from there, the money can be transferred to any person via SMS. If the user does not have a mobile money account, he can reach one of these agencies, hand in the code of the text received via SMS and exchange the amount determined. For extra safety of those using this system, the access to money via SMS is allowed only after entering a number and a pre-determined password. This ensures that the sums remain saved even if the phone is lost or stolen. 2. Visa payWave The new Visa payWave service allows credit cards, debit cards, tickets and transport payment to be integrated into a cell phone. Using the Near Field Communication (NFC) technology, companies Visa, Nokia, Claro, Banco do Brasil and Bradesco performed the launch of the program for mobile payment. The NFC technology allows communication between two compatible electronic devices, which are nearby or touching one another. This way, one device can identify the other and, in a second time, there is the data transmission, effectively. Using the NFC, the new model allows the purchase of products and payment of services in accredited points in Brazil. Just go to an establishment that accepts the standard technology, put the phone next to the terminal and wait for the payment confirmation message.

Mobile Payment
1. Beaches in Rio de Janeiro The Sebrae (Brazilian Service to Support Micro and Small Enterprises) from Rio de Janeiro encouraged mobile payment on the beaches of the South Region in the capital city. Consumers do not need more money or credit card to make their purchases. From home, they register their cell phone and credit card on the Internet. On the beach, the salesperson registers the value in a machine and, on the phone, the consumer confirms the purchase. The amount is charged directly at the users card. The service, meanwhile, is available in 50 tents. The intention, according to the institution, is to increase the access of micro and small enterprises to electronic payment. 2. Bus tickets The Belgium bus company De Lijn made life of its passengers easier with the sale of tickets via SMS. Users choose if they want to buy a ticket for 60 or 120 minutes. A confirmation message is sent and one just have to show it as the proof of purchase. 3. Drinks and food Four hundred visitors from the last edition of the Mobile World Congress might use their mobile NFC (Near Field Communication) to pay for food and drinks - up to a value of 75 euros in more than 30 shops in the whole area of the event. The experience was provided by the GSM Association (GSMA), together with companies Samsung, Telefnica, Visa, Giesecke & Devrient, Ingenico, ITN International and La Caixa, responsible for assembling the first mobile payment pilot based on the model of proximity based on SIM NFC.

12

4. Hotel Customers of carrier Oi can pay for their stay on Formule 1 hotels network in units of Rio de Janeiro and Belo Horizonte through a cell phone. Called Oi Paggo, the service works as follows: during the check-in, the guest tells the clerk their cell phone number. A text-message with the purchase data is sent from Oi to the user, which authorizes the transaction by entering a personal password to the system. The price of the stay will be indicated in the Oi Paggo bill.

Mobile Banking
1. Banking Transactions Large Brazilian banks, such as Bradesco, Ita and Banco do Brasil already have Mobile Banking services. For the most part, the services offer the option of balance inquiry, payments, transfers, purchases of prepaid cards, investment management (home broker), loans and checkbook requests. These institutions have been investing in the expansion of their Mobile Banking services. Bradesco and Ita, for example, have closed a partnership deal with Visa payWave. Meanwhile, Banco do Brasil states that, in 2012, its Mobile Banking service will exceed the Internet Banking one. Due to this scenario, the organization is developing a seven-year project to create a relationship by mobile means with consumers (by sending text-messages) and increase the number of payments made through the device.

13

MAVAM Acision Monitor for Mobile VAS

5. ACISION MONITOR FOR MOBILE VAS MAVAM

The following presents Acision Monitor for Mobile VAS MAVAM, which aims to monitor the market of Mobile Value-Added Services, keeping track of the number of subscribers, usage and revenue by type of mobile VAS service: 1. Messages (SMS, MMS, Email and Instant Messages); 2. Entertainment (Music, Ringtone, Images, Games, TV and Video); 3. Internet Access and broadband; 4. Social Networks; 5. Payments and Banking; 6. Marketing (via SMS) and Advertising; These indicators will be forecasted by Teleco based on the information provided by mobile operators and surveys carried out with users. The first report presented these indicators for the state of So Paulo (Region III of the general Licensing Plan PGO) and for the city of So Paulo. The results were obtained through primary survey with 500 interviews, held in the city of So Paulo along September 2009. For other reports primary surveys were held with 750 interviews, distributed between the cities of Rio de Janeiro (Region I), Porto Alegre (Region II) and So Paulo (Region III). These 3 cities concentrate 26% of the Brazilian cell phones and the margin of error is 6.3 percentage points. The survey for the second report was carried out in November 2009 and for this third report the survey was held in 2010.

5.1 Message Services

Message services are the Value-Added Services (VAS) most widely used on cell phone. In 2008, about 63% of the cell phone users in the world used SMS. This fact was confirmed by MAVAM results for the state of So Paulo, presented below.

Used over the last 3 months

SMS

81%

MMS

7%

Email

3%

Instant message

3%

14

The table below presents results for the cities of So Paulo, Rio de Janeiro and Porto Alegre. USED SO PAULO SMS 89% MMS 8% Email 3% I M* 4% * Instant Message (Example MSN) RIO DE JANEIRO 71% 6% 1% 0% PORTO ALEGRE 68% 7% 3% 7% AVERAGE 81% 7% 3% 3%

Comparing this survey with the one held in Nov/09, we can note small variations in the use of SMS and MMS. These variations are inside the survey margin of error.

USED SMS MMS Email IM

NOV/09 79% 10% 4% 3%

FEB/10 81% 7% 3% 3%

MAVAM also showed that the use of voice messaging service reached 26% in Fev/10. In Nov/09 the average of use in these 3 capitals reached 22%.

5.1.1 SMS and MMS

SMS is used by 89% of the mobile subscribers in the city of So Paulo, 71% in Rio de Janeiro and 68% in Porto Alegre. The average for these 3 capitals reaches 81%. We estimate in 70% this percentage for Brazil in 2009. The survey showed a high use by these users.

3 CAPITALS (USE BY AGE) Sent SMS SMS sent by day

TOTAL 81% 28.8

14 TO 17 18 TO 24 25 TO 34 35 TO 49 50 TO 65 87% 83% 83% 79% 66% 29.8 24 29.6 31.7 23.9

MAVAM shows growth in the use of SMS among clients between 50 and 65 years old. The result points out to an average index (in these 3 capitals) of 23 SMS/mobile access per month, higher than the estimated for the Brazilian average in 2009 (12 SMS/cell phone/month), even though lower than what was presented by the United States in the first semester of 2009 (451 SMS/cell phone/month) and other countries of the region.

15

MAVAM Acision Monitor for Mobile VAS

SMS/Mobile Accesses by month

United States

451

Venezuela

198

Argentina

122

Mexico

59

Latin America

40

Brazil

13

Colombia

14

Peru

10

Chile

Source: Regulatory Agencies and Teleco (2009) One of the factors that can stimulate the use of SMS in Brazil is the reduction of its average unit cost through package offers by mobile operators. The average SMS cost in Argentina and in the United States is R$ 0.05. In Brazil, SMS average cost charged by mobile carriers is R$ 0.35 and the survey pointed to an average spend of R$ 0.24 per SMS. Other factor is the relation between the cost of voice minute and the cost of SMS. While this relation reaches 3.6 in Venezuela, 3.2 in Argentina and 2.6 in the United States, in Brazil it reaches 1.7, if we consider an average cost of R$ 0.24 per SMS

COST (R$) Venezuela Argentina United States Brazil

VOICE MINUTE 0.75 0.23 0.12 0.40

SMS 0.21 0.07 0.05 0.24

MINUTE/SMS 3.6 3.2 2.6 1.7

16

The same is applied to MMS, used by 14% of the mobile subscribers in the world. MAVAM showed that this percentage reaches 7% in the state of So Paulo, 8% in Rio de Janeiro and 6% in Porto Alegre. In the first semester of 2009, while the United States sent 6 MMS by cell phone per month (Teleco and CTIA), in the average for these three Brazilian capitals this indicator reached 1.5 MMS by cell phone/month having an average cost of R$ 0.29 by MMS.

5.1.2 E-mail and Instant message

The use of cell phone in order to send or receive emails or use the instant message service (like MSN) is still low. In the average for these 3 capitals, 4% of the cell phone subscribers sent email and 3% used the service of instant message (like MSN). The use of email reached 13% in the United States (M:Metrics 2008). The survey showed that the use of these services increases when its considered only Smartphone users.

Sent or received email over the last 3 months

Used Instant message over the last 3 months

8% 7%

3%

3%

Has a Smartphone

Any type of device

Has a Smartphone

Any type of device

17

MAVAM Acision Monitor for Mobile VAS

5.2 Entertainment (Music, Ringtone, Images, Games, TV and Video)

The survey confirmed the popularity of music and other services for entertainment in cell phone.

Activities performed through cell phones over the last 3 months

Listened to music

56%

Played built-in games

38%

Watched videos

6%

Watched free TV

1%

The table below presents the results for the cities of So Paulo, Rio de Janeiro and Porto Alegre.

ACTIVITIES IN SO PAULO RIO DE JANEIRO PORTO ALEGRE THE CELL PHONE Watched TV 1% 2% 3% Watched video 6% 7% 4% Played built-in games 38% 36% 41% Listened to music 61% 48% 53% * 16% including those who watched videos recorded through the own cell phone.

AVERAGE 1% 6% 38% 56%

Comparing the survey for the city of So Paulo held in Sep/09 with the one carried out in Nov/09 we can note drop in the use of built-in games. These variations are inside the survey margin of error.

ACTIVITIES IN THE CELL PHONE Watched TV Watched video Played built-in games Listened to music

NOV/09 2% 5% 38% 42%

FEB/10 1% 6% 38% 56%

According to the survey, 56% of the mobile subscribers in the average of these 3 capitals listened to music in the cell phone over the last 3 months, in an average of 4 times a week. This percentage is much higher than the 7% observed in the United States (M:Metrics 2008). 18

Then come built-in games, which were played by 38% of the mobile subscribers over the last 3 months with an average frequency of 2.3 times a week. According to MAVAM, music and ringtones were the most downloaded items over the last 3 months.

Downloaded over the last 3 months

Ringtone 5%

7%

Music

Games

2%

Video

1%

Images

2%

The table below presents the results for the cities of So Paulo, Rio de Janeiro and Porto Alegre.

DOWNLOADED Music Ringtone Games Video Images

SO PAULO 4% 12% 2% 1% 1%

RIO DE JANEIRO 7% 1% 1% 2% 2%

PORTO ALEGRE 7% 4% 3% 3% 3%

AVERAGE 5% 7% 4% 2% 2%

Comparing the survey held for the city of So Paulo in Nov/09 we note drop in the number of users that downloaded contents over the last 3 months. These variations are inside the survey margin of error.

DOWNLOADED Music Ringtone Games Video Images

NOV/09 6% 4% 3% 2% 2%

FEB/10 5% 7% 4% 2% 2%

19

MAVAM Acision Monitor for Mobile VAS

Video presents lower number of users. According to the survey, 6% watched video downloaded in the cell phone over the last 3 months and 2% of the total of cell phone subscribers downloaded videos. The same percentage of those who downloaded images over the last 3 months. In the United States (M:Metrics 2008), 9.2% of the cell phone users downloaded ringtones and 9% games. MAVAM showed that music and ringtones have the highest numbers of downloads by the users of these services, for which they pay a higher average unit price.

Number of downloads by months Average unit price (R$)

MUSIC 6.0 3.9

RINGTONE GAMESS 2.5 7.1 3.7 4.7

VIDEO 1.6 3.2

IMAGES 2.8 3.6

TV presented low penetration in cell phone. According to the survey, 1% of the total of cell phone subscribers watched open TV through cell phone over the last 3 months.

5.3 Internet Access and Broadband

5.3.1 Internet Access and Broadband
MAVAM showed that 4% of the mobile subscribers in these 3 three Brazilian capitals accessed the internet through cell phone over the last 3 months. In the United States this percentage reached 23% (M:Metrics 2009). The survey shows that internet access through cell phone increases when its considered only Smartphone users.

Accessed Internet through cell phone over the 3 months

10%

4%

Has a Smartphone

Any type of device

According to MAVAM, 2% of the mobile users in these capitals have a modem with data plan (Mobile Broadband).

20

5.3.2 Location Based Services

The survey showed that 2% of the cell phone subscribers in the average of these 3 capitals used location based services, maps or GPS over the last 3 months. This is one of the services with great potential for growth in coming years.

5.4 Social Networks

The access to social networks is one of the main activities of the Internet users. According to MAVAM for the average of these 3 capitals, over the last 3 months, 1% of the users accessed social networks. This percentage increases to 4% among Smartphone users.

Accessed social networks through cell phones over the 3 months

4%

1%

Has a Smartphone

Any type of device

In the United States social networks were accessed by 5% of the mobile subscribers in 2008 (M:Metrics).

5.5 Payments and Banking

Payments and Banking were the special theme in this MAVAM edition and it has its results presented in section 3.

5.6 Mobile Marketing

Marketing via SMS/MMS from mobile operators to their clients is an established practice. The survey showed, however, signs of rejection of this practice by mobile subscribers. In the average for these three capitals 73% declared that received SMS/MMS with promotions or advertising. Many users revealed they had erased the messages before reading and for that reason they declared they had not received them. The survey showed that most of these messages are related to promotions offered by the mobile carrier. The survey for the average of these 3 cities also shows that 1% of the mobile users received SMS/MMS with promotions or advertising in their cell phones from competitor mobile operator and 1% from other companies.

21

MAVAM Acision Monitor for Mobile VAS

Received SMS/MMS with promotions or advertising

73%

1% From the mobile carrierndicat From other mobile carriers

2% From other companies

6. FINAL CONSIDERATIONS
This third edition of Acision Monitor for Mobile VAS MAVAM presents indexes of Value-Added Services (VAS) in cell phone for the cities of So Paulo, Rio de Janeiro and Porto Alegre. Services such as SMS, Music, Games, MMS and Internet access have already great number of users in the average of these 3 cities.

Used over the last 3 months

SMS

81%

Listen to music

56%

Built-in games

38%

MMS

7%

Internet Access

4%

MAVAM showed, however, that the use of some services such as SMS is lower than the world average and its also inferior when compared to other Latin American countries. 22

Given the characteristics of income and mobile density, the use of Value-Added Services (VAS) in cell phones in So Paulo is higher than the Brazilian average, but it represents the trend of distribution of these services in the rest of the country. The evolution of 3G technology, with higher data speed accesses, stimulates the use of VAS in cell phone, as well as the use of cell phones that provide to the subscriber a better experience using these services. The survey showed that the use of VAS in cell phones grows in line with the increase in the number of Smartphone users. Its interesting to emphasize the general advance of the mobile VAS segment from 12.4% in 3Q09 to the current 14.2% of the mobile carriers total revenue. In values, they reach R$ 2.4 billion in 4Q09, with growth of 50% over 4Q08.

23

MAVAM Acision Monitor for Mobile VAS

ANEXO 1. MAVAM SUMMARY TABLES

The following presents MAVAM summary tables for So Paulo (state and city) MAVAM AVERAGE FOR SO PAULO, RIO DE JANEIRO E PORTO ALEGRE ITEM CATEGORY / SERVICE USERS USERS USE GROSS PARTICIPA(MILLIONS) (%TOTAL) (CELL./ REVENUE TION IN MONTH) (CELL./ ARPU (%) MONTH-R$) 1.0 Messages 1.1 SMS 36.5 81% 23 SMS 3.1 6.0% 1.2 MMS 3.2 7% 1.5 MMS 0.5 0.9% 1.3 Instant Message IM 1.4 3% 1.4 E-mail 1.8 4% Push Mail 0.9 2% 1.1 2.2% 1.5 Voice Mail 11.7 26% 1.1 2.2% 2.0 Entertainment 2.1 Ringtone 3.2 7% 0.18 0.6 1.2% downloads 2.2 Music (listen) 25.2 56% Music (download) 2.3 5% 0.30 1.2 2.3% downloads 2.3 Games (download) 1.4 3% 0.11 0.6 1.1% downloads 2.4 Open TV 0.5 1% 2.6 Pay TV 0.5 1% 2.6 Video (watch) 2.7 6% Video (download) 0.5 1% 0.07 0.2 0.5% downloads 2.7 Images (download) 0.9 2% 0.25 0.9 1.8% downloads 3.0 Internet Access and Broadband 3.1 Browsing/WAP/ 1.8 4% 0.8 1.5% Widgets 3.2 Broadband Access 0.9 2% 1.2 2.4% 3.3 Location Based 0.9 2% Service 4.0 Social Networks 4.1 Social Networks 0.5 1% 5.0 Payments and Banking 5.1 Banking 2.3 5% 5.2 Payments 2.3 5% 6.0 Marketing and Advertising 6.1 Marketing (Operator) 32.7 73% 6.2 Advertising (other 0.7 2% carriers)

24

MAVAM SO PAULO
ITEM CATEGORY / SERVICE USERS (MILLIONS) USERS (% TOTAL) USE (CELL./ MONTH) GROSS REVENUE (CELL./ MONTH R$) PARTICIPATION IN ARPU (%)

1.0

2.0

Messages 1.1 SMS 1.2 MMS 1.3 Instant Message IM 1.4 E-mail Push Mail 1.5 Voice Mail Entertainment 2.1 Ringtone 2.2 Music (listen) Music (download) 2.3 Games (download) 2.4 Open TV 2.6 Pay TV 2.6 Video (watch) Video (download) 2.7 Images (download)

21.9 2.0 1.0 0.7 0.5 8.4 3.0 15.0 1.0 0.2 0.2 0.2 1.7 0.2 0.2

89% 8% 4% 3% 2% 34% 12% 61% 4% 1% 1% 1% 7% 1% 1%

26 SMS 2.1 MMS 0.30 downloads 0.25 downloads 0.08 downloads 0.09 downloads 0.13 downloads

3.2 0.6 1.1 1.2 1.1 0.9 0.3 -

5.8% 1.1% 2.0% 2.3% 1.9% 1.7% 0.5% -

3.0

4.0 5.0

6.0

Internet Access and Broadband 3.1 Browsing/WAP/ Widgets 3.2 Broadband Access 3.3 Location Based Service Social Networks 4.1 Social Networks Payments and Banking 5.1 Banking 5.2 Payments Marketing and Advertising 6.1 Marketing (Operator) 6.2 Advertising (other carriers)

0.7 0.2 0.2

3% 1% 1% -

0.9 0.2 -

1.5% 0.4% -

1.0 2.2 2.0 20.3 0.3

4% 9% 8% 82% 1%

25

MAVAM Acision Monitor for Mobile VAS

MAVAM RIO DE JANEIRO

ITEM CATEGORY / SERVICE USERS (MILLIONS) USERS (% TOTAL) USE (CELL./ MONTH) GROSS REVENUE (CELL./ MONTH R$) PARTICIPATION IN ARPU (%)

1.0

2.0

SMS MMS Instant Message IM E-mail Push Mail 1.5 Voice Mail Entertainment 2.1 Ringtone 2.2 2.3 2.4 2.6 2.6 Music (listen) Music (download) Games (download) Open TV Pay TV Video (watch) Video (download) Images (download)

Messages 1.1 1.2 1.3 1.4

9.0 0.6 0.4 0.3 1.1 0.1 6.1 0.9 0.4 0.3 0.1 0.5 0.1 0.3

71% 5% 3% 2% 9% 1% 48% 7% 3% 2% 1% 4% 1% 2%

20 SMS 0.8 MMS 0.01 downloads 0.10 downloads 0.03 downloads 0.18 downloads -

2.4 0.3 1.6 2.2 0.1

4.7% 0.5% 3.1% 4.% 0.1%

0.6 0.1 1.2

1.2% 0.3% 2.4%

2.7 3.0

4.0 5.0

6.0

Internet Access and Broadband 3.1 Browsing/WAP/Widgets 3.2 Broadband Access 3.3 Location Based Service Social Networks 4.1 Social Networks Payments and Banking 5.1 Banking 5.2 P Payments Marketing and Advertising 6.1 Marketing (Operator) 6.2 Advertising (other carriers)

0.5 0.4 0.3 0.1 7.4 0.1

4% 3% 2% 1% 59% 1%

2.8 -

5.5% -

26

MAVAM PORTO ALEGRE

ITEM CATEGORY / SERVICE USERS (MILLIONS) USERS (% TOTAL) USE (CELL./ MONTH) GROSS REVENUE (CELL./ MONTH R$) PARTICIPATION IN ARPU (%)

1.0

Messages 1.1 1.2 1.3 1.4 1.5

SMS MMS Instant Message IM E-mail Push Mail Voice Mail

4.0 0.6 0.4 0.2 0.1 0.9

68% 10% 7% 3% 2% 15%

3.7 0.3 0.2 0.8

9.7% 0.8% 0.5% 2.0%

2.0

3.0

4.0 5.0

6.0

Entertainment 2.1 Ringtone 2.2 Music (listen) Music (download) 2.3 Games (download) 2.4 Open TV 2.6 Pay TV 2.6 Video (watch) Video (download) 2.7 Images (download) Internet Access and Broadband 3.1 Browsing/WAP/Widgets 3.2 Broadband Access 3.3 Location Based Service Social Networks 4.1 Social Networks Payments and Banking 5.1 Banking 5.2 Payments Marketing and Advertising 6.1 Marketing (Operator) 6.2 Advertising (other carriers)

0.2 3.1 0.4 0.2 0.2 0.1 0.1 0.2 0.4 0.2 0.2 0.2 0.4 3.7 0.1

4% 53% 7% 4% 3% 2% 2% 3% 6% 3% 4% 3% 7% 63% 2%

0.6 2.0 1.9 0.5 1.1 2.0 -

1.5% 5.4% 4.9% 1.3% 2.8% 5.4% -

27

MAVAM Acision Monitor for Mobile VAS

ANEXO 2. SERVICE DESCRIPTION

The description of the services presented in this report is presented in the following sections.

A2.1 Messages
The services in this category can be defined as: SMS (Short Message Service): 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 users 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 cant be answered.

A2.2 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 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 TVs at home.

28

A2.3 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: 1.1 Cell phone: the internet access from cell phone can be done in the following ways: 1.1.1 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. 1.1.2 Accessing the WAP websites inside the Carrier network through WAP browser. 1.1.3 Through specific programs installed in the handset (Widget, Web-App) provided by companies like Yahoo Mobile. 1.2 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 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 Location Based Services: service which provides users geographic location. These services have the following characteristics: 1.3 Localizao: can be provided as the following: 1.3.1 Through a process of triangulation using information from cell sites and application systems provided by the operator for this purpose; 1.3.2 Through the GPS installed in the cell phone. 1.4 Offered Services: 1.4.1 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 childrens habits, or with the purpose of promoting safety. 1.4.2 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. 1.4.3 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. 1.5 Mobile Marketing

29

MAVAM Acision Monitor for Mobile VAS

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.

30

31

www.acision.com