Vivo may save US$ 232.58 million per year with GSM network

29 August 2006

Sao Paulo, Brazil, 29 Aug – The installation of a network using the GSM standard, which would complement the existing CDMA network, could represent annual savings of 500 million reals (US$ 232.58 million) for Brazilian mobile phone operator Vivo just on the purchase of units, said Banco Brascan analyst Felipe Cunha.

The analyst, cited by Valor Online, said the reason for the savings are explained by the cheaper price of GSM handsets, as this system is the one that is most utilized worldwide.

While the analyst predicted that the company will be able to attract more customers with lower spending power, he estimated that even if it kept its current customer base (28 million), with a subscription cancellation rate of 30 percent, Vivo will acquire 10 million units per year from manufacturers.

The analyst explained that with a difference in price of 50 reals (US$ 23.25) between GSM and CDMA units, there will be savings of 500 million reals (US$ 232.58 million).

Vivo, which is 50 percent owned by Portugal Telecom, chose China’s Huawei and Sweden’s Ericsson as suppliers of this second network.

The Swedish company announced Monday that is closed a contract with Vivo to supply the GSM/GPRS network, without disclosing the deal value.

Last week, Huawei announced it signed a contract to develop Vivo’s GSM/GPRS network in the states of Rio de Janeiro, Espírito Santo, Paraná, Rio Grande do Sul and Santa Catarina, also without providing financial details.

Vivo chairman Roberto Lima has already revealed that the company plans to invest on the project 1.08 billion reals (US$ 502.37 million), of which 900 million reals (US$ 418.64 million will be paid to suppliers. (macauhub)