Brazil's Tim Looks To Compete With Fixed-Line Telecoms

SAO PAULO -(Dow Jones)- Tim Participacoes, Brazil's No. 2 mobile operator, is looking to encourage users to ditch their fixed lines as means of increasing traffic.

Tim, the local unit of Telecom Italia, announced last week it will offer 200 minutes per month for calls from home for 29.90 Brazilian reals (US$13.84), or about 25% cheaper than fixed-line plans. Meanwhile, this week, it announced it will extend the offer to business clients.

"Consumers know that a mobile-to-mobile call is cheaper than a fixed-to-mobile call. Now they will discover that also that a mobile-to-fixed call will cost less than a fixed-to-fixed call when calling from a predetermined geographical base," said Marco Lopes, the company's marketing director.

Wireless phone operators have been engaged in cut throat competition for top-end clients over the past year, a battle that has been reducing revenues per user.

But now, Tim is looking to steal clients from incumbent fixed-line operators Telecomunicacoes de Sao Paulo, Tele Norte Leste Participacoes, or Telemar, and Brasil Telecom Participacoes.

"The idea is to cement the habit among Tim users of using their cellphones at all times," said Stephan Graham, telecom analyst at investment bank UBS, in a recent research note.

While there are more mobile phones than fixed-line phones in Brazil, only a third of all Brazil's phone calls emanate from cellphones, according to Pyramid Research.

Tim hopes to increase incoming, as well as outgoing calls, generating a termination fee.

In the USA, ditching fixed-line phones to use just cellphones is quite common. Brazil has experienced a similar phenomenon for different reasons.

According to government figures, the number of Brazilian households with just fixed-line phones fell to 12.5% in 2005 from 27.9% in 2001. Meanwhile, the number of people with just mobile phones grew to 23.6% in 2005 from 7.8% in 2001.

The figures show that lower income families tend to share prepaid cellphones instead of having a fixed-line phone. Middle-class households tend to have both. The number of households with fixed and mobile lines grew to 36.3% in 2005 from 23.2% in 2001.

One problem with the program is that it can be seen as impolite to ask people to call a mobile phone in Brazil, as rates are much higher.

However, some younger people will probably try this technology, said Luis Minoru, telecom analyst at the Yankee Group in Sao Paulo.

Tim is trying to counteract the convergence plans of Telemar and Brasil Telecom, which are starting to offer bundled fixed-line, mobile and Internet services. In the future, if Telefonica buys sole control of Vivo Participacoes, Brazil's No. 1 cellphone company, it will have broad convergence too.

"Tim's idea is certainly interesting, although the fixed-line operators have many more services to offer," said the Yankee Group's Minoru.

-By Alastair Stewart, Dow Jones Newswires; 5511-3145-1479; alastair.stewart@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 2nd October 2006