Experts agree with IPC Maps data that show post-pandemic habits

09/27/2022

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Sales of cell phones and accessories are expected to grow at double-digit levels this year — Foto: Brenno Carvalho/Agência O Globo

The consumer market is expected to spend R$175 billion this year on telephone services, packages (TV, Internet, and phone), and the purchase of cell phones and accessories. This represents a potential growth of 10.1% compared to 2021 and 32.53% compared to 2019. The growth is based on current prices and may have a margin of error of 5%.

This is what IPC Maps, a study prepared by IPC Marketing Editora, shows. Experts consider that the data is coherent with the country’s reality.

Marcos Ferrari, CEO of Conexis, which represents the big telcos, said that “the pandemic has changed society’s consumption basket and connectivity has become vital.” Mr. Ferrari, a former secretary of economic affairs during the Rousseff administration, added that “people’s lives, companies, businesses have acquired a new form with the importance of connection.” He recalled that the National Household Sample Survey (Pnad) showed that 98% of people access the Internet via cell phone.

The growth of services is “booming” and will continue, said Vivien Suruagy, head of the federation of telecommunications and information technology network infrastructure (Feninfra). These companies expect to spend nearly R$20 billion this year on infrastructure services for operators, small providers, and suppliers, up 10% to 20% over 2021, according to Ms. Suruagy’s informal analysis.

“I think this growth is totally reasonable,” said Luca Belli, coordinator and professor of the Center for Technology and Society at the think tank Fundação Getulio Vargas (FGV). Mr. Belli recalled that the Pnad, from the Brazilian Institute of Geography and Statistics (IBGE), showed in the last few weeks the increase of connected people and of the use of cell phones and connected TV.

“However, you have to be more critical to understand these statistics,” Mr. Belli said. Not all Brazilians are connected, he added, citing that the lower-income population does not have a connection and is unable to surf the internet. In addition, a good part of Brazilians with access to this type of technology “have very limited bandwidth. There is a digital divide.”

Marcos Pazzini, a partner at IPC Marketing in charge of IPC Maps, said that the main telecom consumption categories were analyzed: landline phone, which has been losing importance for users for years; cell phones, the main device in people’s daily lives; the entertainment-work duo; and chargers, which have gained importance, especially after manufacturers decided to sell them apart from new cutting-edge 5G smartphones – both iPhones and brands that run on Android.

IPC found that telecoms account for 3.3% of household expenses after analyzing water, electricity, telephone, and Internet bills, among others.

The advance in telecom spending is stronger than the expectations for overall household consumption in 2022 in the wider IPC survey, which analyzed 22 sectors. General consumption is expected to draw R$5.6 trillion this year in Brazil, up only 0.92% from 2021.

“Brazil is always among the top countries in terms of consumption, whether of telecommunications services or mobile devices, accessories, and appliances,” said Matheus Rodrigues, a Deloitte partner in Brazil and a specialist in the technology, media, and telecom industry.

The growth in consumption of telecommunications products and services in Brazil had already been noted by Deloitte. The executive cited a recent study held by the company showing that Brazil leads five of six pillars in the industry when compared to the United States, United Kingdom, Germany, and Japan. Brazil is a leader in music streaming, games, social media, Internet navigation, media, videos, shows, and movies. The country is only behind in the segments of live concert streaming and movies at home.

According to IPC Maps data, the growth in telecoms spending this year ranges between 9.51% and 10.6%, depending on the category, compared to last year. Landlines are expected to see the smallest growth (9.51%).

The loss of importance of the landline phone becomes more evident when analyzing the potential spending when looking at the bills in reais in 2022 compared to 2019. Spending on this service dropped on average 80%, to R$10.15 billion, while cell phones are expected to grow 35%, to R$58.4 billion. Telephone, TV, and Internet packages are expected to rise 167% to R$58.4 billion, while cell phones and accessories are expected to increase 229.3% to R$47.9 billion.

“Few people depend on landlines and many who still have them at home do so for convenience because if you cancel the landline in the package, the price goes up,” said Mr. Pazzini. In fact, the sharp decline compared to 2019 follows industry trends, but the growth forecast for 2022 seems illogical. The executive explains that it is a nominal variation and the same is true for cell phones and accessories. “It does not mean that it grew by more than 200% in real terms. Inflation from 2019 to 2022 is expected to reach around 70%,” he said.

The industry’s revenues have been falling in real terms since 2015 due to structural issues. Even with an inflation of 5% to 6% per year, there is positive growth in telecoms, said Fernando Moulin, a professor at Insper and ESPM, and a partner at the consultancy Sponsorb. Mr. Molin, who has already worked for telecom companies, said that the growth indicated in the survey is justified by the change in people’s habits, and the tendency is for this to continue. “Digital transformation points to the North, with cultural, economic, and social changes,” he said.

Mr. Molin agrees that the macroeconomic scenario for 2023 is indeed challenging. But microeconomic conditions do not change, and one of them is habit; people want to be connected.

Cell phones, on the other hand, grew the most because people who used them eventually were forced to buy better devices to work at home and make video calls during the pandemic, Mr. Pazzini said.

Sales of cell phones and accessories are expected to grow at double-digit levels this year, said Reinaldo Sakis, research and consulting manager for consumer devices at IDC Brasil. He linked the increase to the change in the mix of products, higher prices, and higher costs caused by manufacturing problems in Asia passed on to products and components. IDC estimates a 5% drop in units sold in 2022, despite the new 5G technology, because retailers are “well stocked.”

In 2021, IDC saw a 6.1% drop in sales in units compared with 2020. In the second quarter of 2022, there was a 3.1% increase, with the sale of 11.3 million handsets. In revenue, from May to June, cell phone sales grew 14.1% year-over-year, to R$17 billion. In the first half, revenues reached R$36.7 billion, up 16.8% from the first six months of 2021.

“5G growth is exceptional, up over triple digits in units,” said Mr. Sakis. But he added that since this advance occurs over a still small base of 5G smartphones, it will not make a difference this year.

In addition, 1,261 new companies were founded in the telecoms sector since 2021, up 2.2% year-over-year. Now they add up to 57,805, the study found.

Spending rose despite higher unemployment because money flows increased as well, Mr. Pazzini said. The population sought income alternatives, and new delivery and transportation applications emerged, for instance. Ride-hailing drivers and motorcycle couriers depend on the Internet. The reliance on connections has created demand in the industry.

Mr. Pazzini says the upward trend will continue into 2023. “But it won’t last,” warned Mr. Belli, with FGV.

*By Ivone Santana — São Paulo

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