Mavam méxico 06 2011 oking

MAVAMAcision Monitor for Mobile VAS

© Acision, june 2011.

All rights reserved.

Prepared by

MEXICO

2nd EDITION

MAVAM | Acision Monitor for Mobile VAS

Eighteen months ago Acision launched MAVAM to furnish the industry with a periodic

tool on the evolution of the value added industry in Brazil. The initiative has recentlyextended further to include more Latin American countries. We currently have MAVAMArgentina and MAVAM Mexico, which is presenting its second edition today.

The value added services (VAS) market in Mexico generated sales for USD 1,045 millionduring the first quarter of 2011, thus placing Mexico as the country accountable for 21% of

the VAS business in Latin America.

Value added services in Mexico increased by 35% over the last 12 months; today, value

added services amount to 28% of the sales for services of the mobile phone operators, whichis slightly above the Latin American average (25%).

Messaging services (SMS+MMS) amount to 60% of the revenues from VAS. MAVAMshows that even the use of SMS has reached such a massive level that there are almost nodifferences at the different socioeconomic levels.

Mobile Internet amounts to 22% of the revenues from VAS, and it has been the highest-growing service from the first quarter of 2010 to the first quarter of 2011 (+65%), thusfollowing the international trend leading to higher data consumption as a consequence of

the higher use of smartphones.

In this edition, we are introducing a special topic: Mobile Marketing & Advertising, a valueadded business which is increasingly major every day on the grounds that mobile phones arethe most widely used in the world with 5.6 billion customers.

At Acision, we are very pleased to make this tool available to get people to know the valueadded market deeper. If the current growth trends continue, value added services may

amount to 50% of the sales of Latin American operators by 2015.

Have a nice reading!

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Editorial

Rafael Steinhauser

Acision

President Latin America


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2 Editorial

5 1. Introduction6 1.1. Value added services in the world

10 1.2. Value Added Services in Latin America14 1.3. Value Added Services in Mexico

18 2. MAVAM - Acision Monitor for Mobile VAS

19 3. Special Topic: Mobile Marketing & Advertising20 3.1. Current penetration of Mobile Marketing & Advertising21 3.2. Message reading, remembering, and content 21 3.3. Sender22 3.4. Privacy and permits23 3.5. Incentives and receptivity24 3.5.1. Discounts and promotions on consumption goods24 3.5.2. Prizes25 3.5.3. SMS for Free and/or voice minutes25 3.6. Perceived Behavior26 3.7. Receptivity - Mobile Marketing Assumptions26 3.7.1. Advertising via Web links included in SMS28 3.7.2. Advertising through the use of Bluetooth at the user’s physical place29 3.7.3. Promotion which requires using the photography camera on the mobile phone30 3.7.4. Publication of messages in exchange for discounts30 3.7.5. Promotion through questions included on the consumed products with incentive offer31 3.7.6. Promotion via SMS survey32 3.8. Mobile Marketing Conclusions

33 4. MAVAM Mexico - First Quarter 201133 4.1. Messaging Services33 4.1.1. SMS 36 4.1.2. MMS36 4.1.3. Instant Messages (IM)37 4.1.4. Voice mail38 4.1.5. E-mail 39 4.2. Entertainment41 4.2.1. Games (Use and downloads)

Index


41 4.2.2. Music (Use and downloads)42 4.2.3. Ringtones (Downloads)43 4.2.4. Images (Downloads)43 4.2.5. Video (Downloads)43 4.2.6. Mobile TV (Visualization)

43 4.3. Internet access46 4.4. Social Networking47 4.5. Mobile Banking48 4.6. GPS and Maps

49 5. Final conclusions

50 6. Glossary

53 7. Technical File

54 8. Team

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By the closing of the first quarter of 2011, there were 5,6 billons connections1 in the world,out of which 581.52 million were in Latin America. There are still people in the world to beconnected to the mobile phone service; market players ensure that by 2015 there will beone terminal per inhabitant.

Notwithstanding that, mobile broadband is becoming increasingly important. At the closingof this study, Wireless Intelligence assessed that by June 2011, the HSPA (3G) connections

would exceed 500 million and that the LTE connections, after a year from the launching ofthe first business networks it has already reached a million connections.

At the same time, IDC assessed that terminal manufacturers will distribute 472 million Smartphones in the world this year (54%more than in 2010). The same consulting firm assesses that 1 thousand million smartphones a year will be delivered worldwide by

the end 2015. Smartphones represent about 26% of phone devices sold in the world, and in the first quarter of 2011 there were

more sales of smartphones than of computers.

In parallel with the growth of terminals and data connections, there is also an increase in the VAS contribution percentage to thetotal revenues of the operator. It is estimated that such percentage is currently 29%3 worldwide; for some operators, such as NTTDocomo with 54% of VAS contribution to its revenues.

The increase in data connections, in addition to the operators’ need to increase the risks posed by the value added services, is speeding

the discussions and processes up for new spectrum allocations, practically in the whole world. In addition to that, the governmentalauthorities speed the plans up to reduce the digital gap, including mobile networks as relevant infrastructure to meet their objectives.

Tablets burst into the market and the market is expectant to see which will be the actual use of these devices, which will be thedemand they will eventually meet. There is no doubt that tablets are new devices whose uses may not be similar to any of the useswe already know.

To all these positive facts which forecast an increase in value added services and data

consumption, it must be added the HTML 5 that will facilitate the creation of applications.Also the interest of other industries in mobile services is growing fast; such as the financial

industry, which analyzes mobile services as a tool to include more people in the financial

system, the healthcare industry thinking of mobility solutions which may help improve thepatients’ quality of life, to prevent and diagnose remotely, thus reaching zones that arecurrently unattended, the energy industry including chips in the meters to manageconsumption, among others.

As a conclusion, the industry is already in the path of value added growth, adding more

people, increasing the use of VAS and adding new connected devices.

MAVAM | 1. Introduction

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Introduction1

1 Source: Wireless Intelligence

2 Source: Convergencia Research. Includes

South America, Central America, Caribbean.

3 Source: Pyramid Research – Data for 2010.


In order to analyze the global impact of value added services on the mobile business, a

sample of seven operators in different countries was selected (See chart 2). Changes in totalrevenue and in Value Added Services (VAS) revenue between Q1 2010 and Q1 2011 wereanalyzed for each company.

Value added services (VAS) mainly comprise: SMS and MMS (messaging), music, videos,games, ringtones (entertainment), payments and mobile money transactions (mobile

Money), broadband and mobile Internet, social networks and mobile marketing/advertising

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1. “Value added services in the world1

Chart 1.

Operators Analyzed• América Móvil - Latin America

• AT&T - United States

• France Telecom

France Telecom France

• NTT Docomo - Japan

• Telefónica

Telefónica Spain

Telefónica Ireland

Telefónica Latin America

• Verizon – United States

• Vodafone

Vodafone Great Britain

Vodafone Germany

Vodafone India


Variation in Voice revenue contribution vs. VAS revenuecontribution

In Q1 2011, a downward trend in voice services contribution to total services´ revenue andan upward trend in value added services revenue contribution were identified among theanalyzed operators. Within this sample, voice services reduced their contribution tooperators’ total Average Revenue per User (ARPU) from 19% (in Telefónica Ireland) to 2%

(in Verizon USA). Vodafone India was the only exception with an increase of 3% in VoiceService´s contribution. This is consistent with a market that has a 60% penetration ofmobile lines on a population that still has a margin for growth in subscribers.In some cases,

VAS revenue already makes up for the drop in voice services revenues. For instance,

Vodafone´s balance sheet stresses that this is the first time that data revenue increase exceedsvoice revenue decline4.

In more mature markets (European Union, the United States and Japan), operators showedgrowth in value added services contribution below 5% compared to Q1 2010. In the casesof América Móvil and Telefónica (Movistar) Latin America these services increased its

contribution by 8% and 7%, respectively.

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4 Vodafone Preliminary Results 1/31/2011

page 9: ¨ First year that Group data revenue

increase exceeds voice revenue decline.

Chart 2.

Variation Voice and VASrevenue contribution

to ARPU Q1 2010 - Q1 2011

Source: Convergencia Research on

the basis of the financial reports

of the operators.


SMSs are important within VAS for emerging and developing countries operators, while, in

developed countries, where smartphones penetration is much higher5 than in the former,SMSs are losing ground to other data services.

In this operators sample, value added services vary between 13% and 54%. As regards NTTDocomo (Japan), value added services already represent 54% of the operator’s revenue. InEuropean Union countries, valueadded services vary between 25%

(Telefónica Spain) and 45%(Vodafone Great Britain), while in

the United States, value added

services represent 38.3% of Verizon´srevenue.

Value added services already represent25% of total revenue in the cases ofAmérica Móvil and Telefónica (Latin

America) and China likewise.

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Chart 3.

Total ARPU vs. MobilePenetration

Source: Convergencia Research

5 One example of smartphones penetration

growth is the following: in Q1 2011, 32% of

Verizon Wireless´s post-paid customer phone

base were smartphones; up 4% from 2010.

Verizon Q1 Highlights Page 5. Ät the end

of Q1, 32% of Verizon Wireless’ retail post-

paid customer phone base were smartphones,

up from 28% at the end of Q4 2010”.

S


In developed countries,mobile operators’ ARPUgrowth opportunities arealmost exclusively based onstate-of-the-art VAS (those

related to the use of mobileInternet) and it is throughthese services that

companies expect to recovervoice losses.

As regards European Unionand United States operators,it is worth mentioning thattheir ARPU is clearly higherthan that of other operatorsworldwide, enabling them tointroduce new and more

sophisticated VAS faster and giving rise to more revenue generation opportunities. Thequick adoption of advanced mobile devices6, Smartphones and tablets, is fundamental to theintroduction of these new value added services.

Operators in emerging and developing countries are focused on sustaining revenue byincreasing voice service penetration and introducing mobile phones that would enableoperators to deliver more and better value added services. Since ARPU in these countries islower (USD 10-15 approximately), the challenge is having both smartphones and other

phones that, despite not being smartphones, have friendly interfaces and features tostimulate value added use.

Value-added services expected to continue to grow in all markets thanks to the promotion ofservices and the introduction of new billable services to keep the business vitality.

In the coming years, mobile operators will have to change their business structure tomaintain VAS contribution to their revenue. Much of their future will depend on how thechanges are made and how these changes will, in business terms, be applied to customers.

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Source: Convergencia Research on the

basis of operators’ balance sheets.

Chart 4.

Analysis of VAS contribution to mobile ARPUDecember 2010

6 A good example is that of AT&T, that, in

the first quarter of the year sold more than

5.5 million smartphones, thus reaching the

third-highest growth quarter. AT&T Investor

Briefing Q1 2011 Page 3. ¨THIRD-

HIGHEST SMARTPHONE SALES

QUARTER EVER: AT&T had another

strong quarter of Smartphone sales.

(Smartphones are voice and data devices

with an advanced operating system to better

manage data and Internet access.) More than

5.5 million Smartphone were sold in Q1, the

third-highest quarter ever.


By the closing of Q1 2011, Latin America had 581.5 million Mobile Phone customers7

which amount to a 98% penetration on the people of the region8, 9 percentage points inrespect of the penetration registered in March 2010, when there were about 9 lines perinhabitant. These data show that over the 12-month period from March 2010 to March2011, 50.2 million new lines were introduced, which amount to 137 thousand netregistrations per day.

19% of the lines in the region operate under the Postpayment method. Despite the factthat, in most countries, the percentage of postpaid lines is not far from such 19%, there arealso particular markets, such as Puerto Rico, where postpaid lines (based on agreements),

amount to 76.6% or Jamaica, where these lines amount to just 3.5% of the total customers.

The pobile phone services business receives revenues which may be grouped under four big

items: Voice services, such as the traffic of minutes, Value Added Services, which includeInternet, messaging and other VAS (content, applications and voice VAS), the revenues fromthe sales of terminals and accessories, and other general revenues9.

Over the first three months of 2011, the mobile phone industry in Latin America10

generated revenues for USD 21,475 million. The voice services11 contributed USD 14,832million (69%), the VAS USD 4,973 million (23%), and the sale of terminals the remaining

USD 1,670 million (8%). The growth of the industry, as compared to the first quarter of2010, when total invoicing reached USD 19,440 million, was equal to 10%. VAS are theservices which best explain the variation in the revenues obtained from the industry, which

experienced a 33%-increase over the last 12 months. Just below the VAS, there is anotherfactor: technological change supporting the VAS represented by the terminals, and whichregistered an 18%-increase.

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2. Value Added Services in Latin America1

7 Estimation made by Convergencia Research

on the basis of the Balance sheets drafted by

Operators, Regulators, Institutions of

Statistics, Related Ministries and of its own

information. This figure does not include

Nextel’s Trunking customers in Argentina,

Brazil, Chile, Mexico and Peru, or Avantel’s

customers in Colombia, which amount to

9.5 million customers.

8 Source: ECLAC – The Economic

Commission for Latin America and the

Caribbean www.eclac.org. Population in

Latin America: 594 million inhabitants

(including all the countries and all the

islands of the Caribbean).

9 The other revenues from mobile phone

services are lower in proportion and as they

are generally in comprised in the revenues

from voice serveces, we have decided to

group them the same way in this report.

10 Estimation made by Convergencia Research

on the basis of the Balance sheets drafted by

Operators,, Regulators, Institutions of

Statistics, Related Ministries and of its own

information. This figure does not include

Nextel’s Trunking customers in Argentina,

Brazil, Chile, Mexico and Peru, or Avantel’s

customers in Colombia, which amount to

USD 1.500 million.

11 Includes the “Other revenues” item.


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Chart 6.

Variation in the revenuesobtained from

the mobile services in Latin America

From Q1 2010 and Q1 2011

In million USD

Chart 5.

Increase in the revenuesfrom mobile services

in Latin AmericaFrom Q1 2010 and Q1 2011


Value Added Services are the main characters of this report and of the current condition of

mobile services both in our region and in the entire world. We can see, on a daily basis,how the offers of most of the operators are increasingly focused on fostering the use ofthese new services. These offers are always based on two sales arguments; the product withits packaged services and the accompanying Smartphone12, thus increasing the exposition ofthese phone devices.

During the first quarter of 2011, the use of Value Added Services by mobile subscribersgenerated revenues of USD 4,973 million in Latin America, which is 33% higher than theUSD 3,743 million of the first quarter of the previous year. Of the USD 4,973 million

invoiced during the first quarter, SMS and MSS contributed USD 3,024 million (61%),Internet USD 1.371 (28%) and Others USD 578 (12%).

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12 Smartphones are phone terminals which

have some kind of data connectivity system

–among other features– such as GPRS or

2G, 3G and/or Wi-Fi.

Chart 7.

Distribution of mobileservices ´revenue in

Latin America

As of Q1 2011 in million USD


Costa Rica has the highest ARPU inUSD in the context of the othercountries in the region, in spite of thefact that its position as far as mobileservice penetration is concerned ispractically the opposite (57%). This ismainly the consequence of the fact thatthis market has not adopted the prepaidmethod until 2010, and at the sametime, there is just one operator (ICE),although Claro and Movistar will also be

operating by the end of 2011.

As regards the relative value of VAS ARPUin respect of service total ARPU, Argentinais the leading country in the region witha 42% contirbution. Panama is at thebottom of this comparison with a VAS

ARPU equal to 12% of its service ARPU.

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Chart 8.

Services ARPU13: VAS vs Voice Service ARPU in Latin America As of the first quarter of 2011 in USD.

N/D No disponible

13 Services ARPU do not include device´s sales, therefore it is lower than total ARPU. Total ARPU is the ARPU

reported by operators´ in their financial statements.

Chart 9.

VAS ARPU and evolution in the region As of the first quarter of 2011.


The mobile phones market in Mexico is the second leading marketin Latin America14 in terms of sales volume. During the first quarter

of 2011, the mobile industry generated revenues for about US$ 4,000million15 ($48,325 million), representing 19% of the region’s total

invoicing. Mexico, with 92.9 million16 mobile lines, also ranks second inthe region with 16% of the total number of mobile subscribers.

A third relevant fact is that service penetration over the total population isonly 83%, which is 15 pp (percentage points) below the regional average

(98%). This involves a growth opportunity for operators, since there are peoplestill to be introduced to mobile technologies, up to more than 100% - figure which

has already been exceeded by various countries in the region (Argentina, Uruguay, Brazil,

and Chile, among others). Between the first quarter of 2011 and the same period of 2010,the range of lines grew by 9%, matching the growth of the region, while the revenuevariation reached 7%17, which is 3 pp below the average growth for Latin America (10%).

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3. Value Added Services in Mexico

14 Latin America includes the following

countries: Belize, Costa Rica, El Salvador,

Guatemala, Honduras, Nicaragua, Panama,

Mexico, Argentina, Bolivia, Brazil, Chile,

Colombia, Ecuador, Guyana, French

Guyana, Paraguay, Peru, Surinam, Uruguay,

Venezuela and the 24 insular countries of the

Caribbean.

15 The exchange rate used was US$ 1 = $12.08

for the first quarter of 2011 and US$ 1 =

$12.80 for the first quarter of 2010. It does

not include revenues for Nextel’s Trunking

service, which amounted to US$ 546

million.

16 Does not include the 3.4 million lines of

Nextel’s Trunking.

17 Growth in American Dollars. The variation

in the business in Mexican Pesos was 3.2%.

Chart 10.

Mobile telephone lines by operatorVariation Q1 2010 vs. Q1 2011

1


Among the Mexican mobile market’s features, we find that the share of the leading operator

(Telcel), amounting to 71%, tripled by the company ranking below (Movistar), with a shareof only 22%. This allocation of lines among operators is not common to the rest of thecountries in the region and even less in larger markets (For instance: Argentina, Brazil, Chileand Venezuela). In these last markets there are 3 or 4 operators in the market with similarshares. Within the most important countries, only in Colombia, Comcel (also owned by thegroup América Móvil), has a similar market share (68%). In Mexico, the market share of

each company has been relatively stable during the last year.

As we have already mentioned, Telcel is the leader in the Mexican market, both in number

of lines and in terms of revenues. Telcel was also the operator with the highest growth (11%,measured in US$), while the leader in growth in terms of number of subscribers was

Movistar (+ 12.6%).

In Mexico, operators have profiles that are very different from their total ARPU18. Iusacell,with the lowest number of lines is also the operator with the highest ARPU (US$ 17) andTelcel has an ARPU 67% higher than Movistar.

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Chart 11.

Market share byoperatorQ1 2011, In thousands of lines.

18 Total ARPU: Includes the sale of terminals,

voice services, added value services and other

revenues, the revenue reported by companies in

their financial statements. Source: Operators’

financial statements.

Chart 12.

Total ARPU by operatorQ1 2011.


The US$ 4,000 million invoiced by the mobile phones industry in Mexico during the first

quarter of 2011 are allocated as follows: US$ 310 million ($ 3,745 million), for the sale ofterminals and devices. This share of the business represents 8% of total sales, whichincreased by 1% as compared to the first quarter of 2010. The remaining 92% pertains torevenues from services, including voice services and value added services (VAS).

Sales for services (voice + VAS) amounted to US$ 3,690 million ($44,581 million), a

growth of 9% as compared to the same period of the previous year (a 3% the variation inMexican pesos). Voice services generated US$ 2,645 million ($31,954 million),representing 72% of revenues for services and grew by 2% in US dollars in relation to the

first quarter of 2010. The other item included in revenues for services is VAS (value addedservices), which generated revenues for US$ 1,045 million ($12,626 million). This business

was the key engine of the mobile phones business in Mexico during the first quarter of the

year, growing 35% in US dollars and 28% in Mexican pesos. Mexico’s invoicing for VASrepresented 21% of the VAS business in Latin America. (US$ 4,973 million), placingMexico as the second market in sales volume, right below Brazil which contributed 26%(US$ 1,282 million) and above Argentina, where the VAS business equals 15% (US$ 740

million) of the regional aggregate.

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Chart 13.

Mobile phone Business: Variation by type of incomeQ1 2010 vs. Q1 2011.


The VAS business can be categorized into three main components:SMS and MMS services, Internet (data traffic) and other VAS (which

include revenues for content downloading, applications and voice value

added services, depending on the operator). In Mexico, messagingservices represent 60% of the VAS business, with 27% growth in US

dollars and 20% growth in Mexican pesos. Revenues obtained fromInternet services were the highest-growing items (65% in US dollars and56% in Mexican pesos), totaling a share of 22% in the VAS business.The remaining item (other revenues from VAS), grew by 33% in US

dollars and 26% in Mexican pesos.

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Chart 14.

Distribution of revenuesby type of services

Q1 2011, in million USD.

MAVAM | 2. MAVAM (Acision Monitor for Mobile VAS)

The MAVAM Acision study aims at analyzing the evolution of value added services in LatinAmerica. It has been carried out in Brazil since 2009. The study also started to be carriedout in Mexico, in 2010 and in Argentina, in 2011.

This edition of MAVAM Mexico has been prepared on the basis of the followingmethodological characteristics:

a. 798 interviews were made to people contacted on the Web (Computer Aided WebInterviewing – CAWI).

b. The geographic area covered by the sample comprises all of Mexico’s regions. The sample

considers the number of inhabitants, the economic status and Internet penetration by

geographic region (it is a Web-based interview), in order to improve local representativeness.

c. The survey was made on the Web (CAWI), pursuant to the rates applicable to the socio-economic level, age and gender, which preserve the proportions of Mexican population.

Since the number of Internet users (about 34.9 million) is lower than the number of mobileusers (92,912,866), and given the fact that the sample represents people who are more

familiarized with technology, the values obtained in some cases may not be extrapolated tothe market aggregate; instead, such values are considered for reference and orientationpurposes. These cases are explained throughout the study.

d. Los servicios analizados en esta edición son:

• Messaging• SMS • MMS • E-mail • Instant messaging

• Voice mail

This MAVAM Mexico edition was performed by Convergencia Research, in May 2011.

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MAVAM Acision Monitor for Mobile VAS

2

• Entertainment• Music

• Pictures• Games • Ringtones• TV • Video

• Mobile Internet • Social Networks

• Location services (GPS)• Payments and mobile banking • Mobile Marketing

(Special topic)

Sampling participationpursuant to thegeographic residence in Mexico:

Residence

Mexico City 50%

Rest of the country 50%

MAVAM | 3. Special Topic: Mobile Marketing & Advertising

As per Magna Global consulting firm, the world investment in advertising on the media in

2010 was equal to about 390.61 billion dollars. Magna Global estimates that the investmentsin advertising will be increased by about 5.4% in 2011 to reach 411.7 billion dollars. Thetraditional media, such as television, radio, and newspapers represent the bigger portion ofinvestment in advertising; notwithstanding that, they are growing at lower rates than the non-

traditional media, such as the Internet and advertising on mobile phones.

Pursuant to the figures furnished by the consulting firm, the expenses incurred inon-line advertising was equal to 63 billion dollars worldwide in 2010, and 12.5%

growth is expected in 2011. As regards online advertising, the mobile business

generated business for 2.1 billion dollars in 2010 and a 32% is expectedduring 2011.

As it arises out of the data furnished by the Internet Advertising Bureau, theinvestments in on-line advertising in Mexico during 2010 were equal to3,392 million Mexican pesos (US$ 265 million2) and there was a 35%increase in respect of the previous year.

Advertising on mobile phones comprises such varied formats as: sendingSMS, use of short messages to interact with television contests or other

prizes, banners at the operators’ sites; new formats arising out ofsmartphones, such as video spots or preferential locations in the

mobile browser’s navigation bar, and augmented reality among

many others.

In order to better understand the mobile advertising phenomenon, MAVAM analyzes twomain groups based on the sender. On the one hand, the messages generated by theoperator itself (the so called ¨mobile marketing¨), and on the other hand, any messages

sent by different companies in general (other than telecommunication operators) usingthe mobile device as a channel. The latter is called ¨mobile advertising ¨.

In this MAVAM edition we will focus on two main aspects. One aspect is related to thecurrent penetration of the receipt of promotional SMS, their senders, levels ofremembering, the need to obtain consent from user and receptivity levels in exchange forincentives. The other aspect consists in analyzing some practices, such as sending linksincluded in SMS and the use of Bluetooth for promotions near the user’s location, amongother practices, and in finding out about the prospective response that mobile subscribers

could give to this type of messages.

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Mobile Marketing & Advertising3

1 Source: Magna Global. The figures may vary

as they are provided by different consulting

firms since there is not a single method to

assess the advertising investment market.

2 Source: IAB, PriceWaterhouse, Terra: Fact

Sheet: Advertising Investment on the Internet

2010. Investment in online advertising 3,392

million Mexican pesos. Exchange rate used

US$ 1 = 12.8 Mexican pesos.

SPECIAL TOPIC

N

SO E


3.1. Current penetration of Mobile Marketing

& Advertising

84% of the people surveyed some time received advertising or promotional SMS or MMSwith discounts on their mobile phones. There is an increase equal to 5 percentage points inrespect of Q3 2010 (MAVAM Mexico, first edition).

Frequency: Almost half of the people surveyed

(49.8%) receive promotional SMS more frequentlythan once a week; they receive 6 promotional

messages per month on average.

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Chart 15.

Receipt of advertisingon users’ cell phonesBasis: 798 cases (Total sample).

Chart 16.

Frequency of receipt of advertising

Basis: 668 cases

(Users who received advertising

some time on their cell phones).


3.2. Message reading, remembering, and

content

79% of the users who received advertising messages have read them carefully and 98% ofthose users can remember the content of the message in detail. These percentages are in linewith the figures obtained by MAVAM in Brazil and Argentina, and they show the value of

mobile phones as prospective high-remembering advertising means.

Generally, the content of the promotional messages is related to prepaid recharge promotions,

change of plans and phone devices, contests or rewards, content download, news broadcastingand so on.

3.3. Sender

88.3% of the people surveyed answered that the main sender of advertising is the mobilephone service operator itself (the so called “mobile marketing”). The figures show that themobile marketing strategies implemented by the operators are being broadly used, while the

other sectors of economy make an incipient use.

Service companies rank second in the promotional message senders’ chart, whether such

companies are mobile operators or not (10.2%) and the companies providing massconsumption products rank in the third place (6,3%). The other categories do not reach 5%of the mentions. Inside the öther companies¨ category, the promotional material sent by

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Chart 18.

Advertising orpromotion senderBasis: 668 cases (Users who

received advertising some time on

their cell phones).

Multiple choice.

Chart 17.

Careful reading ofSMS/MMS receivedcontaining advertisingBasis: 668 cases (Users who

received advertising some time on

their cell phones).


banks and news services stands out. Only 6% of the users are not able to remember the sender,

although in most cases users can actually describe the content of the messages in general.

3.4. Privacy and permits

82% of people surveyed said that companies must ask users for permission to carry outthese promotional or advertising actions.

Postpaid users are more aware of privacy issues than postpaid users. While 82% of prepaidusers consider that companies in general must ask for permission before sending anypromotions, 87% of users are subject to postpaid system (agreement).

As regards the socioeconomic level, the sectors which are best positioned in the

socioeconomic scale (ABC+) tend to require more permits at the moment of receiving

propaganda and advertising (86%) as compared to the simple average (81.6%). Thesequestions seem transversal to the age groups on the grounds that there are no significantdifferences as to the need to grant permits to the companies sending advertising messages.

67.9% of the people surveyed would be willing to receive advertising or promotions only fromsuch companies as may have been granted the permit to do it. Data show that in order to take

advantage of mobile marketing potential it is important to respect the privacy of users.

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Chart 19.

Companies must askusers for permission to

send messagescontaining propaganda

or advertising to theirmobile phones

Basis: 798 cases (Total sample).


3.5. Incentives and receptivity

In general, users have proven to be willing to receive advertising messages and to obtainincentives in exchange for that. 69% of people surveyed proved to be receptive (they fully

agree) to incentives, such as the option of obtaining free SMS or promotions offeringminutes to make phone calls. Receptivity is reduced to 55% when the incentive in questionis a prize and it is reduced to 44% when discounts are in issue.

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Chart 20.

I would like to receivemessages with

propaganda but onlyfrom the companies

I have authorizedBasis: 798 cases (Total sample).

Chart 21.

Acceptance of textmessages containing

propaganda andadvertising in exchange

for certain incentivesBasis: 798 cases (Total sample).


3.5.1. Discounts and promotions on

consumption goods

The offer of discounts and promotions on clothes, CDs, events, etc. gets 44% acceptance,though at the same time it entails the highest hesitation percentage: 26% of users neitheragree nor disagree. This type of incentive does not have any differences as to the plan hired

or gender. Nevertheless, the ABC+ sectors proveto be more receptive to discount incentives(51%) than C and D sectors (46% and 40%).People older than 44 years of age show thelowest level of acceptance to discount incentives

(38%) as compared to an average of 46% in the

other age categories.

3.5.2. Prizes

Such users as are willing to receive messages

containing propaganda or advertising in exchangefor some kind of prize amount to about 55% ofthe people surveyed. However, there is a higher

percentage of users who fully agree to that (27%).

The fact of receiving some kind of prize as anincentive does not show any differences as tosocioeconomic level or type of plan hired.

Notwithstanding that, people’s disagreementwith the situation increases as the age of theusers increases, where only 40% agree to receive

messages in exchange for prizes, as compared tothe average 55% of the sample.

The proportion of men (61%) who agree toreceive some kind of prize is higher than theproportion of women who agree with that

situation (52%).

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Chart 23.

I am willing to receive messages containing propagandaor advertising on my cell phone if I am given a prize inexchange. Basis: 798 cases (Total sample).

Chart 22.

I am willing to receivemessages containingpropaganda or advertising on my cell phone if they includediscounts and promotions on clothes, CDs, events, etc. Basis: 798 cases (Total sample).


3.5.3. SMS for Free and/or voice minutes

69% of users would be willing to receive promotional messages in exchange for free SMS orvoice minutes. These are the highest-receptivity values within the three incentives analyzed

(prizes, discounts and free SMS or voice services). This is theoption most users fully agree with (41%) while thepercentage of users who just ägree¨ is similar to the other

incentives analyzed. Furthermore, this is the incentive withthe lower proportion of users who fully disagree (7%), ascompared to the 3% obtained under the other two

categories (prizes and discounts).

Users under 35 years of age tend to be more receptive to this

incentive (73%) as compared to 64% of users from 35 to 54years of age, and to 54% of users above 55 years of age.There are significant differences per socioeconomic level,gender or type of plan hired.

3.6. Perceived Behavior

Users were asked about the possibility that advertising ontheir cell phones may motivate them to try the product orservice promoted.

In this case, the percentage of users who have not yet made

their minds (33%) is almost equal to the percentage ofusers who somehow consider that they would be motivated

(8% fully agree and 24% agree).

Users subject to postpaid plans are more willing to bemotivated than those who have postpaid systems [sic] and(38%) men are more receptive than women (30%). Thereare significant differences per socioeconomic level or age.

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Chart 24.

I am willing to receivemessages containing propaganda or advertisingon my cell phone if I get free messages or minutesto make phone callsBasis: 798 cases (Total sample).

Chart 25.

It is probable that advertising or propagandaon my cell phone could make me try theproduct or service promotedBasis: 798 cases (Total sample).


3.7. Receptivity - Mobile Marketing

Assumptions

In order to go deeper in the analysis being conducted on the use mobile marketing andadvertising, a series of questions were asked to the people surveyed on how their behaviorwould be in respect of hypothetical formats of advertising messages involving mobile phones.

All the hypothetical situations were approached subject to the condition that the promotedproduct / service should be of interest to users. This condition has applied because in most

countries the regulations in force require that the user had given his or her prior consent toreceiving advertising messages on their cell phones; consequently, it may reasonably be

expected that the future development of advertising on mobile phones will be focused on

sending messages to receivers who have an interest in, or are particularly familiar with, thesender. Despite of the fact that the hypothesis analyzed do not involve message sending, forthe sake of consistency, the ¨product of interest¨ restriction was maintained.

In the construction of the possible scenarios, the possibility of presenting options whichcould turn out to be massive by taking advantage of the most common functionalities in the

current range of phone devices and leaving other options such as augmentedreality or video downloading which are only suitable for a limited number of

devices (mostly smartphones) was also taken into account.

3.7.1. Advertising via Web links

included in SMS

Users were asked: “What would you do if you received a message on your cell phoneoffering a promotion on a product or service of your interest and a link to accessdirectly to such product or service’s site?”

30.8% of the people surveyed would be willing to surf in the product’s promotion site, but theywould concrete the purchase by payment methods other than cell phones. 35.2% of userswould only click on the link after the promotion in question has been analyzed. 28.1% of userswould not click on any links with promotions on their cell phones and only 5.9% of users

answered that they should click on the link and that they would also purchase the product.

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The option to purchase directly from the mobile phone is reasonably low, because users are

exposed to two hypotheses: the first one is the linking action and the second one is thepayment action by means of the mobile phone; this functionality is almost non-existent sofar in Latin America. However, the fact that the mobile payment system is practicallyundeveloped and that, at the same time, 5.4% may answer that they would eventuallyconcrete a purchase through the cell phone is more than positive at the time of thinkingabout the potential of the mobile phone as means of payment.

In turn, 63.3% of users show some kind of resistance to access links. Even though this studyis not interested in exploring the grounds for their refusal, it is indeed important to make a

comparison with the users’ experience on Internet links, where spam containing links hascaused bad experiences. There is another negative factor arising out of the fact that surfing

the Web on cell phones is very expensive for users and therefore, it is reasonable that users

may be more cautious at the time of answering to any action which may be using datatraffic of their data package hired.

In spite of the fact that negative reactions exceed the positive reactions, it is to be noted that

30.8% of the people surveyed would be willing to visit the site suggested in the message,even though the purchase transaction may be materialized by means of different paymentmethods. To conclude, the main role of the advertising messages received is still, to a large

extent, at the information level, moving toward interaction (would click) but withoutarriving at the operational level (the purchase).

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Chart 26.

Action expectation withrespect to the receipt

of SMS containing linksof access to any

promoted product´sWeb site



3.7.2. Advertising through the use of

Bluetooth at the user’s physical place

The people surveyed were asked what they would do if a sign on a store or shopping wouldinstruct them that by activating the Bluetooth tool on their cell phones they would have theoption of downloading a promotion with a discount on any product/service of their interest

which is near the location where they are.

In such a situation, there is a combination of a traditional means (the promotion by means

of the sign) and the digital means which, in turn, require a highly-complex interaction withmobile devices (know how to activate and use the Bluetooth tool).

In this context there is an objective barrier which consists in the users' own device features.In our sample 14.7% of users whose terminals lack the Bluetooth technology would beexcluded from the possibility of gaining access to the promotion.

51.7% of the people interviewed show some kind of resistance to the activation of theBluetooth technology, but more than half of these people would be willing to activate itprovided that they could seriously consider the promotion; that is to say, if the message was

clear as to the information and sufficiently motivating.

Nevertheless, 34.1% of users would activate their Bluetooth connection, although most of themwould postpone the actual purchase action. Only 11.7% of users considered activation and

purchase at the moment probable.

As compared to the hypothesisconsidered in the section above,

receptivity improves by about 4percentage points, even

considering that interaction viaBluetooth requires higher skillsthan mere clicking on a Weblink. The improvement inreceptivity could be pointing atthe potential of combinedadvertising messages with users’

location.

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Chart 27.

Action expectation withrespect to the use of theBluetooth device todownload promotionswith discounts Basis: 798 cases (Total sample).


3.7.3. Promotion which requires using the

photography camera on the mobile phone

After having been asked what would they do if any advertising on a magazine or newspaperincluded a picture in bar code format that once photographed with the mobile device couldmake it possible for users to download a discount on any product or service of their interest,

34.1% of the people surveyed answered that they would be willing to participate.

The values are similar to those pertaining

to Bluetooth activation;notwithstanding that, in the caseof pictures in bar code format, thehighest values pertaining to thegeneration of product purchasetransactions (15%) are registered overany other hypotheses; maybe this is aconsequence of the fact that from the verybeginning of the hypothesis the factor oftaking advantage of the promotion divides the

users’ action in two stages: first, users getinformation about the promotion; then, userpurchases. This division somehow represents amore familiar or common way of acting.

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Chart 28.

Action expectation inrelation to the use of

photographs todownload promotions

with discounts Basis: 798 cases (Total sample).

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3.7.4. Publication of messages in exchange

for discounts

Users have been asked the following question: “What would you do were you offered to sendan SMS to be published on a television show, on a Web site or on any giant screen somewhere

and to receive a discount on any

product of your interest in exchange?”

In the context of this assumption, the

work was focused on the idea of a moreactive receiver; a receiver who may not

only receive messages but who may also

send messages or somehow take part inthe process.

31% of the people surveyed would not

provide any response to this promotionwhile there is a 35.2% who would bedoubtful as to whether they shouldtake part or not, and even though thereis a relatively high number of userswho would answer the message, a few21% estimate that they would actuallymaterialize the purchase.

3.7.5. Promotion through questions

included on the consumed products with

incentive offer

Yet another prospective situation places faces each person surveyed with a text in aadvertising or in the label of any product just bought which reads: “Send the answer to thefollowing question via SMS to number 12345, take part in the drawing of lots for a 0 KMvehicle and get a 30% discount to purchase any product of your interest”.

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Chart 29.

Action expectation in respect of the request for sending SMS forpublication purposes and to obtain promotions with discounts Basis: 798 cases (Total sample).


This situation shows the highest

proportion of users who would nottake part in the promotion(39.1%), despite the participationlevels around the general averageof the other situations (about 30%of users would send the message).

The high degree of refusal to takepart could be an indicator of the

fact that even though users wouldreceive the promotion through a

consumed product –which wouldindeed indicate some kind ofprevious interest–, thetrustworthiness of the advertisingcould be impaired by the

possibility of obtaining a significantprize, such as a brand new vehicle.

3.7.6. Promotion via

SMS survey

Lastly, the people surveyed were asked tostate what could they do were they offered

to take part in a survey via SMS about aproduct of interest, in exchange for getting a

discount. 35% of the users condition theiraction to the content of the promotion;31% of the users would not participate, and18.9% would send the response. 15.2% ofusers would end the response and purchasethe product, thus obtaining the discountbenefit. These potential purchase values are

among the highest values of the sample.

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Chart 30.

Action expectation in respect of the request for sending SMS withthe answers required to participate in the drawing of lots to getprizes and discountsBasis: 798 cases (Total sample).

Chart 31.

Action expectation in relation to the request to fill in asurvey via SMS in exchange for a discountBasis: 798 cases (Total sample).


84% of the people surveyed have received SMS or MMS on their mobile phones containing

promotions or advertising. Such percentage is almost 6% higher than it was in the thirdquarter of 2010.

The receipt of messages on mobile phones has high-reading levels. 79% of the peoplesurveyed read the messages carefully and 98% of such percentage of people surveyed mayremember the type of content received which mostly pertains to promotions and discounts.

In 88.3% of the times the message sender is the mobile operator itself (mobile marketing),followed by other service companies (10.2%) and mass consumption companies (6.3%).

Only 6% of users are unable to identify the sender.

In such situations in which the proposed advertising actions require the interaction of

receiver, such as Bluetooth activation, the use of photography cameras, clicking on any linkleading to a Web site, only 10% to 15% of the people surveyed would participate andpurchase without any further conditions, while 30% to 35%, depending on the option, isnot willing to participate. In all the instances, almost half of the people surveyed either need

more information or they need to analyze the information received before giving a positiveanswer to the indications provided in the promotion. The trustworthiness of the benefitsoffered in the promotions affects the acceptance and rejection level.

The proposal of clicking on a link received in a SMS toAccess the Web site of the product being promoted was theone with the least relative supporters; the use of other devicessuch as Bluetooth and photography cameras had higheracceptance (even though they require higher interaction skillsby users). The lowest acceptance was registered in relation tothe sending of responses to questions displayed on the labels

of consumed products, which may provide discount benefits.

To sum up, it may be stated that the role of mobile

marketing and advertising is still focused on providinginformation and there is an unaccomplished goal whichconsists in developing such advertising formats as mayrequire the intervention of consumers, even consideringthat all the assumptions analyzed have been agreed upon asconditioning provisions that the promotion received

consisted in a product of interest to users.

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3.8. Mobile Marketing Conclusions

Chart 32.

Promotion-sendingformats through mobilephones and levels ofacceptanceBasis: 798 cases (Total sample).

MAVAM | 4. MAVAM Mexico

4.1. Messaging Services

Short text message (SMS), multimedia messages (MMS), mobile e-mail and mobile messageservices can be grouped under the “Messaging Services” heading. On the basis of the dataprovided by several consulting firms1, this group of services represents a global market ofbetween US$180 and US$ 200 thousand million sales per year. SMS and MMS services arethe most widely used services in the world, and they represent about 60% of the total

messaging market (SMS + MMS + e-mail + instant messaging).

The use of SMS and MMS in Mexico generated sales by US$ 626 million dollars, during the

first quarter of 2011. These figures rank the Mexican market as the most important as far as thesales volume of SMS and MMS in Latin America is concerned, followed by Brazil and Argentina.

Revenues from SMS grew by 27% between the first quarter of 2011 and the same period of2010. The operators surveyed for this study consider that the growth of smartphones isreplacing SMS with instant messaging solutions, although the operators also believe thatthere is still no room for higher use by users who own basic phone devices.

4.1.1. SMS

98% of surveyed users use the SMSservice; however, only 95.5% have usedthis service over the last three months.The numbers remain stable ascompared to the prior edition of

MAVAM (Q3 2011). Short textmessages constitute such a massivecommunication alternative among

users that there are even slightdifferences at the socioeconomic status:there is a difference of only fourpercentage points between ABC+ ends(97% used the service over the lastthree months) and D (93% used the

service over the last three months.)

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MAVAM Mexico – First Quarter 20114

Chart 33.

Use of messagingservicesBasis: 798 (Total users).

*Active users: use the service

at least once a week.

1 Differences vary according to the source and

calculation method used.


According to MAVAM, 82.6% of individuals in Mexico send more than one SMS per day.

43.7% of users sent between 2 and 5 messages a day, and most users represent to have sent 5SMS a day. The values for the use of SMS remain constant as compared to MAVAM’sedition for Q3 2010.

Based on the data furnished by Cofetel, the average of messages sent by user per monthduring the first quarter of 2011 was 62 SMS. There has been a 5% growth over the last 6months (59 SMS per month on average were sent in the third quarter of 2010) and 6% ascompared to the first quarter of 2010.

The differences between MAVAM and regulators’ records arise out of two factors: in the first

place, the users we surveyed are more familiar with technology, because in addition to being

mobile telephone users, they are Internet users (the survey is Web-based and includes allsocial classes); in the second place, regulators measure messages sent and the result isobtained by dividing the total number of messages sent by the total amount of mobile lines;as it is known, in all countries not necessarily 100% of lines are active (consuming), part ofthose lines are only data lines (mobile broadband – USB), or machine to machine lines(M2M), and therefore the denominator by which the amount of SMS sent is divided is

higher than it should be.

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Chart 34.

Use of SMSBasis: 792 cases (Total sample).

SMS use according to socioeconomic statusSMS use pursuant to socioeconomic status.

Basis: Those who sent SMS in the last three months: 763 cases.


52% of respondents spend between

$35 and $70 per month. The mostfrequent average expense rangesfrom $71 to $150 per month(29%), while in the first edition ofMAVAM Mexico (Q3 2010) themost mentioned spending rangehad been 36 to 70 pesos (29%) ofthe sample. As for this sample,users spend on average $104 per

month in SMS.

Opertors´s focused their offers in

SMS packages for users whoseconsumption is over 100 SMS onmonthly basis. For instance, Telceloffers 300 SMS packages for $103,in which the SMS value lowersfrom $0, 88 (when there is no

package hired) to $0, 34 hiring this service. This offer reduces the SMS unit price in 158%. It

also offers packages of 1500 SMS for $155 ($0,10 unit price) and another of 2500 SMS for$207 (Unit price $0,08)2. Meanwhile, Movistar offers 100 SMS package for $0,873 unit price.

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2 Fuente: sitio web de Telcel

http://www.telcel.com/portal/servicios/mensajes_

sms/paquetes_sms.html?mid=1202

3 Fuente: sitio web de Movistar

http://www.movistar.com.mx/Movil-Servicios-

Mensajes-Paquete-SMS-T

Chart 35.

Sending SMS per dayBasis: 750 cases (those who sent SMS in the last three months).

Chart 36.

Average monthlyexpense for SMS

Basis: 762 cases (Those who sent

SMS in the last three months).


4.1.2. MMS

62.2% of respondents own telephones enabled to send and receive multimedia messages;however, only 24.3% has sent a multimedia message in the last three months, and withinthat group, less than half of the users (40.9%) sent one MMS per week on average, 20%higher than the figure obtained by MAVAM for Q3 2010. A similar number of users(39.8%) send up to 5 MMS per week.

These values indicate that about 9% of respondents are active users of multimedia messages;i.e., they use the service more than once a week. These figures are high as compared to the

global evolution of the multimedia messages service, although it is important to take intoconsideration that users are generally not familiar with the technology jargon in detail,

which means that what they know is that they are using their cell phones to send images or

multimedia files, regardless of whether these messages are sent through an MMS platform.One way or another, the evolution of those who send messages or multimedia constitutesproof of the increasing importance of mobile telephones as instruments to exchangeaudiovisual content.

From the offer standpoint, some operators such as Movistar are starting to pack MMSs,while others such as Iusacell think of MMS as just another service available in cell phones,

and used by a small percentage of customers mainly to exchange images.

The percentage of people who sent an MMS in the last three months is higher for postpaidthan prepaid. For the group with postpaid plans it is 37.9%, compared with those with aprepaid (21.9%). Another reading indicates that 47.7% of users who own a type ofadvanced terminal have sent an MMS in the reviewed period. This proportion decreasesamong those who use a traditional type of device (18.7%).

4.1.3. Instant Messages (IM)

15.9% of respondents use instant messaging services more than once a week (active users).The users who use the IM service tend to use it daily (62.4%).

In Mexico, the operators surveyed think that this service is growing rapidly. Over the lasttwelve months, the use of this service increased as a result of the progress of smartphones.

Smartphones represent about 13%4 of the customer base. Mainly Premium customers are

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4 Note: Smartphones + Smarters

Chart 37.

Use of MMSBasis: 798 cases (Total sample).


migrating towards more intelligentterminals and once they migrate theyadopt instant messaging as thehabitual communication means.

MAVAM confirms the tendencyperceived by the operators surveyed,since 80% of those owning an

intelligent terminal use instantmessaging services.

4.1.4. Voice mail

Pursuant to the analysis carried out for this edition of MAVAM, 31.5% of users use thevoice mail service. We noticed a decrease in use as compared to the data obtained for Q32010 (65%). In terms of frequency of use, 10.8% of respondents are active users of theservice (more than once a week).

The use of this service does not amount to any kind of expense for 14.7% of the totalrespondents using the service. 25.9% of the group users represent not to know the amount

paid for using the voice mail service. Likewise, the cost category of up to $35 per month is

the most frequent range (46.2% of users).

The voicemail service is mostly used among those with a postpaid plan (45.3%) comparedwith those with a prepaid plan (28%). The use of voicemail drops among younger agegroups: 26.8% among those whose age is under 35 years old and X1.2% among thepopulation over 34 years.

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Chart 38.

Frequency of use for Instant MessagingBasis: 149 cases (Users who use IM).


4.1.5. E-Mail

54.9% of respondents confirmed that their phones are enabled to set up e-mailaccounts. However, only 30.1% of these users has set up an e-mail account on theirmobiles. Those users equal 16.5% of respondents.

The users who have not set up e-mail accounts stated that the main reason for that was

price, and secondary reason is the lack of need for an e-mail o their mobile phones. 81.8% of the users who have set up e-mail accounts have used the service in the lastquarter, amounting to 13.5% of the survey.

Only 11% of respondents have terminals enabled to set up e-mail accounts to receive e-mails automatically (push e-mail). One functionality generally available in smartphones5,but also in the so-called "smarters" (phones that are not smartphones but are enabled for

many Internet-related functionalities).

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5 Definition of Smartphone.

Chart 39.

E-mail frequency of useBasis: 798 cases (Total sample).


4.2. Entertainment

This section analyzes some forms of mobile entertainment, such as: ringtones, music, imagesand pictures, videos and mobile TV, and games.

In the entertainment analysis, as in the analysis of other VAS, the frequency of use isimportant, because were the mobile content only kept in the “rarely or occasional” use, the

volume in the business would not be the volume necessary to result in a growth driver foroperators' revenues.

In the entertainment MAVAM also makes a distinction between user types. On the onehand, the users that sometime in the last three months have downloaded entertainment and

on the other hand, users who download and use entertainment more than once a week. The

grounds on this classification reside in the incorporation of almost daily usage. This willinitially increase the business flow for the operator as well as for the content provider. Thosewho use it eventually are part of future business potential (increasing frequency of use).

In line with the proposed classification, downloading mobile entertainment is an occasionalhabit that varies from 6% of users (video) and 26% (Images photos). The download musicand picture tops the list of preferences of mobile subscribers in Mexico.

When we analyze only active users (downloading more than once a week), music and imagesremain the favorite with 11% and 9.9% respectively.

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Chart 40.

Download by type of entertainment

(Active users)Basis: 798 cases

(Total users surveyed).


In general, these contents are downloaded for free; however, games (39%) and ringtones

(49%) are the segments in entertainment that most frequently result in an expense beingcharged to respondents.

Users that have incurred some kind of cost to download entertainment, spend between $24and $29 on average. Videos appear as the components with the highest cost for download,but also the lowest in percentage of paid download (only 10%).

Prices obtained are only a reference, since the number of users paying for contents is stillvery low.

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Chart 41.

Free entertainment vs.paid entertainment

Basis: Users who downloaded each

type of entertainment.

Ringtones Music Images/Pictures Videos Games

Frequency of downloads per month 3 6 5 5 4

Most commonly paid price $ 15 $ 15 $ 5 $ 30 $ 30


4.2.1. Games (Use and downloads)

82.2% of users use the games that have been preloaded in their phones; only 53.8% use thegames more than once a week. The highest frequency of use ranges from twice a week to 3

times a week.

The users who download

games (x of the sample %) doit an average of 4 times amonth. When downloading is

paid, the most frequentexpense charged to users is$30 per download. Users who

are used to making this typeof download at least once aweek (active users) represent4.1% of the total sample.Paid-game downloadingappears as the secondcategory in terms ofimportance (39%), belowringtones.

4.2.2. Music (Use and downloads)

82.6% of the interviewees have devices that allow music usage, either by radio

(67%) or MP3 (69%). 80.5% of surveyed users have listened to music on yourcell phone sometime in the last three months. These represent 97.5% of those

who have phones capable of playing MP3 files or tune in Radio. The figures showthe importance of the mobile music business, especially considering that 79.1% of

those surveyed actively listen to music, more than once a week.

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Chart 42.

Use of preloaded gamesBasis: 656 cases (Users who use preloaded games).


Only 11% of users download music to their mobiles actively (at least once a week). Themonthly average download frequency is 6 units, subject to an ordinary price of $15 per

download; however, 70% of downloads are for free.

4.2.3. Ringtones

(Downloads)

Ringtones may be considered as the may meansof customizing mobile phones, and the firstapproach towards downloading paid contents.

However, these services are losing ground; inour sample only 1.8% of respondents use thisservice more than once a week. The numberof monthly downloads is the lowest in thesample (3 on average), but the highest interms of proportion of paid downloads

(49%).

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Chart 43.

Listening to music onmobile phone devicesBasis: 642 cases (Users listening to

music through their mobiles.


4.2.4. Images (Downloads)

9.9% of users download images and pictures more than once a week; this is the secondhighest category in the sample below music. On average, 5 downloads are made per month.Only 24% has paid for images, in this case the average value is $5.

4.2.5. Video (Downloads)

Only 2.6% of users download videos actively, more than once a week, and 90% of the casesthe download is for free. However, paid downloads had the highest costs this quarter when

compared to the rest of the contents: $30 for each download. The average number of videos

downloaded is five per month.

4.2.6. Mobile TV

(Visualization)

Mobile TV is a service that, from theoperator’s standpoint, has not found itsbusiness model yet, and people are stillhaving a hard time figuring out whatmobile TV really means.

In order to avoid users from mistaking TVprogramming for watching videos online,we introduced such differentiation in this

edition within the same question, adistinction between watching an on-line video on the cell phone, watching an air TVprogram, or watching a “digital TV” program. Only 1% of respondents agreed to watch atleast one air TV program in their mobile, and 0.5% agreed to watch “digital TV” in the lastthree months.

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4.3. Internet access

61.7% % of respondents represented that their phones are enabled for Internet access fordifferent kinds of services (e-mail, messaging, social networks, browsing). The figuresshow that users are aware of the fact that their phones are enabled to gain access to theInternet, despite the fact that it is worth noting that not all of those phones aresmartphones or used to access the Internet, whether due to price or because the terminal

is not user-friendly.

The use of Internet services on mobile phones is way too lower considering the number

of Internet-enabled phones. Only half of the users who own Internet-enabled telephones(26.1% of respondents) accessed the Internet over the last three months; and barely

7.1% of all users have hired a mobile Internet access plan. This gap shows that there is a

group of about 19% users that access the Internet but have not hired a plan, andtherefore the use is limited, and at the same time this 19% may be captured by offeringattractive data plans.

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Chart 44.

Internet access viamobile devices



The most popular means for accessing mobile Internet is the Internet browser (59%),

followed by WAP (28%) and other means such as widgets, Web-apps/apps (10%).

More than half (53.4%) of the users

who connect to mobile Internet

mentioned an average expense below$200.

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Chart 46.

Gasto promedio por mes en el uso de Internet.Basis: 208 cases (Users who accessed the Internet or has set up an e-mail account).

Chart 45.

Means of access tomobile InternetBasis: 208 cases (Users who

accessed the Internet from a cell

phone in the last three months).


4.4. Social Networking

22.3% of users accessed social networks through their mobile, at least once in the lastthree months. Facebook is the preferred network and has been used by 19.5% of usersmore than once a week. Twitter ranks second with 7.5% of frequent users.

If we consider the total users

who have accessed social

networks through their mobilephones (users who access theInternet frequently plus thosewho have accessed at least once)Facebook is hegemonic (97.2%)and followed by Twitter (42.1%).

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Chart 48.

Access to social networkson the mobile phone Basis: 178 cases (Users who accessed

social networks).

Multiple choice answer.

Chart 47.

Access to social networks Basis: Total users.

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4.5. Mobile banking

In the new era of the mobile industry, those services giving rise to monetarytransactions through the mobile will become increasingly important. Banksalready use the mobile as an access platform to ease transactions made bycustomers. The financial industry as a whole is carefully looking at the use ofthe mobile as a way to include new social layers to the financial system.

Meanwhile, credit transfers between cellular phones, maybe one of the firstforms of monetary transaction through mobile services, is being used by a

large number of subscribers.

38.3% have made at least one credit transfer between mobile phones in the last month, but

the use of that service is occasional in general. Only 5.4% use that service more than once

a week.

The use of mobile phones to access banking services is only 3.6%, while 1.9% said to haveused the mobile to make payments at least once.

The numbers are in line with the rest of Latin America, and although Mexico, together withColombia and Brazil are the countries with the highest growth in terms mobile banking,

still ranks low in terms of the number of people who have adopted it, and also the levels ofadoption are tied to the level of bank usage in each country. Still with a low currentpenetration, expectations are high for money transactions via mobile to expand in thefollowing years. However, the growth of these services has a complexity of its own due totelecommunications and financial regulations.

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Chart 49.

Mobile bankingBasis: 798 cases (Total users).


4.6. GPS and Maps

15.9% of respondents own a terminal with GPS or maps service; however, only half of themhave used the service in the last three months (7% of respondents).

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MAVAM | 5. Final conclusions

During the first quarter of 2011, value added services in Mexico generated revenues for

1,045 million dollars, which is 35% higher than the amount pertaining to the same periodof the previous year. These figures place Mexico as the second valued added sales market,right below Brazil and above Argentina.

Value added represents 28% of the sales for operators’ services; which is 3 percentage pointsabove regional average.

Mexico is the leading SMS market in America as far as the sales volume is concerned. In thefirst quarter, the sales of SMS and MMS services reached US$ 626 million.

The revenues from mobile Internet were the highest-growing item (65% in US dollars and 56% in Mexican pesos), thus obtaining

a 22% share in the VAS business.

95.5% of mobile subscribers used the SMS service over the last three months. This VAS is so popular that there are almost nodifferences in use in the different socioeconomic levels. As a general rule, users send from 2 to 5 SMS per day.

Instant messaging is growing with the growth of smartphones. 15.9% of the people surveyed have used the service during entertainment.

Music and pictures are the most popular mobile entertainment tools in mobile phones; 9.9% and 11%, respectively download

these contents with a frequency higher than once a week. The entertainment downloads range from 3 to 6 times a month peruser, and they are mostly free of charge.

The number of users that received promotional content to their cell phones via SMS was increased by 4 percentage points in 6months; it grew from 79% in Q3 3011 [sic] to 84% in Q1 2011. Users receive an average of 6 messages with promotionalcontent per month.

Out of the total users who received messages with promotional content, 79% of users can

actively remember, and almost all of them can remember their content. The operator is themain generator of promotional messages (88%) thus showing a significant development of

mobile marketing and a scarce spread of mobile advertising because only 6% of the

messages received by users was issued by a mass consumption company.

15. In response to the new advertising formats, as those which require Bluetooth activation,taking a picture to a barcode, etc., 10% to 15% of users are receptive to this type ofpromotions, 30% to 35% of users show some kind of barriers to reply to the promotionalmessages, and the remaining users (about 50%) would need more information or analysis

before responding to any promotion of this type.

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Final conclusions5

MAVAM | 6. Glossary

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

Messages The services in this category can be defined as:

SMS (Short Message Services): 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 donemanually, in other words by user’s 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 MSNor Yahoo.

Answering Machine or Voice Messaging: gives access to the automatic messagesrecording service offered by the carrier, in case of receiving calls that can’t be answered.

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. Thehandset 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 onthe cell phone. The handset must be able to display several formats of pictures and imagessuch 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

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Glossary6

MAVAM | 6. Glossary

be able to run the games available in the device and also the downloaded

ones, and additionally provide Bluetooth or data connectivity forinternet access (eg.: EDGE, EVDO, or 3G).

Video: service which provides the download of videos or videostreaming to be played on cell phone. The handset must be able to playdownloaded 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 TVreceptor and capturing contents through the same signals (frequencies) received by

traditional TV’s at home.

Internet and Location The services in this category can be defined as:

Internet Access: service which provides broadband access to the Internet via cell phoneor modem. In both cases users must have a data plan contract with the mobile operator.

This service has the following characteristics:

Cell phone: the internet access from cell phone can be done in the following ways: 1. Using a browser to access the same websites accessed by fixed internet through acomputer. Examples of browsers: the ones offered by the cell phone or smartphone(Internet Explorer Mobile, for Windows Mobile), or alternative browsers such as Skyfire orOpera.

2. Accessing the WAP websites inside the Carrier network through WAP browser. 3. Through specific programs installed in the handset (Widget, Web-App) provided by

companies like Yahoo Mobile.

Modem: devices which can be connected to desktop computers or notebooks. ProvidesInternet 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

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MAVAM | 6. Glossary

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, whichallows the access to users accounts in these institutions. These services can range fromsimple balance consults to the payment of bills or conclusion of investment transactions.

Location Based Services: service which provides users’ geographic location. Theseservices have the following characteristics:

Location: can be provided as the following: 1. Through a process of triangulation using information from cell sites and application

systems provided by the operator for this purpose;

2. Through the GPS installed in the cell phone.

Offered Services: 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 monitortheir children’s habits, or with the purpose of promoting safety. 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. 3. Contextual Filter: permits the mobile operator, or other service providers, to offeraddresses or other types of promotions at stores, restaurants, movies, among others, basedon the instant location of users.

Mobile MarketingThe 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 othercompanies, again using SMS messages.

Mobile Advertising: similar to Mobile Marketing, Mobile Advertising is also anadvertising service implemented by mobile operators or other companies. If the subscribersagree to receive it they can participate of promotions such as free minutes, free SMS

packages, and others, as a reward for receiving advertisements.

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MAVAM | 7. Technical File

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Technical File7

Analyze the evolution of value added services in Latin America (Brazil, Mexico and Argentina).

Through the Web (Computer Aided Web Interviewing – CAWI), quota sampling persocioeconomic status, age and gender, and geographic place of residence in Mexico.

798 interviews (CAWI).± 3.5 p.p. statistical error margin, with 95% statistical confidence.

From May 13 to May 30 (Results for the Q2 2011 – MAVAM 2nd Edition).

Both genders from 14 to 65 years; socioeconomic classes ABC+/C/D (pursuant to Mexico’sCriterion); mobile phone users.

People who are more familiarized with technology. Therefore, it is expected that some of theresults obtained from this study may be higher than the values found in the generalpopulation.

Purpose

Data Compilation

Sample Size

Data Collection Period

Addressees

MAVAM | 8. Team

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Team8

Rafael Steinhauser | President Latin America

Jorge Leonel | VP Marketing and Business Development

Edson Melo | Marketing Manager Latam

Mariana Rodriguez Zani | Diretor

Ines Leopoldo | External International Advisor

Matías Guardiola | Research Manager

Pablo Castro | Analyst

Mónica Perez Serantes | Designer

Javier Carreto Mares |

Documents

Mavam méxico 06 2011 oking