MOBILE SERVICES STATISTICAL INFORMATION 2ND QUARTER 2017 1st version - 02/08/2017
Index SUMMARY... 4 1. Mobile service penetration rate... 6 2. Mobile Service / active user devices... 7 3. Distribution of active mobile stations / active user devices by provider with actual use..... 10 4. Users of typical mobile broadband services... 11 5. Traffic... 15 5.1. Voice... 15 5.2. SMS... 18 5.3. MMS, video-calls and Mobile TV... 21 5.4. International Roaming... 22 6. Mobile service revenues... 24 Index of tables Table 1 - Active mobile stations / user devices with actual use and associated with Machineto-Machine (M2M) communications... 9 Table 2 Distribution of active mobile stations/user devices with actual use by provider.10 Table 3 - Distribution of mobile stations/user devices by provider...11 Table 4 - Users of typical mobile broadband services...12 Table 5 - Voice traffic: minutes...17 Mobile Service 2nd Quarter 2017 2/26
Table 6 - Text Messages (SMS)...21 Table 7 - Multimedia messages (MMS)...22 Table 8 - Roaming in traffic...23 Table 9 - Roaming out traffic....24 Table 10 Revenues from mobile telephone service...25 Table 11 Average monthly revenue per subscriber...25 Index of graphs Graph 1 - Trend in number of active mobile stations / user devices and with actual use... 8 Graph 2 - Penetration of broadband services...13 Graph 3 Level of use of Internet access services on mobile phones...14 Graph 4 - Trend in voice call traffic in minutes...15 Graph 5 - Average number of minutes per month per active mobile station with actual use, excluding Internet access cards and mobile stations associated with M2M communications...18 Graph 6 - Trend in text message traffic (SMS)...19 Graph 7 Trend in percentage of mobile phone users who used instant messaging services...20 Graph 8 - Average monthly subscription charge for MTS customers aged 10 or over...26 Mobile Service 2nd Quarter 2017 3/26
SUMMARY At the end of 2Q2017, the penetration of mobile services rose to 166.2 per 100 inhabitants. The penetration rate of mobile stations with actual use was 126.2 per 100 inhabitants. There were 17.1 million authorized mobile stations using the service. Of these, 13 million (75.9% of the total) saw actual use in the last quarter. Excluding tablets/pcs and mobile stations associated with Machine-to-Machine communications (M2M), there were 11.6 million mobile stations/active user devices with actual use in 2Q2017, +1% than in the previous quarter and +1.6% than in 2Q2016. Pre-paid plans increased by 0.1% compared to the previous quarter. However, they decreased by 1.5% year on year. At the end of 2Q2017, the proportion of pre-paid subscribers stood at 47.5% (-1.6 percentage points than in the previous year). According to Marktest's Telecommunications Barometer, in June 2017, around 40.4% of residential mobile telephone service customers subscribed to this service as part of a bundled offer incorporating services provided at a fixed location. There were 6.8 million actual users of characteristic mobile broadband services (i.e. video telephony, broadband data transmission, mobile TV, etc.), the highest value recorded to date (+3.5% over the previous quarter and +17.7% over the same quarter the previous year), making up 52.6% of total mobile stations with actual use. The growth reported in the use of these services (in year-on-year terms) is associated with the increase in the number of mobile phone Internet users (+20.5% versus 2Q2016), particularly when included in bundled offers, and the growing penetration of smartphone users. MEO continued to be the main provider with 43.9% of active mobile stations with actual use, followed by Vodafone with 30.5%. NOS increased its share to 23.6%. The volume of conversation minutes originating on mobile networks increased by 2.4% compared to 1Q2017, and by 1.9% compared to 2Q2016. In year-on-year terms this growth is mainly due to the growth in off-net traffic (+11.1%) following the introduction of offers, particularly offers with the mobile service, with calls included and without onnet/off-net tariff differentiation. On-net traffic saw a year-on-year decrease of 3.4%. International traffic registered a significant increase in this quarter (+19.2%), which is Mobile Service 2nd Quarter 2017 4/26
normal at this time of year (due to seasonal factors). Compared to the same period in the previous year this grew by 12%. The average number of conversation minutes per mobile station was 191 per month, 4 more minutes than in the previous quarter, to reach a historic maximum. Users of the text message service (65.3% of total mobile stations with actual use, excluding cards for Internet access and equipment associated with M2M communications) sent 9.9% fewer messages compared to 2Q2016. The average monthly number of messages sent per user of this service was 187, which represents about 6 messages per day. This type of traffic has seen a significant reduction due to the emergence of alternative forms of communication. The number of users of international roaming services outside Portugal represented 7.3% of total mobile stations with actual use. Voice and Internet traffic in roaming out increased in comparison with the same quarter in the previous year, reaching the highest levels to date. Of note is the Internet traffic in GB which increased 93.7% year-on-year. This development is to be linked to the reduction in roaming charges resulting from the change in the regulatory environment. This price reduction began on 30 April 2016 and culminated in the termination of roaming charges on 15 June 2017. In relation to the previous quarter, roaming in traffic registered increases above 50%, as is normal at this time of year (due to seasonal factors). Of note also was an increase in Internet traffic (+244.1% compared to the same quarter in the previous year). The volume of accumulated revenues 1 from services provided to end-customers totalled about 657 million euros up to the end of 2Q2017, falling 3.1% with regard to the same quarter of the previous year. Average monthly revenue per subscriber was 9.7 euros. 1 Excludes revenues from mobile services included in bundles with fixed services. Mobile Service 2nd Quarter 2017 5/26
1. Mobile service penetration rate At the end of the 2nd quarter of 2017 (2Q2017), the penetration of mobile services increased to 166.2 per 100 inhabitants 2. If only mobile stations with actual use are considered, the penetration rate in Portugal would be reported at 126.2 per 100 inhabitants. Excluding tablets/pcs and mobile stations associated with the Machine-to-Machine (M2M) service, the penetration rate would be reported at 112.8 per 100 inhabitants. According to data from Marktest's Telecommunications Barometer 3, this quarter, 95.1% of Portugal's residents were Mobile Telephone Service (MTS) customers. The difference between the penetration rate given above and this value is due to several factors, particularly: There are users who have more than one active card. The number of mobile phone owners who had more than one active card reached around 5.9% in June 2017; The activation of new SIM cards for exclusive use of data and Internet access services. There are about 561 thousand cards associated with tablet/pc broadband Internet access, with a penetration rate of 5.4 per 100 inhabitants; There are active cards used in machines, equipment, vehicles and companies (automatic payment terminals which use the mobile network, alarm equipment, security, telemetry and telematics, etc.). The number of cards associated with M2M applications at the end of 2Q2017 rose to 814 000, i.e., about 7.9 per 100 inhabitants. 2 Resident population (No.); Annual - INE (Statistics Portugal), Annual Population Estimates. Data reference period: 31/12/2016. In this report, and for purposes of calculating penetration rates, the most recent population estimates are used, subsequent to the 2011 Census, as published by INE (Statistics Portugal) in June 2017. 3 The Telecommunications Barometer is a regular study undertaken by Marktest for the Telecommunications sector. The population of the Telecommunications Barometer - Mobile Network comprises individuals aged 10 and over living in mainland Portugal and in the Autonomous Regions of Madeira and Azores. A sample is compiled on a monthly basis which is proportional to and representative of these areas, corresponding to 1,350 interviews per month. Mobile Service 2nd Quarter 2017 6/26
2. Mobile Service / active user devices 4 At the end of 2Q2017, there were approximately 17.1 million active mobile stations 5 associated with post-paid tariff plans, pre-paid plans and combined/hybrid plans (+1% compared to the previous quarter and +1.7% compared to the same quarter in the previous year). The number of active mobile stations in 2Q2017 is within the bounds of the forecast range resulting from the historical trend. About 13 million active mobile stations (75.9% of the total) saw actual use in the last month of the quarter (+1.3% than in the previous quarter and 2.2% than in the same period in the previous year). In this quarter, the value of this indicator reached the highest value since 2013, above the upper limit of the forecast range resulting from the historical trend and the estimated seasonal effect. Excluding tablets/pcs used for Internet access and mobile stations associated with Machine-to-Machine communications (M2M), the number of mobile stations/user devices with actual use would be 11.6 million in 2Q2017, an increase of 1% compared to the previous period and 1.6% compared to the same quarter in the previous year. 4 Information compiled on 03-08-2017. The quarterly information presented in this report may be subject to change should this data be revised or updated. 5 Active mobile stations are mobile stations which are eligible to use services without these having necessarily been used. Mobile Service 2nd Quarter 2017 7/26
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Graph 1 - Trend in number of active mobile stations / user devices and with actual use 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 Active Mobile Stations Forecast Active Mobile Stations with Actual Use Forecast Range* Unit: millions of mobile stations / user devices Note: * Forecast range at a significance level of 95%. To model the active mobile stations a linear regression model was used Yt = 110.781-88.099Q2 + 109.085Q4 + 13.981PP*t^2-4.727OP*t^2-25.178UMTS*t^2 + (142.706t + 18.641t^2)3G + (-333.888t - 2.137t^2)CE with all significant independent variables at a 95% confidence level, including seasonal dummies for the 2nd and 4th quarters, dummy for pre-paids (PP) introduction with a positive quadratic trend from the 3rd quarter of 1995, dummy for the entry of Optimus (OP) with a negative quadratic trend from the 3rd quarter of 1998, dummies for the awarding of UMTS licenses with a negative quadratic trend from the 4th quarter of 2000, dummies for the launch of 3G commercial deals with a positive quadratic trend from the 2nd quarter of 2004, dummies for the change to the economic backdrop in Portugal with a negative quadratic trend from the 3rd quarter of 2010. The adjusted coefficient of determination (adjusted R 2 ) is 0.999. A historical series has been used since 4Q1991. To model the mobile stations with actual use series a linear regression model was used with quadratic trend (t 2 ): Y t = 13.247.649-708 t 2. The following seasonality indices were calculated (additive model): Q1= - 45,350; Q2= - 95,644; Q3= 7,600 and Q4= 143,495. The adjusted coefficient of determination (adjusted R 2 ) is 0.612. The historical series has been used since 1Q2010. Mobile Service 2nd Quarter 2017 8/26
Table 1 - Active mobile stations / user devices with actual use and associated with Machine-to- Machine (M2M) communications 2nd Quarter 2017 Var. Quarterly Var. Year-on-year Mobile stations / Active user devices with post-paid, pre-paid and hybrid/combined tariff plans 17 139 100.0% 170 1.0% 288 1.7% of which with actual use 13 008 75.9% 169 1.3% 278 2.2% of which associated with M2M 814 4.8% 36 4.6% 99 13.9% Post-paid plans 4 567 26.6% 98 2.2% 378 9.0% of which with actual use 3 888 29.9% 87 2.3% 311 8.7% of which associated with M2M 415 51.0% 25 6.4% 11 2.8% Pre-paid plans 8 145 47.5% 8 0.1% -125-1.5% of which with actual use 5 733 44.1% 60 1.1% -89-1.5% of which associated with M2M 0.0 0.0% 0 0 Combined/hybrid plans 4 427 25.8% 64 1.5% 36 0.8% of which with actual use 3 386 26.0% 21 0.6% 56 1.7% of which associated with M2M 399 49.0% 11 2.8% 88 28.2% Unit: thousands of mobile stations/user devices, % Pre-paid plans increased by 0.1% compared to the previous quarter and reduced by 1.5% compared to the same quarter from the previous year. The proportion of subscribers on prepaid plans was 47.5%, the lowest level since data on these indicators was first compiled. Post-paid plans continued to show a growth trend (+2.2% over the quarter and +9.0% over the previous year). Combined/hybrid plans increased by 1.5% compared to 1Q2017 (+0.8% over the previous year). Combined/hybrid plans with actual use increased by 0.6% compared to the previous quarter (+1.7% over the same quarter in the previous year). This trend is mainly associated with increased penetration of multiple play tariffs which include mobile telephone service 6. According to Marktest's Telecommunications Barometer, in June 2017, 40.4% of residential mobile telephone service customers had a multiple-play offer, compared to 35.9% at the end of 2Q2016. From another perspective, in 2Q2017, 53.7% of 6 The number of mobile stations/user devices associated with post-paid and hybrid plans may have been influenced by the accounting criteria adopted by operators for multiple play offer subscribers. Mobile Service 2nd Quarter 2017 9/26
homes with multiple-play offers (bundles) had a deal which included a mobile telephone service 7 (4.6 percentage points more compared to June 2016). 3. Distribution of active mobile stations / active user devices by provider with actual use The table below shows the distribution per provider of the total number of active mobile stations with actual use 8 associated with post-paid, pre-paid and hybrid tariff plans. MEO continued to be the main provider with 43.9% of active mobile stations with actual use, followed by Vodafone with 30.5%. NOS increased its share to 23.6%. Table 2 Distribution of active mobile stations/user devices with actual use by provider 16Q2 17Q1 17Q2 Quarterly var. (p.p.) Year-onyear var. (p.p.) MEO 44.2% 43.9% 43.9% 0.0-0.3 Vodafone 32.0% 30.7% 30.5% -0.2-1,4 (note1) NOS 22.4% 23.5% 23.6% 0.1 1.2 Other providers 1.5% 1.9% 1.9% 0.1 (note1) 0.5 (note1) Unit: %, p.p. Note 1: The differences resulting from the values in the table are due to rounding. 7 Cf. MARKTEST - Telecommunication Barometer Study, June 2017 [Base: Homes with bundles of services (Total)]. 8 Active mobile stations with actual use are stations eligible to use the service and which saw actual use during the period being reported, i.e. they registered traffic in the last month. Mobile Service 2nd Quarter 2017 10/26
Table 3 - Distribution of mobile stations/user devices by provider 2nd Quarter 2017 CTT Lycamobile MEO Vectone 9 NOS Vodafone Nowo Onitelecom Mobile stations / Active user devices with post-paid, pre-paid and hybrid tariff plans Mobile stations / Active user devices with post-paid, pre-paid and hybrid tariff plans in actual use 0.1% 1.2% 45.8% 0.0% 24.1% 28.3% 0.5% 0.0% 0.1% 1.1% 43.9% 0.0% 23.6% 30.5% 0.6% 0.0% Mobile stations / Active user devices with post-paid, pre-paid and hybrid plans in actual use, excluding tablets/pcs used for Internet access Mobile stations / User devices with post-paid, pre-paid and hybrid plans in actual use, excluding tablets/pcs used for Internet access and mobile stations associated with Machine-to- Machine communications (M2M) 0.2% 1.2% 44.3% 0.0% 23.1% 30.6% 0.7% 0.0% 0.2% 1.2% 44.0% 0.0% 22.8% 31.0% 0.7% 0.0% Unit: % Note: It should be noted that the definitions of the indicators used for calculation are those set out in the mobile services form currently in use. These definitions may differ from those used by the providers. It should also noted that the trend for these indicators may have been affected by the e-iniciativas programme; as such the shares of each provider may partly reflect the different commitments taken on in the context of tenders to allocate UMTS licensing for the purpose of the promotion of the information society. It should be mentioned that in 2Q2017, around 134 thousand mobile numbers were ported, an increase of 3.7% versus the previous quarter and an increase of 19.7% compared to the same period in the previous year. 4. Users of typical mobile broadband services In 2Q2017, there were about 13.8 million users eligible 10 for typical mobile broadband services, 4.1% more than in the previous quarter and a historic maximum. In this period, these users represented 80.6% of the total active mobile stations. 9 Mundio Mobile (Portugal) Limited changed its name to Vectone Mobile (Portugal) Limited on 23 March 2017. 10 Eligible user refers to a mobile station/user device which contractually and technically has the capacity to access broadband services, regardless of whether access is actually made during period being reported. Mobile Service 2nd Quarter 2017 11/26
Table 4 - Users of typical mobile broadband services 2nd Quarter 2017 Quarterly var. Year-on-year var. Total number of users of typical mobile broadband services (eligible) 13 809 549 4.1% 387 2.9% of which are users of 3rd generation services, active equivalent upgrades and standards (who recorded traffic in the last month of the period being reported) 6 837 229 3.5% 1 029 17.7% of which are users of broadband Internet access service 6 720 224 3.4% 1 042 18.4% of which are users with a specific tariff for broadband Internet access 1 357-3 -0.2% -256-15.9% of which have an Internet connection through tablets/pcs 561 16 2.9% -4-0.6% of which have an Internet connection using mobile phones 6 159 208 3.5% 1 046 20.5% Unit: thousands of users, % There were 6.8 million actual users of 3rd/4th generation characteristic mobile broadband services (i.e. video telephony, broadband data transmission, mobile TV, etc.), the highest value recorded to date (+3.5% over the previous quarter and +17.7% compared to 2Q2016), Users of such services make up 52.6% of total mobile stations with actual use (+6.9 percentage points higher than that observed in 2Q2016). According to the Telecommunications Barometer from Marktest, the preference for mobile broadband was indicated as the main reason for not having fixed Internet (23.3%, +7.9 p.p. compared to the previous quarter). Mobile Service 2nd Quarter 2017 12/26
Graph 2 - Penetration of broadband services Percentage of cards/modems out of total users of 3G services, upgrades and equivalent standards Percentage of users of 3G services, upgrades and equivalent standards out of total mobile stations with actual use Percentage of users of 3G services, upgrades and equivalent standards out of total users eligible to use broadband services Percentage of users eligible to use broadband services out of total active mobile stations 8,2 8,2 8,6 9,5 9,7 52,6 51,5 51,0 49,2 45,6 49,5 49,8 47,9 45,5 43,3 80,6 78,1 80,4 80,1 79,6 0 20 40 60 80 100 2Q2017 1Q2017 4Q2016 3Q2016 2Q2016 Unit: % The growth (in year-on-year terms) reported in the number of users of 3G/4G services is associated with the significant increase in mobile phone Internet access (+20.5% compared to 1Q2016), namely when associated with bundled offers, and the widespread uptake of smartphones 11. Smartphone penetration grew to 72.7% in June 2017, according to Marktest's Telecommunications Barometer 12. Around four out of every five users of the Internet access service via mobile phone send instant messages, and this is the most used service. Furthermore, 78% of users of the Internet access service use email and social networks on the mobile phone. Browsing maps (e.g. Google Maps) is the fourth most used service. Of note in this quarter is the increased use of online music services such as Spotify, Deezer, Google Music, itunes, MEO Music, etc., by customers using Internet through their mobile phone (+3.5 p.p. in the last 3 months, reaching 44.7%) and the increase in OTT services for calls made with applications such as Skype, Viber, WhatsApp, Facetime, etc. (+3.1 p.p. in the last 3 months, 55.6%). 11 gfk study available at: http://www.gfk.com/temax/western-europe/pages/portugal.aspx 12 Cf. MARKTEST - Telecommunication Barometer Study, June 2017 [Base: Individuals with a mobile phone (Total). Excludes non-responses]. Mobile Service 2nd Quarter 2017 13/26
Graph 3 Level of use of Internet access services on mobile phones 13 550 500 450 400 350 300 250 200 150 100 50 0 11,5 10,3 19,3 20,9 18,8 18,4 19,9 28,6 27,9 24,7 28,4 25,4 43,8 42,3 44,3 41,2 44,7 46,7 47,4 49,6 52,5 55,6 63,7 63,1 61,7 64,7 63,8 61,1 65,3 64,4 64,8 64,5 78,5 80,5 79,5 78,3 80,4 79,6 80,4 79,6 78,8 81,7 80 84 83,6 82,9 84,7 jun/16 sept/16 dec/16 mar/17 jun/17 Watch TV Online (Iris Online, MEO Go, Vodafone TV, Cabovisão Always) Access bank accounts via apps (Mobile Banking) Online gambling Listen to music online (e.g: Spotify, Deezer, Google Music, itunes, MEO Music...) Make voice calls through Skype, Viber, WhatsApp, FaceTime, or others Watch videos online (YouTube, Vevo...) Browse Maps (e.g. Google Maps, Apple Maps, MEO Drive, etc.) Access social networks through apps Access email via apps Use Facebook Messenger, WhatsApp or other to send messages Unit: % Source: MARKTEST - Telecommunications Barometer, September 2015 to June 2017. Base: Individuals aged 10 or over who access the Internet using a mobile phone (includes accesses made exclusively using Wi-Fi). Of all users of mobile broadband services who registered traffic in the last month of the report, 8.2% were users of the Internet access service via tablets/pcs. Since the current questionnaire was introduced (1Q2010), the number of tablet/pc accesses has fallen by 56.5%, mainly as a result of the end of the Government's e-iniciativas scheme. 13 MARKTEST - Telecommunications Barometer, June 2016 to June 2017. Services accessed through the Internet on your mobile phone (suggested question). Mobile Service 2nd Quarter 2017 14/26
1Q2002 2Q2002 3Q2002 4Q2002 1Q2003 2Q2003 3Q2003 4Q2003 1Q2004 2Q2004 3Q2004 4Q2004 1Q2005 2Q2005 3Q2005 4Q2005 1Q2006 2Q2006 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 5. Traffic 5.1. Voice There was a total of 6.6 billion conversation minutes originating on mobile networks in 2Q2017 (+2.4% compared to 1Q2016 and +1.9% compared to 2Q2016), and in this quarter reached the historic maximum and was close to the upper limit of the forecast range resulting from the historical trend and the estimated seasonal effect. Graph 4 - Trend in voice call traffic in minutes 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Unit: millions of minutes Minutes(Y) Forecast Forecast range* Notes: * Forecast range with a significance level of 95%. A regression model was used Yt = 2.373.925 + 2191t 2 84.522Q1 + 67.521Q3 + 2.975.644CE + (2.837.353+144.231*t- 3.979*t^2)P with all significant independent variables at a 95% confidence level, including, positive quadratic trend up to 3Q2010, seasonal dummies for the 1st and 3rd quarters, dummy for the change to the economic backdrop in Portugal with effect between the 4th quarter of 2010 and the 4th quarter of 2012 (CE) and dummy related to the introduction of bundled offers with MTS (P) with increasing linear trend from the 1st quarter of 2013. The adjusted coefficient of determination (adjusted R 2 ) was 0.997. The increase in traffic seen in this quarter compared to the equivalent period in 2016 (+1.9%) stems, above all, from increases in off-net traffic (+11.1%). Off-net traffic also showed its highest value since data on these indicators was first compiled. On-net traffic saw a year-on-year fall of 4.3%. On-net traffic now represents 52.9% of originated traffic (3.4 p.p. less than in the same period in 2016). Mobile Service 2nd Quarter 2017 15/26
Mobile-fixed traffic (+6%) saw significant growth in year-on-year terms, reaching the highest value until that date. International traffic registered a significant increase in this quarter (+19.2%), which is normal at this time of year (due to seasonal factors). Compared to the same period in the previous year this grew by 12%. The increase in off-net traffic and mobile-fixed traffic, and the consequent change of traffic structure that has been occurring, results from the discontinuation of price differences in a number of tariff offers between on-net calls and off-net calls, and the appearance of offers with calls included" to all national networks. There is also evidence that this tariff change may be reducing the strength of the so-called calling club effect. According to Marktest's Telecommunications Barometer 14, in March 2014, around 30.3% of individuals with a mobile phone (in cases where the main mobile phone was not included in a bundle) reported that their main reason for choice of operator stemmed from the fact that the people they communicated with were connected to the same network. In June 2017, this figure had fallen 19.4 percentage points to 10.9%. Likewise, this was pointed out as reason for the change of operator. In March 2017, according to Marktest's Barometer, only 7.4% of individuals with a mobile phone who switched operator did so because friends/family members were connected to the same network. In March 2014, this reason was cited by 26% of individuals. The combination of services/bundles is the second reason most often given by individuals with mobile phones who have switched operator (15.6%), followed by pricing. 14 Cf. MARKTEST - Telecommunication Barometer Study, March 2014 to June 2017 [Base: Individuals with a mobile phone in cases where the main mobile phone was not included in a bundle (Total)]. Mobile Service 2nd Quarter 2017 16/26
Table 5 - Voice traffic: minutes 2nd Quarter 2017 Distribution of traffic type Quarterly Var. Year-on-year var. By traffic source 6 638 409 100.0% 157 826 2.4% 122 363 1.9% To the actual provider (on-net) 3 509 184 52.9% 13 276 0.4% -157 665-4.3% To other national MTS providers (off-net) 2 460 520 37.1% 103 628 4.4% 245 757 11.1% To national FTS providers 327 767 4.9% 10 155 3.2% 18 536 6.0% For short numbers and non-geographic numbers 138 223 2.1% -1 903-1.4% -6 034-4.2% To providers of international networks 202 715 3.1% 32 670 19.2% 21 769 12.0% By traffic termination 6 411 165 100.0% 135 455 2.2% 111 419 1.8% To the actual provider (on-net) 3 509 184 54.7% 13 276 0.4% -157 665-4.3% From other national MTS providers (off-net) 2 475 085 38.6% 105 273 4.4% 267 276 12.1% From national FTS providers 157 683 2.5% 8 431 5.6% 24 169 18.1% Number of minutes ending in short numbers and non-geographic numbers 65 467 1.0% -4 605-6.6% -5 672-8.0% From providers of international networks 203 746 3.2% 13 079 6.9% -16 689-7.6% Thousands of Minutes, % There were around 6.4 billion minutes terminating in mobile networks (+2.2% in comparison with 1Q2017 and +1.8% over the same quarter in the previous year). In 2Q2017, the average number of conversation minutes per mobile station with actual use (excluding tablets/pcs and M2M equipment) was 191 minutes per month, 4 minutes more than in 1Q2017, to reach a historic maximum. Of these, on average, 101 minutes were onnet, 71 minutes were off-net, 9 minutes were associated with calls to the fixed network, 4 minutes with calls to short/non-geographic numbers and 6 minutes international networks. Mobile Service 2nd Quarter 2017 17/26
Graph 5 - Average number of minutes per month per active mobile station with actual use, excluding Internet access cards and mobile stations associated with M2M communications Minutes to international networks per mobile station with actual use Minutes to short and non-geographical numbers per mobile station with actual use Minutes for national FTS per mobile station with actual use Off-net minutes per mobile station with actual use On-net minutes per mobile station with actual use 2Q2017 1Q2017 4Q2016 3Q2016 2Q2016 5,8 4,9 5,1 6,6 5,2 4,0 4,0 4,2 4,6 4,2 9,4 9,2 9,0 9,2 9,0 70,9 68,1 67,5 66,0 64,3 101,1 100,9 102,9 103,3 106,4 0 25 50 75 100 125 Unit: minutes Calls originating from the mobile network (excluding tablets/pcs and M2M equipment) had an average duration of 155 seconds per call this quarter, an identical value to that recorded in the equivalent period in the previous year. 5.2. SMS In 2Q2017, about 4.3 billion text messages were sent (+2.1% over the previous quarter and -9.9% compared to the same period of the previous year). The value corresponding to the period being reported is slightly above the upper limit of the forecast range resulting from the historical trend and the estimated seasonal effect. Mobile Service 2nd Quarter 2017 18/26
2Q2005 3Q2005 4Q2005 1Q2006 2Q2006 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 1Q2009 2Q2009 3Q2009 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Graph 6 - Trend in text message traffic (SMS) 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 Messages(Y) Forecast Forecast range* Unit: millions of messages Notes: *Forecast range with a significance level of 95%. A linear regression model was used with linear and quadratic trend (t and t 2 ): Y t = 999.203 + 432.069 t - 7.782 t 2. The following seasonality indices were calculated (additive model): Q1= - 105.142; Q2= - -15.304; Q3= 92.735 and Q4= 27.711. The adjusted coefficient of determination (adjusted R2) is 0.96. The decline in text message traffic seen over recent years stems mostly from the appearance of alternative forms of communication. According to Marktest's Telecommunications Barometer 15, about 51.7% of mobile phone users aged 10 or older used instant messaging services 16, +8 percentage points compared to June 2016. Around four out of every five users of the Internet access service via mobile phone send instant messages (instant messaging). 15 The Telecommunications Barometer is a regular study developed by Marktest for the telecommunications sector. The universe of the Telecommunications Barometer - Mobile Network comprises individuals aged 10 and over living in mainland Portugal or in the Autonomous Regions of Madeira and the Azores; a sample is compiled on a monthly basis which is proportional to and representative of the study's universe, corresponding to 1200 interviews per month (3500 interviews per quarter). 16 The question in the survey refers to "services that you normally use on your mobile phone. Mobile Service 2nd Quarter 2017 19/26
2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Graph 7 Trend in percentage of mobile phone users who used instant messaging services 55 50 45 40 35 30 25 17,8 20 11,7 12,4 13,8 15 10 5 0 21,2 25,3 28,3 31,7 34,5 37,4 39,2 43,6 43,7 46,7 49,9 50,5 51,7 Instant Messaging Services (Facebook Messenger, WhatsApp or other, to send messages) Unit: % based on microdata from Marktest's BTC, 2Q2013-2Q2017 Base: Individuals aged 10 years or over with a mobile phone Of note was the notable increase in the number of SMS messages sent to other mobile networks in 2Q2017 (+7.1%). This increase in off-net traffic results from the growth seen in offers that allow users to send free SMS messages to all mobile networks. The number of SMS messages sent to users' own networks has fallen for sixteen consecutive quarters, and recorded the lowest level since data for this indicated started being collected in 2010. Mobile Service 2nd Quarter 2017 20/26
Table 6 - Text Messages (SMS) 2nd Quarter 2017 Distribution of traffic type Var. Quarterly Var. Year-on-year Number of originated SMS 4 293 231 100.0% 86 294 2.1% -470 659-9.9% SMS to own network (on-net) 2 597 028 60.5% -25 702-1.0% -647 084-19.9% SMS to other national MTS providers (offnet) 1 685 624 39.3% 112 224 7.1% 178 361 11.8% SMS to national FTS providers 606 0.0% 39 6.9% 46 8.1% SMS to international networks 9 973 0.2% -267-2.6% -1 982-16.6% Unit: thousands of messages An average of 187 messages were sent by users of this service each month (212 in 2Q2016), which represents about 6 messages per day. The total of value-added messages reached 25.6 million in 2Q2017, a value corresponding to 0.6% of total messages sent. The number of users of the text messaging service represents, on average, about 65.3% of total mobile stations with actual use, excluding Internet access cards and devices associated with Machine-to-Machine communications (M2M) (compared to 65.4% in the previous year). 5.3. MMS, video-calls and Mobile TV In 2Q2017, users of the mobile service sent around 16.5 million MMS messages 9% more than in the previous period. Year-on-year the number of multimedia messages sent by users of this service decreased by 10.2%. Mobile Service 2nd Quarter 2017 21/26
Table 7 - Multimedia messages (MMS) 2nd Quarter 2017 Var. Quarterly Var. Year-on-year No. of originated MMS 16 543 1 364 9.0% -1 869-10.2% No of video-calls Calls 278 0-0.1% -200-41.8% Video-call traffic volume Minutes 468-87 -15.7% -995-68.0% Unit: thousands In 2Q2017, the number of users using the multimedia messaging service was relatively low (representing just 11 % of total mobile stations with actual use, excluding tablets/pcs and M2M devices). The volume of traffic generated by this service is also relatively low. On average, each user sent an average of 4 MMS per month during this quarter. As for video-calls, 278 000 were made during 2Q2017, a value similar to that registered in the previous quarter. In comparison with the same quarter in the previous year there was a decrease of 41.8%. This reduction may stem from the appearance of deals offering mobile data launched by operators, as well as the increase in traffic volume included in existing deals, to enhance the use of video-calls through OTT applications. As at the end of 2Q2017, there were around 2.7 thousand users of the Mobile TV service (0.04% of total mobile stations with actual use of broadband services). 5.4. International Roaming The number of users of the international roaming service represented 7.3% of total active mobile stations with actual use, excluding tablets/pcs and M2M devices. Mobile Service 2nd Quarter 2017 22/26
In relation to the previous quarter, roaming in traffic 17 reported significant increases in all categories, as normally occurs in the second quarter of each year (due to seasonal factors). There were also significant increases over the same quarter of the previous year, particularly Internet traffic (+103.4% in terms of number of sessions and by +244.1% in terms of traffic in GB). Table 8 - Roaming in traffic 2nd Quarter 2017 Originating Incoming Var. Quarterly Var. Year-on-year Number of calls 57 767 64.6% 35.4% 22 517 63.9% 14 140 32.4% Number of minutes 166 391 61.4% 38.6% 59 258 55.3% 45 491 37.6% Text messages 202 428 25.1% 74.9% 82 293 68.5% 45 798 29.2% Number of Internet access sessions Volume of Internet access (GB) Average duration of calls 747 766 n.a. n.a. 344 239 85.3% 380 200 103.4% 1 427 019 n.a. n.a. 886 354 163.9% 1 012 340 244.1% (sec.) 164 188 Unit: thousands The number of roaming out 18 voice minutes and calls increased by 2% and 8.8%, in this quarter and in comparison with the same quarter in the previous year, respectively. The number of Internet access sessions increased by 51.4%, while Internet traffic volume in GB increased by 93.7% (for seventeen consecutive quarters this type of traffic has shown positive year-on-year changes above 90%). 17 Traffic flow (generating and terminating) in national networks by subscribers to foreign networks. 18 Traffic generated and terminated by subscribers of national operators as users of networks of other operators abroad. Mobile Service 2nd Quarter 2017 23/26
Table 9 - Roaming out traffic. 2nd Quarter 2017 Originating Incoming Var. Quarterly Var. Year-on-year Number of calls 39 177 48.5% 51.5% 5 235 15.4% 760 2.0% Number of minutes 172 525 43.4% 56.6% 17 120 11.0% 13 914 8.8% Text messages 24 355 n.a. n.a. 3 748 18.2% -2 780-10.2% Number of Internet access sessions Volume of Internet access (GB) 115 220 n.a. n.a. 21 571 23.0% 39 114 51.4% 264 735 n.a. n.a. 80 886 44.0% 128 070 93.7% Average duration of calls (sec.) 236 291 Unit: thousands It should be noted that these trends, especially the significant increases reported for Internet traffic, were influenced by the entry into force, on 30 April 2016, of new rules designed to cut the difference between national tariffs and roaming tariffs in the European Economic Area (EEA), entailing a decline in current tariffs. Roaming charges were reduced on 30 April 2016 and were definitively terminated on 15 June 2017 19. On the other hand, this drop in prices may have been influenced by variations in SMS traffic, which saw a reduction of 10.2% over the same quarter of the previous year. 6. Mobile service revenues Revenues from services provided to end-users in the 2nd quarter of 2017 rose to around 657 million euros, 3.1% less over the same quarter in the previous year. 19 Since 15 June 2017, operators have been obliged to implement Roam Like at Home (RLAH), except if they can show the regulator that they are unable to recover the costs they have incurred with regard to the provision of roaming services. Thus, within the EEA, costs of communications made cannot exceed domestic tariffs (in the case of calls, SMS, MMS and video calls made, this price should not exceed the price paid by communications to other national networks). However, operators may apply a responsible use policy (RUP) for the roaming service. Therefore, if the limits or rules of this RUP are violated, the price of roaming communications may be increased by certain maximum surcharges established by the European Commission. Mobile Service 2nd Quarter 2017 24/26
Table 10 Revenues from mobile telephone service January- June 2016 January- June 2017 Year-onyear change Revenues from provision of services to retailer customers 677 657-3.1% Units: millions of euros, % Note 1: Revenues accumulated since the beginning of the year. Note 2: Includes revenues from mobile services not included in bundles with fixed services and revenues from additional services as part of bundles with additional services, such as additional traffic not included in the monthly subscription charge, Add-On s and monthly subscription charges for additional cards. According to the available data, the average monthly revenue per average subscriber (with actual use) is estimated at 9.7 euros and has decreased by 3.5% compared to the same period in 2016. Table 11 Average monthly revenue per subscriber January- March 2016 January- March 2017 Year-on-year change Average monthly revenue per average subscriber. 10.0 9.7-3.5% Unit: euros, % Note 1: Active MTS subscribers reporting actual use were considered, excluding subscribers to 4P/5P bundles. According to the sampling data elements, collected when compiling Marktest s Telecommunications Barometer - Mobile Networks, regarding residential customers, user expenditure on mobile services at the end of the 2nd quarter of 2017 was 12.4 euros 20, increasing by about 2.6% compared to the same period in the previous year. 20 Cf. MARKTEST - Telecommunication Barometer Study, June 2017 [Base: Individuals with mobile phones where the mobile phone is not included in a bundle]. Mobile Service 2nd Quarter 2017 25/26
Mar.10 Jun.10 Sept.10 Dec. 10 Mar.11 Jun.11 Sept.11 Dec.11 Mar. 12 Jun.12 Sept.12 Dec.12 Mar.13 Jun.13 Sept.13 Dec.13 Mar.14 Jun.14 Sept.14 Dec.14 Mar.15 Jun.15 Sept.15 Dec.15 Mar.16 Jun.16 Sept.16 Dec. 16 Mar. 17 Jun. 17 Graph 8 - Average monthly subscription charge for MTS customers aged 10 or over 25 20 15 10 5 0 Unit: euros Source: MARKTEST - Telecommunications Barometer, 1Q2010 to 2Q2017. Base: Individuals with mobile phones (until Apr13) / People with mobile phone not included in a bundle (May13) Mobile Service 2nd Quarter 2017 26/26