MVNOs hit the road in Latin America - Prepaid MVNO

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FEATURE REPORT Triple-play driver Of the companies that are already participating in the Latin American MVNO market, Colombia’s Uff Móvil has the largest number of subscribers, according to Informa Telecoms & Media. The company ended 2011 with about 259,000 users or a .7% share of the wireless market in that country. This represents an expansive growth compared to its .18% market share in the second quarter of 2011 and considering it was launched by the Colombian TV group RCN in November 2010. Uff Móvil uses Tigo’s network to offer inexpensive longdistance calls to fixed and mobile numbers in the countries where many Colombian expats live. Number portability, which began in Columbia in July 2011, benefited the MVNO, but it was not the only factor, according to Uff Móvil’s CEO, Santiago Aldana. “People understand what MVNOs are about, and as more are launched, it becomes easier to gain subscribers,” Aldana said. In Colombia, MVNOs such as Uff Móvil and Empresa de Telecomunicaciones de Bogota compete with big players: América Móvil’s Comcel, Teléfonica’s Movistar and Tigo. But they have high goals. For instance, ETB aims to reach 1 million subscribers over the next five years. ETB is focused on Bogotá, which is Columbia’s largest city and represents 17% of the population, 26% of Colombian GDP, 34% of total fixed lines and 32% of total broadband subscribers. ETB, which also uses Tigo’s network, earlier this year added mobile voice to its data MVNO service, expanding its convergent services, which already has fixed lines and wireless modems for mobile broadband under an MVNO model. According to Sérgio González, ETB’s VP for strategic planning, the company currently has approximately 15,000 customers – although this might not be the most accurate number since ETB delivered free SIM cards to current customers across the country. González said that to address future challenges and in the context of consolidation and potential new entrants, ETB needs to strengthen its participation in the Bogotá market; achieve fixed-mobile convergence in positioning its MVNO offer; upgrade its networks for the provision of new services by deploying fiber-to-thehome; consolidate its TV service; and migrate to digital entertainment. One of the first MVNOs to enter the market – a status that remains important in the Colombia telecom scene – UNE EPM launched LTE services in Bogotá and Medellín in June, with plans to expand the service to Cali, Barranquilla, Cartagena and Bucaramanga during the second half of this year. The goal is to have up to 180,000 users by the end of the year. UNE has invested about $130 million to begin offering LTE services. This is a huge step as until it had built its own infrastructure, UNE EPM operated as an MVNO using Tigo’s networks. UNE EPM’s LTE journey began in 2010, when the carrier paid $40 million for a 50 megahertz, 10-year license in the 2.5 GHz band. While “triple play” services (TV, broadband and phone) remains a major MVNO driver, it is easy to find partnerships between ISPs and cable companies. In 2007, the Mexican fixed-line operator Maxcom won approval from telecommunications regulator Cofetel to become an MVNO, and it started operating the following year. Maxcom was the first company in the region that signed a wholesale agreement with Telefónica and one of the first MVNOs in Latin America. Last year, Mexican cable operator Megacable Holdings also launched its MVNO service through an agreement with the local unit of Telefónica. The move allowed Megacable to have a “quad-play,” by offering wireless services alongside its existing package of television, Internet and fixedline telephone. The MVNO service, which was originally announced last year, will operate under the Megacel brand. For the foreseeable future, Informa Telecoms & Media expects alternative ISPs, especially in the most unbalanced fixed-line markets, to retain a strong interest in the MVNO model with the aim of increasing customer loyalty and reinforcing their offerings by bundling products. Virgin Mobile’s impact Certainly one of the biggest announcements affecting the MVNO scene was the arrival of Virgin Mobile Latin America. In June 2011, the United Kingdom-based Virgin Group announced plans to launch operations in several markets, including Chile, Colombia, Brazil, Peru and Mexico, by packaging products specifically to meet the needs of the youth market. Since then the company has signed with Telefónica’s Movistar to operate in Chile and Colombia, and effectively, VMLA launched services in Chile in April. In Chile, Virgin Mobile offers prepaid data, voice and messaging services, and it is targeting the youth segment by offering additional benefits, such as discounts on brand products, and concert and event tickets. VMLA also has license approvals to operate in Mexico and Colombia. In May, Jeffery Buckwalter, VMLA’s SVP for business development, said the company expects to launch MVNO services in Colombia and Brazil over the next 18 months. Colombia is
FEATURE REPORT set to be its second market, and the launch might happen this year, while Brazil is expected to be its third, with a VMLA launch in 2013. Virgin Mobile’s experience in Chile will be valuable as the company’s focus moves to other countries. “Colombia is in place, and we are at the advanced discussion stage in Brazil. The challenges are that we still have several pieces to put in place. In Brazil, we cannot apply for a license … until we have an operator,” Buckwalter said. In both Chile and Colombia, Virgin Mobile has signed agreements with Movistar, but there is no MVNO partner yet for the Brazilian market. Peter Macnee, president and CEO for VMLA, said the company may not use the same operator partner in all countries, but he did note that the company planned to build its operation teams locally. “Our teams are able to do local market research and combine experiences. We are hiring a management team and balancing that with local markets,” Macnee said. VMLA is holding independent conversations in each country, and in Brazil the company is in talks with the four major operators. Of the four largest carriers, TIM has the most experience in completing agreements, as it already has MVNO agreements with Porto Seguro, Datora and Sisteer. When asked if VMLA could follow its agreements in Chile and Colombia and close the deal with Telefónica’s Vivo, Buckwalter answered that having the same carrier would have some benefits, but also raises some concerns. “We are very happy in Chile and in Colombia, but the question is how much influence would Telefónica have over us,” he said. The global Virgin Mobile brand currently has more than 15 million customers worldwide, and seems to be very confident in the Latin American market. “We want to build a regional business and operate in major countries,” said Macnee. “If you look at the region, there are a small number of regional brands. And we are finding that the major carriers are interested in having a small number of MVNOs on their system, but they are focusing on the major ones.” The question is how VMLA will differentiate itself among current players. Buckwalter said that the company is focusing on the youth segment with prepaid plans and strong data services. “Voice is a commodity. Data is where the future is,” he explained. However, branding is still a challenge since Virgin is not very well known in several Latin American countries. “We are making significant investments to enhance our brand awareness. There is no shortcut,” Buckwalter said, adding that Mexico might be the country where the Virgin brand is the most recognized in the region. “We will have to invest more where Virgin is not known,” he said.
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