 | Issue: | Latin America 2012 |
| Article no.: | 10 | |
| Topic: | Brazilian mobile communications will never be the same | |
| Author: | Eduardo Arbesú | |
| Title: | Director of Business Consulting | |
| Organisation: | Everis | |
| PDF size: | 1500KB |
About author
Eduardo Arbesú is Director of Business Consulting in Everis, Brazil. He currently holds the position of Director responsible for Everis Business for the Telecom industry in the Brazilian office. Since 1999, he has been developing his career in the international consulting Everis, leading different projects in Telecom clients in countries such as Spain, Italy, Colombia, Chile, Peru and Puerto Rico.
With an extensive experience in this market, Mr Arbesú worked on projects of operational efficiency and revenue maximization, as well as competitive positioning in both fixed and mobile business areas, new business development and telecommunications strategy.
Eduardo Arbesú has a degree in Theoretical Physics from the University of Oviedo and a Master in Management and Development of Telecommunications from the EOI Business School.
Article abstract
Anatel, the Brazilian national communication agency, is encouraging the introduction of MVNOs, expecting them to grab 5-10% share of the Brazilian market within five years. This is a major opportunity for Brazilian businesses, but they must heed lessons learnt in other countries. Since rates are expected to fall as a result of higher competition, prospecting MVNOs must find their own differentiation in their speciality packages (e.g. M2M, migrants or church and club followers). They can compete on business agility that enables higher consumer satisfaction, faster service activation, consumer self-support and on the service package, but must not rely only on price cutting.
Full Article
We face an impending change in the Brazilian mobile telecommunication market with the entry of MVNOs, companies that use the traditional communication network of mobile operators to offer their own services for customers.
Today, Claro, Nextel, Oi, TIM and Vivo manage over 250 million mobile subscriptions in Brazil. With the entry of MVNOs, an increase in the number of operators is projected by Anatel (Agência Nacional de Telecomunicações), which will change this with the acquisition of 5% to 10% of market share over the next five years. Some well-known companies in Brazil have already declared their intention to enter the market as communication operators, and it is expected that some of them will be offering their services through this option.
Although not immediately obvious to the consumer, the entry of MVNOs, which is encouraged by Anatel, will involve multiple challenges, but will also bring benefits to different parties. MVNOs are entering a lucrative mobile market, which promises significant benefits with relatively low risk. They avoid the burden of investment in expensive network infrastructure. Some of these MVNOs will be established companies in various business sectors (banks, insurance companies, retail chains) that wish to complement their offering to their customers, revitalizing their market that may begin to show signs of exhaustion. Others will be entities that are going to use the market pull of their brands, their impact on their followers (church or football teams) or the common interest of particular niche markets, where they know best the real needs of their customers.
In more mature markets, MVNOs have grown by using a prepaid strategy, focused on low-cost, on young audience or immigrant segments. In Europe, there are also some specific exceptions of SMEs service-oriented operators. Today, there is a semi-virgin market where MVNOs can fight on equal terms with incumbents: data services.
Forecast reports of mobile data services, fast growth of tablet devices and prospects of M2M (Machine to Machine) services represent great opportunity for all operators, especially for MVNOs who look for differentiation. The traditional operators may initially see the new entrants as increased competition and a threat, but they will take advantage of what these new business models will add to their revenue. They will be able to optimize their network investments. Operators who can see the potential business and are agile in planning their position will be able to incorporate the higher value MVNOs in their business.
For Brazilian consumers, the new scenario will be a quiet revolution: This will represent a market with a penetration rate of 130% and high levels of churn, as forecast by Anatel. This is explained in part by high rates, inadequate service quality and the desire to buy a new mobile phone every few months.
The MVNOs’ entry should not present a big change in terms of the quality of the services, as they will be supported by existing networks. On the other hand, it can be a problem for new operators who would not achieve good agreements with the traditional operators, and will be offering a poor service to clients who have placed their trust in them.
It is possible for MVNOs to differentiate in other areas controlled by them, such as the customer experience in every interaction, from sales to after sales. That is where a MVNO can be different comparing to a traditional mobile operator, since you can design a completely lean and innovative structure, unencumbered by complex processes. Aspects, such as the service activation, the self-service and the flexibility of choosing products and services can be an experience unknown to the Brazilian market yet.
Another obvious benefit in the Brazilian market is the expected drop in rates (according to Everis’ own study). Brazil, according to the World Telecommunication/ICT Indicators Database study conducted by ITU (International Telecommunication Union) in 2011, has one of the most expensive worldwide rates, similar to economies such as Switzerland, Spain and Japan. According to this study, for the same calling package Brazilian consumers pay US$57.10 – a similar price to those in countries with higher purchasing power.
Although taxes and interconnection costs are largely responsible for Brazilian consumers carrying two or three phones in their pocket, the entry of MVNOs may result in a drop in rates. This has happened in more mature markets and the same can be expected in this country, since the price continues to be one of the factors that entrants have to compete on, in order to win more than 15 million customers – as Brazilian MVNOs are expected to have in 2015 (according to Everis’ MVNO Latin-American Market Study).
Although there is a known path to MVNO development, it does not give all the answers, because the mobile business is very complex. If we look at markets where MVNOs have been in place for some years, there are many successful cases but also many failures, where operators did not manage to build a distinctive model and were unable to reach the necessary critical mass. Selling telecommunication services has its secrets. A good brand positioning, attractive product offering to a certain niche market, a distribution channel that could cope with the population geographic dispersion of Brazil and, of course, a favourable agreement with the network operator will be among the many challenges that the new entrants must addressed before a commercial launch. Therefore, it is essential to design a successful strategy and to implement it with a model that takes into account not only the potential customers’ offers, but also the relationships with third parties as well as the technology and the operational model that supports it all.
In summary, MVNO deployment in Brazil is imminent. Brazilian operators and their customers must be prepared for the inevitable change in mobile communications in which they will have a very active role in deciding which new MVNOs will succeed in this country.
