In a brand new instalment of the MVNO Monday Q&A, TeleGeography spoke with Oscar Casado Oliva, the Corporate Affairs Director of Tuenti.
How would you classify your MVNO’s business model?
Tuenti is a Spanish technology company that was born ten years ago as a social network, and became the most used service of its kind in Spain. In 2010 Tuenti was acquired by Telefonica and, in subsequent years, we have successfully pivoted from a local social network to a global digital telco, with a value proposition totally based on our differential technology capabilities. We leverage this to empower our customers to take control of their digital life.
We consider this aspect to be a crucial factor for us: innovation is not just a simple add-on to Tuenti’s proposition. Innovation is part of our DNA, and our strategy and all of our efforts are oriented to provide an end-to-end digital experience, adding an innovation layer through an over-the-top (OTT) multi-platform app that increases customers’ engagement. This end-to-end digital service is called the full ‘cloudphone experience’ and is based on a set of highly innovative services developed in-house, at the core of our telco business. All of this can be enjoyed by our customers both through Tuenti’s web platform and via the app (available for Android and iOS), across a wide range of platforms and devices.
When did you launch your MVNO, who is your network provider, and has this partnership remained unchanged since launch?
Our first MVNO business – Tuenti Spain – was launched in 2012. Afterwards, Tuenti Mexico, Tuenti Argentina and Tuenti Peru all started their operations at different points during 2014, whereas Tuenti Ecuador launched in 2015.
This entire project would not be possible without the support of the Telefonica Group in general and Movistar in particular, which is, and has been, our network provider in all of the aforementioned countries since the beginning.
How would you define your key target user market(s)?
We can differentiate our customers into two main streams: young subscribers in their twenties, that demand useful tools and flexible plans adapted to their needs (i.e. in Latin America customers demand not just monthly plans, but also weekly and even daily plans for added flexibility); and smart, trendy and technology-focused customers that make intensive use of their smartphone, and search for value beyond price (i.e. a customer that is not willing to spend a lot of money on roaming calls, and analyses the market in search of smart options).
What is the size of your current user base?
When you include all of the countries in which we are now operating, the size of our current user base adds up to around 700,000 customers.
At the current stage of the company’s development, which of the following is most important to you: growing your subscriber base, increasing your ARPU, or increasing your profitability?
At the present moment in time, our most important objective is to transfer value from the OTT layer of our proposition to the telco one, in order to improve traditional telco KPIs such as ARPU, churn reduction, customer satisfaction index, subscriber acquisition cost, brand awareness etc.
Can MVNOs expand their services to multiple sectors and become major players themselves?
MVNOs operating in overcrowded and highly competitive markets definitely tend to expand their services to multiple sectors. At Tuenti we perceive a great opportunity from taking what works in the OTT world and integrating it within our MVNO business Whether or not we become a major OTT player will depend on a number of other circumstances – many of them out of our control.
Do you have any plans for future international expansion?
We are planning to open one new market in 2016 and we will continue our international expansion in the future.
Are you currently able to offer 4G LTE services via your wholesale agreement, and is 4G important to you?
We are currently offering 4G LTE services in almost all of the countries in which we are operating. Since Tuenti’s strategy is heavily focused on the OTT side of our proposition, 4G LTE is very important for us because it enhances the quality and user experience of certain functionalities available from our app, such as VozDigital (see below).
What do you regard as the company’s biggest achievements since launching services?
At Tuenti we have leveraged our previous experience as one of the most successful technology start-ups in Spain. The great team that made that possible – now with Telefonica’s support – has worked to build the best end-to-end digital experience. We developed our VoIP app2app functionality about three years ago, offering it to our customers in Spain totally free of charge. Since 2014 our Spanish customers have also enjoyed the possibility to call from our app to any GSM or fixed-line number nationwide – and to 40 other international countries – with no extra cost over a Wi-Fi network or via 3G or 4G networks. We call this VozDigital.
However, we did not want to stop there. Next we allowed our users to also answer calls directly, either in the app or on the web. We are not talking about app2app calling, we are talking about calls to-and-from your GSM number, that you can answer literally everywhere – 100% portable. You do not need a SIM card, you just need to be logged into a device with a data connection.
As a result, our customers are now much less afraid of leaving their smartphone at home, running out of battery or travelling abroad, because they just need one device (mobile/PC/tablet) and a data connection to have access to their full conversation history, contacts, agenda, dialler, voicemail, SMS, customer support, account management, SIM restoration, top-up and purchase information. In other words, they have total control over their communications and digital life – directly in their hands.
Now, we are bringing all of this innovation to new markets that will benefit from it, and rapidly evolving our digital experience at the same time. In fact, anyone can enjoy our full ‘cloudphone experience’, just by downloading the app from the store – without even needing to purchase a SIM card.
Do you consider the government and regulator’s positions regarding MVNOs to be conducive to a healthy market, or are there still significant obstacles?
MVNO regulation usually serves the purpose of introducing and boosting competition within the mobile telecommunications market and, ultimately, reducing prices – thus favouring the end-user. Notwithstanding, while this may be imperative in certain markets characterised by low levels of competition, there are other countries with highly competitive markets where maintaining and/or introducing strict MVNO regulations may be counterproductive. For example, by forcing the introduction of lower prices, it reduces the capacity of the operators themselves to invest and innovate.
Which MVNOs/resellers/sub-brands do you see as your main competitors?
As we are operating in five different markets it is impossible to provide generalised statements. Market maturity ranges from quite saturated markets with a high MVNO presence (such as Mexico or Spain) to others that have an emergent regulation, or are still to be regulated, and have no operational MVNOs at the moment (such as Peru). As a consequence, the competitive landscape varies from country to country.
Do you believe that the MVNO sector is already overcrowded? Do you expect to see the number of players reduced during the next five years, or is there plenty of room for niche operators?
In many countries in the LatAm region the MVNO sector is just about to take off, so we expect to witness a continuous growth in revenues – and players – in the coming years. On the other hand, some countries in Europe, such as Spain, do have an overcrowded MVNO sector, and we expect a process of consolidation to take place, as demonstrated in Spain in recent years. However, it remains to be seen whether or not this process will end up reducing the number of players, or if the different takeovers just change the ownership of the MVNOs, leaving the actual operations unaffected.
Are you seeing rising competition from MNOs via their secondary, no-frills brands? If yes, how do you intend to defend your market share from these players?
The more players there are in the market, the higher the level of competition is, and MNOs launching secondary/no-frills brands generally foster competition, just like any other new player. However, we also have to take into account that many of those brands target specific segments/niches of the market and, as a consequence, these brands coexist without friction – or do not have a great impact on the strategies of pre-existing players. In any case, telecoms is becoming a commodity in most countries, and price has become the main driver in mature markets.
Tuenti’s strategy is to create services based on innovation, in order to build sustainable differentiation. By increasing the perceived value for our customers – on the top of the traditional telco model – the operator does not need to have the lowest price, nor does it require a massive advertising budget. We have achieved this by offering a truly unique end-to-end digital experience: a telco-OTT integration model that adds a layer of innovation through a multiplatform app (incorporating ‘cloudphone’, IP communications and account management) that increases a customer’s engagement with the brand.
This strategy has proven to have a positive impact on crucial telco metrics and KPIs such as customer lifetime value. For example, those customers who use VozDigital and our app stay with us longer, spend more money and actively promote the product. The consequences of this are higher engagement results, not only in better customer satisfaction, but also an improved churn rate and higher ARPU.
With OTT apps increasingly supplementing/replacing traditional calls and SMS for voice and messaging, is there a danger that MVNOs will struggle to remain a valid proposition if markets continue to move towards data?
Although this situation affects the whole sector, MVNOs in general are more sensitive to the competitive pressures coming from OTT apps than other operators. As previously stated, Tuenti also has presence in the OTT market – a consequence of us having a proposition that relies strongly on the OTT functionalities available from our app/website. The OTT side of our proposition is not just linked to our MVNO operation, it is completely integrated with it, in order generate value for our users by delivering the best of both worlds.
For example, we have developed an OTT user-acquisition strategy named ‘Try-before-you-buy’, which allows subscribers from third-party operators – who are users of our app, but are not yet our customers – to enjoy our VozDigital service for a trial period. They are encouraged to become full customers through a seamless process within the app. This has proven to be an effective, alternative, cheap acquisition channel, and offers a great example of how combining and exploiting the advantages of two platforms (telco and OTT) can be extremely beneficial.
We believe that, should operators want to stay relevant in the communications arena, they will need to develop a strong IP-communications strategy. In fact, there are studies showing that nearly 80% of customers will trust their operator to provide them with IP-comms services, and will be more likely stay with an operator’s own service. As a consequence, there is still room to adapt to the changes that are ahead, and at Tuenti we have decided to do so through an end-to-end digital experience that allows us to remain a valid proposition in a changing environment.
What advice would you give to a company planning an MVNO launch in another market?
Having a good value proposition is not enough. You need to know the specific characteristics of the market you will be launching in. For example, there might be markets where, due to their own characteristics, online acquisition may not work as well as you might expect, and you will need to focus more on retail-based acquisition strategies.
In any case, our philosophy is to ‘always stay in beta’. We design, launch, learn, improve and iterate. Tuenti’s scale provides agility to develop, launch and test in the market features that – if successful – can be scaled later. That means we never stop innovating or creating new products and services that have the potential to improve the end-to-end digital experience of our customers.
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