Evolving from a telco to a "digital lifestyle" company

Friday, April 4, 2014

Perhaps no mobile operator playing in emerging markets has understood the need to diversify their revenues streams and play ball with the over-the top (OTT) players than Swedish telco Millicom, which operates the Tigo brand in 14 markets in Central and South America and Africa.

As OTT players threaten to convert telcos into a "dumb pipe," Millicom has recognized that if you can't beat them join them and is allying with content players and leveraging its networks for all they are worth to offer new value added services to customers such as music and mobile wallet. Millicom is also drawing together disparate new services such as TV from its cable operations under the Tigo brand and starting to call itself a "digital lifestyle company."

Millicom recognizes that this is not an option but a necessity in order to keep up with consumers' rapidly evolving and changing needs based on their adoption of smart devices. The company has even taken the game to the over-the-tops and allied with digital entrepreneur group Rocket Internet to invest in and build the next generation of startups.

BNamericas spoke to Mario Zanotti, Millicom's senior EVP of operations, about where the company is going with this very proactive approach to the consumer.

BNamericas: One of the recurring headaches for telcos is how to diversify their revenues and compete with OTT players. How come Millicom is so forward looking?

Zanotti: We've always been proactive, always pushing the concept of diversified offerings to the consumers. That has helped us define an early strategy in this digital era.

BNamericas: Some companies are trying to work with over-the-top players while others are trying to take them on. Millicom seems to be doing both.

Zanotti: The times have changed because the consumers' needs have evolved, propelled by advances in technology. This means mobile operators have to focus a lot more than in the past on trying to understand what the consumer is demanding from us.

It is frequent in the digital ecosystem to cooperate and compete at the same time. We try to be a friendly member of the ecosystem, and look at how we can resolve consumer needs together.

BNamericas: Do these initiatives make money for you or are they just to show that you are in touch with the consumer?

Zanotti: We're a small company and disciplined in terms of our use of capital. We always try to make money on whatever we do.

Music adds value to the customer proposition. It's a product that is appreciated by the consumer. It enhances the value proposition that Tigo brings to the table.

BNamericas: Are OTTs a threat to your revenues?

Zanotti: I don't think there is much we can do. They are there, so we must understand how they play and play together in a way we can both make money. But we also need to learn how to compete with them, learn what our key strengths are and leverage those and try to minimize our weaknesses.

BNamericas: I guess that as long as you get more people using broadband, they're spending more money than before and buying other services as well.

Zanotti: Absolutely. This is a play with lots of factors. One is the ecosystem; the other is about efficiencies because operators have to pay a lot of attention to cost and being able to operate efficient networks. That is why you see a lot of initiatives like spectrum, network and tower sharing, and I think they'll be more frequent going forward.

BNamericas: You've announced several new brands like Tigo Star. Will we continue to see more brands like that?

Zanotti: Tigo is now like an umbrella brand from which you can differentiate different products we offer. The Tigo Star brand brings entertainment, connectivity and value added services to the home over a mix of mobile and fixed networks. We needed a brand that would bring several innovations to consumers step by step.

BNamericas: Mobile wallet has been successful in Africa. Have you seen synergies from those experiences in Latin America?

Zanotti:  What's interesting with mobile wallet is it's upside down. You would assume new products would take off fastest in the more developed economies. With these products the most advanced experiences are in Africa. Mobile wallet is bringing financial services to people who in the past didn't have that possibility. 20 years ago people didn't think mobile would be a mass product. But it ended up being a way to bring communications services to the masses. I think this is the way we should look at mobile wallets. This is also an ecosystem. All players in the ecosystem should cooperate.

BNamericas: What are biggest challenges? Getting players to accept the payment system or getting consumers interested?

Zanotti:  Both. At the beginning in the wireless industry, it was very difficult to make people understand how this could help your life. I think this is the same; it will take some time. It's important to keep the momentum and keep pushing it because there is a real need from consumers to use financial services in a more easy and affordable and accessible way.

BNamericas: Why is Millicom getting into e-commerce?

Zanotti: This is a digital age venture. The idea is to take proven business models and replicate them in emerging economies. It's a way of spreading innovation very quickly.

BNamericas: Will you be an incubator for startups?

Zanotti: No, we're an investor in Rocket Internet. Speed of execution is key. There's a clear business model known to deliver results. We know what has to be done. Now it is a question of going in and doing it.

BNamericas: Will you act as a seed investor and seek fast exits or keep a stake in those companies?

Zanotti: Normally Millicom is a longer term investor. But this is also new. Everything can evolve. Our philosophy is to bring to the mass market products that previously were not available to them. This is what we're doing with voice, messaging, mobile internet, financial services and now e-commerce. We see it as a logical extension to our business model.