Investor's Business Daily, May 21st, 2007
Brand power is at the heart of many successful companies, including phone companies such as AT&T and Verizon Communications.
Wireless firm Millicom International Cellular's MICC has chosen a branding strategy that differs from many of its rivals. It uses the same brand not only in different countries, but also in different regions of the world.
Millicom sells mobile phone services in 18 countries in Latin America, Africa and Asia.
The Luxembourg-based company rolled out its "Tigo" brand in Latin America in 2004, later expanding into Africa and Asia.
Its tack is working, as its shares have risen roughly 40% this year. (For a look at its IBD industry group, see Follow the Leaders on A5.)
Chief executive Marc Beuls recently spoke with IBD about Millicom's marketing strategy and other issues.
IBD: Why has Millicom taken a one-brand approach in so many markets?
Beuls: We wanted to become a real strong marketing organization. And we wanted to run our business in exactly the same way in all of our countries.
We needed a brand that would reflect a certain business strategy, which in our case is a triple-A strategy -- affordability, accessibility and availability -- in emerging markets.
We're dealing with people that have low income. GDP-per-capita is very low compared to the Western world. So we make products and services very affordable. We focus on prepaid products. Most wireless companies bill by rounding to the next minute. With us, if you talk five seconds you pay for five seconds, not a full minute.
Distribution is key. People can buy Tigo minutes in as many (retail) outlets as they can buy a soft drink. Availability reflects on the size and quality of our networks.
The Tigo brand was developed by a company in Argentina. It only cost us $100,000. Tigo comes from the Spanish 'contigo,' meaning 'with you.' But it sounds good in every language.
The common brand also allows us to save a lot of money. We don't need to reinvent the wheel in each country. We have similar advertising and media in each market.
IBD: America Movil AMX, by contrast, uses different brands throughout South America.
Beuls: We used to do that, too. Different names, different brands was all very confusing. From our experience, you need to create an identity. People want to know what you stand for. Tigo is a friendly brand that focuses on the customer.
It's just one example of how we create synergies across our businesses. We also have synergies in procurement and product development. Maybe other companies haven't done that as well as we have.
IBD: Are the countries you operate in very different in terms of competitive intensity and consumer purchasing power?
Beuls: Latin America is the region where we have the highest GDP-per-capita, especially Colombia. The countries in Africa and Asia are lower in purchasing power. There are some differences within a region. Take Ghana in Africa, where GDP is higher.
GDP-per-capita is also reflected in mobile penetration. In Colombia, 60% of people have mobile phones. In the Democratic Republic of Congo, it's only 5%.
The competitive environment differs. In two markets, Senegal and Honduras, there are only two (wireless) operators. Most of countries have three, four, sometimes five mobile operators in the market.
Fair competition is a driver of growth. You get a lot of promotions, a lot of market noise, that really pushes mobile penetration.
IBD: Latin America has two big wireless players, America Movil and Telefonica TEF. Does their size pose problems?
Beuls: We compete with America Movil in five markets and with Telefonica in three. They are large players. I've said for many years that scale is important in this industry. But being big isn't necessarily a driver of success.
If you look at our market positions in Latin America, we have gained market share in Guatemala, where we are co-No. 1 with America Movil. In El Salvador, Paraguay and Honduras we are No. 1. In Colombia we are No. 3, but we just entered that market. It's too early to make a judgment.
What is important in this industry is being fast, being first and to have a business model adapted to emerging markets. America Movil has taken a North American model and copied that into Central and South America. Telefonica has taken a Spain or European model, including the brand, into Latin America.
IBD: What about Africa? Have any big wireless firms targeted that region?
Beuls: Orascom has divested more or less from sub-Saharan Africa. We don't compete with them.
There's MTC, MTN and (Vodafone-owned VOD) Vodacom and a little bit of France Telecom FTE. Those are the four operators we compete with in Africa.
Africa is different than Latin America in the sense that it was only three years ago operators began investing real money in infrastructure. We solved our balance sheet issues which allowed us to invest a lot more money. That's driving our growth.
Africa is a lot lower in mobile penetration, but it's catching up. Will it get to the same penetration levels as Latin America? Probably not, because of lower GDP-per-capita. But there are interesting countries, with demand for telecom services.
IBD: Millicom sold off its wireless unit in Pakistan last year. Are you committed to Asia?
Beuls: We did divest from Pakistan after 17 years because we had come to the point 15f investing an enormous amount of money to get a decent market position, but (potential) profitability wasn't as high as we are used to in Latin America. So we sold out to China Mobile CHL.
But we are committed to the three remaining markets -- Sri Lanka, Cambodia and Laos. They were underperformers in 2006, probably because we focused too much on Pakistan. We have started to invest more in that region. Our expectations for Asia in 2007 are a lot higher.
IBD: Does Millicom plan to invest in next-generation 3G Internet services like most wireless firms in developed countries?
Beuls: We have one fully commercial 3G network. It's in Mauritius. That network was started 2 1/2 years ago.
If I had to make that decision again today, I wouldn't do it. That's because customers aren't interested in technologies, they want services. We can provide many value-added services over existing Edge (2.5G) networks.
