It might be stretching it a little to say that Yoigo was born out of a dream, or to try to argue that its lean operating structure as much a virtue as a necessity. This national, spectrum-owning, license-holding operator, exists with fewer than 100 employees. It hires 2G national roaming coverage from Telefonica. It subcontracts building and management of its network. It outsources customer care. It outsources IT development and operations. Its retail and distribution structure operates on a franchise basis.
Although it has a 7% market share and its owner now wants to sell it, it still has 4 million customers under management.
Yoigo was in fact born out of a combination of a necessity and an opportunity that looked too good to pass up. Back in 2006, a fourth operator license had been lying unused in Spain since 2001. Efforts to establish a new operator, operating only a 3G network, had run aground, supposedly dashed on the rocks of an immature 3G equipment supplier market. By 2006 the current majority owner – Vivendi – had decided that it didn’t, after all, want to go ahead. In six months’ time, the license would have to go back to the regulator if no network had been built.
Minority owner TeliaSonera was faced with a quandary. It could write off its investment to date in the carrier – standing then at about EUR100-150 million, or it could try and do unto others as it had been done by in its home markets in Scandinavia. In Sweden where it was the incumbent it had seen its market disrupted by low cost player 3, with retail prices dropping 70% in three years. In Finland, Sonera had gone from 33% EBITDA positive to -21% EBITDA in 15 months.
What if it could do something similar to Telefonica and the other two main carriers (Orange and Vodafone) in Spain?
As one party close to the action at the time says: “Telia Sonera was faced with question: “What the hell do we do? Do we sell the company… but there were no buyers. Do we close down the company… which would have meant a cash loss of about 100-150 million Euros. Or do we start it up and see what happens, and if we start it up can we cap it at 1 billion Euros peak funding?”
If TeliaSonera wanted to go ahead, it had six months to get a network (of sorts) deployed and start operating services, otherwise the regulator would have the license back. Faced with two things, the certain loss of its stake if it pulled out, and the temptation of being the low cost disruptor in a Western European market for a change, TeliaSonera decided to go ahead.
What happened next? READ THE FULL ARTICLE IN TMN QUARTERLY…
