Vodafone Malta CEO Inaki Berroeta talks about the effect of the global financial crisis on the local telecoms market, the emergence of MVNOs and Vodafone’s corporate philosophy. Interview by Charlot Zahra.
Inaki Berroeta, the sprightly Basque who has been at the helm of telecoms operator Vodafone Malta for the past 15 months, is not perturbed about the effect of the global financial crisis on the local telecoms market.
“To be honest, up to now, we have not been affected greatly in Malta,” he starts. “We are not seeing a big effect on that. What we predict is that it will mostly affect our foreign business because of the reduction in people travelling during the crisis.
“I think there were already some figures published by Malta International Airport saying that tourists were down. We expect that tourism could be a bit of a challenge, especially for our roaming business,” he said.
“I think Malta is a very good tourism destination for leisure. It is also a good destination for those companies choosing the island for offsite meetings, but I think this area could be impacted next year,” Berroeta added.
The Vodafone Malta boss does not foresee a reduction in subscribers or turnover as a result of the impact of the global financial crisis.
“In terms of subscribers, so far the numbers are good as expected. We do not really see that the economy is impacting consumers in not using their mobile phones,” he told Business Today.
“The mobile phone has become a fundamental part of people’s lives and at the end of the day, the service they are getting from it is really worth the money spent. Mobile telephony is not where consumers are cutting in on their expenses,” he pointed out.
“In terms of subscribers, last December we passed the 200,000 mark, and this year we are well above that. We are happy with the trust our customers are putting in us as the number one mobile operator in Malta,” he said.
Vodafone Malta has taken concrete steps to cope with the predicted slump in consumer spending.
“We have already started working on more affordable pricing. In fact, we have recently launched our ‘Knockout’ tariffs, which have been very well received.
“We also launched a new broadband package for home internet at €9.99, the most competitive package on the market.”
The company also seems to be undergoing an internal cost-cutting exercise.
“We are trying to save up on all unnecessary expenditure,” he said. “We are being very cautious on how we spend money. We have significantly cut our travel expenses, for instance.
“We are also looking into saving energy. Next year, we will be carrying out a network swap and this will significantly reduce energy usage. This way, we are not only being cost-conscious but also environmentally-conscious.”
But as well-prepared as one may be, with such fierce competition in the mobile telephony sector - is there still room to play about with rate reductions?
It seems Berroeta has already reduced his tariffs by 10 per cent in the last year, and over and above that, he still feels “there is room for more reduction in price”.
“It is always a question of balance between usage and price,” he explained.
“For instance, because there is a very high SMS usage in Malta, we have the most affordable prices within the Eurozone at the moment.
“In terms of voice telephony, one must look at the total price of the service, and not just at the advertised price per minute. I think we are quite competitive on the whole, especially when considering the economic situation,” he stressed.
Perhaps because of vested interests, Berroeta agreed that the introduction of Mobile Virtual Network Operators (MVNOs) like Bay Mobile and One Mobile have had a positive effect on the local mobile telephony market.
“At the end of the day, MVNOs are bringing more choice to the consumer. We now also have more players to compete with, and this increases our efficiency,” he said.
“I believe that the Maltese now have a good choice in mobile telephony. Maybe in the future there will be a fifth operator also, and that is when Melita decides to launch, along with the possibility of other MVNOs,” Berroeta told Business Today.
But with five, or possibly even six or more mobile phone operators - wouldn’t a small market like Malta risk going on overkill?
“Malta is a very particular market because it is a micro-market. If you compare the island to any other European country, Malta is like a middle-sized European city.
“Therefore if you talk about four operators for a population of less than half a million, the reality is that there is a lot,” he explained.
However, according to Berroeta, what you need to look at is how many people are investing in their network infrastructure.
In fact, Vodafone is the only company supplying the infrastructure to MVNO operators, who would in turn re-package the service and re-sell it in a customised manner to their subscribers.
With every new MVNO operator, Vodafone creates more traffic on its network - thus getting a faster return on investment.
“So the real investment in the country has been in two mobile infrastructures, separate and independent. I think that it makes sense to encourage competition and let other operators using that same infrastructure,” the Vodafone Malta CEO insisted.
“But I think investing in other networks brings a little bit of a challenge, as one has to look at what’s going to happen in the future with three operators investing at the same time,” he warned.
Moving on to explain the reasons leading Vodafone to decide on supporting MVNOs, Berroeta said:
“First of all, there was a point where the regulator was saying that we should open up our network. Up to a certain extent this was something that was being asked of us.
“Also for us, we thought once the Government decided to issue a third licence, we believed that allowing MVNOs was a way for us to get more return out of the investment made in our network.
On a yearly basis, Vodafone invests significant amounts of money in its network infrastructure, “and with other competitors coming in, we needed to have more volume.
“With regard to GO’s decision not to go for MVNOs, you could ask them what they think,” he said.
Asked whether he knew of more MVNOs in the pipeline, Berroeta said that “there have been other companies interested in MVNOs, but if I had to tell you whether there is another one coming by a certain date, honestly I wouldn’t know,” he said.
Berroeta explained that the take-up of the Wi-MAX service since it was launched last year had been satisfactory.
“We launched the product last Summer and the take-up was very good, espcially in specific areas of Malta and in Gozo.
“We invested significantly in Gozo since the infrastructure for home internet there was not serving the population of Gozo well enough,” he explained.
The take-up of Wi-MAX improved after in September Vodafone decided to offer a package worth €9.99 for 2 Megabytes per second.
Asked whether he agreed with those who said that prices of broadband internet were still relatively high, Berroeta said that the situation depended on the kind of package chosen.
“I think on the 2 Megabytes’ package, which is the most popular, prices in Malta are comparable to anywhere in Europe, and the take-up is quite good,” he said.
“I think the issue lies with the more expensive packages. The ones going over 10 Megabytes per second are really expensive compared to European equivalents,” he conceded.
“Therefore I think that by means good pricing, there could be more take-up on higher bandwidth packages,” Berroeta told Business Today.
The fact that Vodafone Malta’s two main competitors – Melita and GO – had become quad-play operators – was not placing the telecoms operator at a competitive disadvantage in the telecoms market, Berroeta said.
“I think that at the end of the day, being a quad-play operator, a three-player, a two-player or a one-player is more of an industry name than a consumer issue.
“I mean, consumers don’t really care about whether you are a quad-player or a three-player – what they care is that you give them a good service. We at Vodafone position ourselves as the preferred operator for telecoms,” he said.
“Firstly, on mobile telephony, which, we think, is our main expertise, we continue with our leadership because we believe that we can provide a service which is different and that can be differentiated enough to our competitors for customers to choose us.
“On that same line, we wanted to offer good Internet service and fixed home telephony packages as well,” he insisted.
“At the end of the day, are you going to buy from a service provider because it sells four different types of services or are you going to buy the best from each? My understanding is that mobile telephony is a very personal choice,” he explained.
“Nowadays people depend on mobile telephony - whether one wants to go out, set an appointment, call friends urgently, set an agenda, or organise a meeting….
“Because my TV provider sends me one bill, it doesn’t mean that I’m going to choose his mobile phone if his service is not better than the one I currently use,” he insisted.
“Therefore, when you are a quad-play operator or a three-play operator, your strategy has to be that you need to be the best in each one of your products,” he told Business Today.
“If you look at the state of competition across the whole telecoms market, there is very fierce competition in mobile telephony. This is not the case with television,” he said.
In the past three months, Vodafone Malta has managed to gain 7,000 new subscribers, as published in the company’s recent half-yearly results. Remarkable. But Berroeta is no longer aiming at achieving numbers but rather to provide quality service to customers.
“To be honest, if you look at the penetration figures published by the MCA, the latest figure on mobile phone usage stands at 92 per cent. However this doesn’t mean that 92 per cent of the Maltese population actually use a mobile phone. It only means that the ratio of phones to people is of 92 per cent.
“There are countries in Europe where the penetration rate is even higher – I think it stands at 130 per cent in Italy, primarily because lot of people choose to have multiple phones. Even many of our customers have multiple phones.
“But I don’t think that looking at the growth of business in terms of the number of SIMs or penetration ratios is the right way of approaching the market,” Berroeta insisted.
“The question we have to ask ourselves is: What kind of added value can we offer our customers? And I think that is there where the real growth lies,” he explained.
“Bringing BlackBerry to our customers, for example, has enabled subscribers to answer e-mails while on the go. It’s a win-win situation - growth for us and better service to the customer,” Berroeta concluded.
