In Brazil, we have (for the time being) four large cell phone companies. The sector is harshly criticized by consumers, whether for the lack of diversity of offers, quality of service or price. Virtual mobile operators are alternatives that can increase market competitiveness.
The business model for mobile virtual operators was regulated by Anatel in 2010, but little is said about these companies. After all, did MVNOs work in Brazil?
But after all, what is an MVNO?
MVNO is an acronym for mobile virtual network operator, which in good Portuguese means virtual mobile operator. This business model allows a single cellular network to provide services to different companies, with the same existing infrastructure and without the need to build new antennas and adopt other transmission equipment.
The business model in Brazil has been possible since November 2010, when Anatel first regulated the provision of services by MVNOs. In practice, small companies enter into a capacity contract with large operators and, from there, begin to operate in the market.
According to Anatel’s May 2021 data, Brazil has about 2 million mobile lines owned by MVNOs. It’s not much: all these accesses do not reach 1% of all mobile telephony contracts in Brazil.
A mobile operator… free?
Veek is a very good operator. difference and bet on a free cell phone plan: whoever buys a company chip can use the internet for free (with a limit of 1 GB per month) and make calls, without recharging. In return, the customer must watch advertisements, and each check in releases services for one hour.
O Techblog spoke with Alberto Blanco, CEO of Veek. He has been Oi’s marketing director in the past and explains that the virtual operator’s business model is based on high value-added ads:
“It’s a very premium ad, it’s different from an ad you watch on TV or YouTube. The customer needs to check-in for the service to be released, so he enters there, watches and at the end has written that the advertiser has enabled free navigation. It’s a tangible benefit.”
So far, there are few advertisers present at the moment — I’ve tested their chip around here and all check-ins have advertising from the virtual operator itself. In addition to the freemium model, Veek also sells paid plans; Blanco says that this revenue also helps cover the expenses of non-paying users:
“At Freemium, if we have an average of 3 check-ins per day per user, the bill is paid, but without making money with the model we have today”.
Blanco also reveals that Veek customers average four check-ins per day.
The business model
Considering the cell phone market, it is at least unusual to offer a free plan. Blanco explains:
“We really believe in this model, I’ve been in telecom for a long time, I know other companies, I know how terrified they are with this idea. If you have a very conservative, financial mind, don’t launch a service like this. You need to have a bit of audacity and believe in this model.
The amount of digital services that pass through the smartphone is very large, and all these platforms need to advertise. What we want to do is to unite the two worlds: instead of the company buying advertisements in programmatic media, it can show pieces to a client who is aware that they will not pay the bill, and the user knows that they will be impacted by offers and advertisements that will fund the cell phone plan.”
Veek’s Freemium plan only gives you 1GB of internet per month, which is small for many but can be useful for others. “We know how much R$30, R$40 or R$50 reais today makes a difference for many people. It’s money that people can use for other things,” says Blanco.
Even with the focus on low-income users, Blanco reveals that Veek also targets high value, with paid plans and ads inside the operator’s app: “If I take a potential customer to test-drive at a car dealership , how much will this brand want to pay us? I’ve been to an advertising agency, I know how much brands pay for a lead test drive from a qualified customer”.
Less competitive paid plans
We already know that Veek has paid plans, but in practice the amount charged by MVNO is more expensive than traditional operators. I questioned this to Blanco:
“Teles took a path that they can no longer leave: they only earn money if the client is on the wrong plan. If you hire a package that you pay X reais to have X GB and use the entire contract, the operator loses money.
What do I know of people who say ‘well, look here, I buy 20 GB but I use 3 GB, 4 GB’… The reality is that people don’t count, because if you take your plan and look at how much you spend on In fact, you’ll find Veek’s plans are the best plans.
If you buy 8GB from me and use 2GB a month, you’ll have the remaining 6GB to use next month. If you don’t want to pay your bill next month, you can use the 6GB on Freemium, because it’s yours, just check-in.”
The MVNOs of Brazil
THE Dator is the company with the most expressive number of lines and operates in the corporate segment and sells access to Internet of Things devices, such as vehicle trackers, credit card machines, etc. With about 820.3 thousand accesses, almost the majority uses 2G technology, widely used for machine-to-machine (M2M) connections.
However, one of the biggest players in the sector is the Surf Telecom, which acts as an authorized MVNO – that is, it is responsible for the contract with the main operator and all the infrastructure, machines, servers, interconnections, etc.
Surf has adopted a business model that allows companies from different sectors to enter the cell phone market as well. According to Anatel, it has 674.4 thousand mobile accesses, of which 99.9% are prepaid.
The Post Office cell phone operator
Correios is one of Surf Telecom’s most relevant – if not the most relevant – customers. THE Mobile Post is marketed by the state company responsible for sending letters and parcels.
O Techblog contacted the Correios press office to better understand the service. Asked about the importance of cell phone service for the state-owned company, the company says: “Telecommunications are essential to make people’s lives easier and expand the availability of access to telework, teleeducation and telehealth.”
A curious thing is that Correios has the largest capillarity in Brazil and its services reach all 5,570 municipalities in Brazil. Surf Telecom has a contract with TIM and, for now, the tele has a cell phone signal available in 4,398 cities in the country. The state-owned company says it does not sell the service in locations without coverage, but claims that 4,957 agencies are able to sell Correios Celular chips.
An important detail: the company’s postmen and couriers use a smartphone during work to record deliveries. Correios informs that these devices do not have the participation of Correios Celular and are contracted through a bidding process.
The Correios press office informed that the contract with Surf Telecom was signed for a period of five years, renewable for another five years. The entire customer base is owned by Correios and, if there is no renewal or contract termination, the transition to another operator must be carried out.
How many customers use Correios Celular?
The choice of supplier for Correios Celular was made through a competitive bidding process. In 2016, EuTV (now Surf Telecom) won the process and offered the state-owned company a remuneration of R$297.5 million for five years.
At the time, Correios had an expectation of reaching 1 million subscribers in the first year of operation. O Techblog tried to obtain how many customers Correios Celular has through the press office and the Access to Information Law, but the state-owned company claims that there is business secrecy and cannot provide this data.
However, observing Anatel’s data, it is possible to clearly verify that Correios Celular did not reach the target, considering that Surf Telecom reported 674.4 thousand contracts to the regulatory agency.
Chips or lines?
The number of Surf Telecom and Correios customers was investigated in the past.
O Techblog obtained access to a document issued by Anatel in 2018. At the time, an agency employee asked for explanations for the fact that the company informed the press that Correios Celular had sold 80 thousand chips, but Surf had only reported 17 thousand accesses.
Anatel also questioned about the operation in 12 Brazilian states, while the reported data only contained contracts in only 10 states.
Surf replied to the agency that “at the Correios’ service desks [os] chips are sold, and it is up to the customer to later decide the best period for their activation/use” and that “there is a sale of chips to third parties (wholesale), who purchase a quantity of chips at a discount for retail resale to future Correios customers Cell”.
We already know about Surf Telecom’s role in the MVNOs market. The operator is proud to say that it has hundreds of virtual operators and is studying to go public on the stock exchange.
O Techblog tried to interview a Surf Telecom spokesperson to clarify some doubts about MVNO’s business model, but the company claimed that the executives’ agenda was not available. The tele is responsible for several virtual operators in Brazil and serves soccer teams, regional fixed broadband providers and names such as Uber, Revista Caras and Lari Cel (by actress Larissa Manoela).
The contract numbers disclosed by the company are not very transparent. In 2019, Surf Telecom announced to the press that it had sold one million chips. As pointed out the Telesynthesis, the provider had, at the time, only 250 thousand accesses computed by Anatel, and the millionaire brand corresponded to all SIM Cards that were used for a period and have already been discarded or disabled.
The company’s COO, Alexandre Pieroni, told the Telesynthesis in February 2021 Surf had 1.5 million customers, but did not reveal how many actually use the cellular service.
To the Techblog, Surf Telecom’s press office confirmed the executive’s statement about 1.5 million customers and said that the number includes SIM Cards that have been enabled but that at some point may have ceased to be active lines.
Finally, the company also clarifies that “there is a difference between the number of chips sold and activated” and that “Anatel’s numbers reflect the number of active lines and are correct”.
In other words: Surf does not have 1.5 million customers, since it has 674.5 thousand active accesses.
In May 2020, Banco Inter launched its MVNO in partnership with Surf Telecom. Intercel was marketed to fintech customers and even had aggressive promotions.
It seems that everything started to go wrong in July 2020, when a failure caused the lines of all Surf Telecom operators to run out of signal and unable to make calls and use mobile internet for some days.
It didn’t last long and Intercel’s sales were closed by Banco Inter. In January 2021, the financial institution announced that it would launch a new MVNO, this time in partnership with Vivo; the former Intercel customers remained with Surf and were directed to another company, Mega+.
Also, the Techblog revealed firsthand that Magazine Luiza has partnered with Claro to open a new MVNO. On June 1, 2021, the retailer communicated to Anatel the de-accreditation of its former operator Maga+, which operated in partnership with Surf Telecom. Customers were also transferred to Mega+ (only one letter changed, come on).
In a statement, Surf Telecom argues that the MVNOs that have been closed “are natural movements in the market” and that “just as the agreements were closed, many new customers started, and this number has been growing at an accelerated rate for Surf”.
Problems with partners
The network failure was a landmark episode in the company’s history. In a confidential document obtained by Techblog, Surf alleges that Plintron, partner and service provider, carried out a sabotage as of July 3, 2020 that interrupted the provision of services, “without prior communication and any plausible justification”.
Surf also alleges that Plintron “disrupted the access of the entire customer base” (with over 1 million users, mind you!) and that the company started deleting accesses from its platform. Due to the inconvenience, it was necessary to activate the regime of Disaster Recovery Program with TIM, a kind of contingency regime that allowed the return of services at a high cost.
Surf and Plintron fight in court over an imbroglio regarding the corporate structure of the Brazilian MVNO. The foreign company claims that the original agreement allowed the conversion of preferred shares into common shares, with an option to purchase more shares to become a controlling shareholder.
To the Techblog, Surf states that it will not comment on the conflict with Plintron, and that it is awaiting a decision from the Arbitration Chamber.
Veek was also a Surf Telecom customer in the past
Veek began operations in partnership with authorized Americanet in 2020. However, tele has already offered services in partnership with Surf Telecom in the past and a misunderstanding between the companies resulted in the termination of the contract and the transfer of customers to Geek.
I asked Blanco what happened:
“That was a boring story, because defaulting is something that nobody likes. Surf Telecom gave us a default. She didn’t pay us, she robbed us, this process is at Anatel, it is in the judicial process and they have already been convicted several times.”
According to the executive, the resumption of Veek’s operation took a while:
“They robbed us, we assimilated the coup. Basically, we built two companies: we launched the first one and we had almost 70,000 active clients at that time, and today we would be by far the largest operation [virtual] in Brazil. We had to make another contract, ratify again at Anatel and make all the connections. Despite having the experience, it took a while.”
Surf Telecom defends itself and counterattacks Veek:
“The issue of Veek is being decided in court, since we had to file a lawsuit against the company for ideological falsehood and embezzlement. Surf Telecom was the one who filed a lawsuit against the company to be compensated in the fairest way, not the other way around.”
But after all, did MVNOs work?
With all this turmoil in the Brazilian virtual operator market, it is difficult to entrust your own phone line to a company that can disappear overnight or be transferred to a different company.
If “it works” is considering the number of lines, then no, MVNOs did not work, at least for the individual market. Operators Claro, Oi, TIM and Vivo still concentrate 99.2% of the entire Brazilian cell phone market.
MVNOs’ cell phone plans should target niche markets that are underserved or underserved by traditional operators. In countries abroad, it is common to find services aimed at some specific audiences, such as:
- foreign residents: telephones with benefits for international calls;
- tourists: companies offering temporary internet packages to cater to foreign visitors and local users who want to escape international roaming charges;
- teenagers and young adults: affordable packages, zero rating apps used by this audience and subscriptions to streaming services included in the plan;
- Users premium: companies that charge more, but have gigantic internet packages and cell coverage provided by more than one operator;
- Fixed carriers: opportunity to create combos involving broadband, pay TV and mobile telephony. Some Brazilian providers even have their own MVNO, but they lack convergence and there are few benefits.
In practice, the Brazilian market has several MVNOs concentrated in a single company and the plans are very similar between them, if not the same. There are few exceptions with different packages, like Americanet, Fluke and Veek itself that was mentioned in the article.
Collaborated: Everton Favretto