If you have ever looked carefully at the fixed broadband account or cell phone plan, you will find some charges … strange. Music and reading apps are the most common, but there are some different titles like gym classes, meditation and even plumber and electrician service. But… what does a telephone operator have to do with this?
Companies have dozens of plans, and most people are used to comparing only the monthly price, speed of access or internet franchise. A lot has changed in the past few years, and we have reached a situation in which all the plans of the major operators include some application subscription, the so-called Value Added Services (SVA).
A lot of apps that you didn’t even know you had
See the main value-added services offered by operators in November 2020. Some are restricted to specific plans, and the most expensive package does not always include all apps:
|sure||Mobile service: Claro Banking, Claro Música, Claro Notícias, Claro Vídeo, Uncomplicated, NET Now, Skeelo and Truecaller
Broadband: Cine BR, Cine Euro, Cine Docs and Netflix
|Hi||Mobile service: Oi Play, Oi Newspapers, Oi Magazines, Oi Vida Saudável, Oi Info Games, Read Online, Coquetel Magazine, Skeelo, Clic News
Broadband: Oi Play, Oi Expert, Paramount +, Discovery Kids Go and HBO Go
|TIM||Mobile service: TIMMusic by Deezer, TIM Banca Virtual, TIM Banca Jornais, TIM Segurança Digital, Skeelo, Babbel, Netflix, YouTube Premium and HBO Go
Broadband: Looke, Esporte Interativo Plus, Cartoon Network Já, WatchESPN, TIM Games PC and TIM Games Club
|Live||Mobile service: GoRead, NBA, Babbel, Vivo Recado, Vivo Avisa, Super Comics, Vivo Meditação, Babbel, Hube Jornais, Ubook, BTFIT, Forbes Brasil, Casa do Saber, Vivo HomeFix, Rappi, Disney +, Spotify, Netflix, Premiere and Telecine
Broadband: ESPN, Esporte Interativo Plus, Magazines Club, Discovery Kids Plus, Vivo Protege, Bancah Newspapers, Fox Premium, Netflix and Disney +
To better understand this market, the Tecnoblog talked to João Stricker, head of marketing at TIM. He defends the inclusion of extras: “We see VAS as a complement to our plans, especially with the most relevant services. We work with partnerships that, along with TIM’s scale, can bring benefits to the customer at a reduced cost or additional benefits that he normally would not have if he subscribed to the service directly with the company ”.
TIM’s main VAS is TIM Music, the result of a partnership with the streaming service Deezer signed in 2014. It is found in all postpaid plans and TIM Beta, but was also present in prepaid until 2018.
Some operators have cases that deviate from the standard. The most obvious example is Vivo HomeFix: available on a plan of R $ 529.99 per month, the service allows the customer to have plumber, electrician, locksmith services, TV installation, home theater and white line, in emergency situations or scheduled.
I asked Stricker what he sees as an acceptable limit and how far it is possible to reach with SVAs: “It has to be a service that makes sense for use on the smartphone. The client relates the device to the operator itself, so we look for applications that can be used by the cell phone. It is not the case of a plumber, ”he says.
However, the executive points to new services that have become part of the routine of cell phone use: “One thing that exploded in the pandemic is health on the smartphone, and people use telemedicine on their cell phones. There’s a lot of new stuff coming and we’ll keep an eye on it ”.
The tax issue of SVAs
One of the most sensitive points in the existence of SVAs is the tax difference. By discriminating these products on the invoice, operators benefit from different rates: telecom services are charged with the state tax (ICMS), and this does not occur with application subscriptions, which pay ISS (city tax).
In practice, this can yield good change for operators: the ICMS rate varies between 25% to 37%, depending on the state, while the ISS costs a maximum of 5%.
For example, I took an account of my broadband service. The plan includes “free” access to the Magazine Club, Bancah Jornais, Discovery Kids Plus, ESPN Play and Esporte Interativo Plus. All apps are listed on the invoice:
Some state deputies understood that the model brings losses in the collection and tried to block the business model. In 2019, a law passed in Santa Catarina prohibited the inclusion of VASs free of charge. The same occurred later in Amazonas and Roraima.
The battle continued until the Federal Supreme Court, and telcos questioned the legality of these laws. According to the Federal Constitution, it is up to the Federal Government to legislate on telecommunications and states should not interfere in the service, which is regulated by the National Telecommunications Agency (Anatel). The companies have already returned with the sale of SVAs in these locations.
I asked Stricker how important it is to have value added services in the composition of the offer, and if the presence of these applications is advantageous for operators just because of taxes: “Despite the tax difference, there is a cost for the service. If I don’t have VAS, I don’t have the cost, and the better the service, the more expensive it is. We don’t necessarily have a margin gain because we have to pay the partners ”, he comments.
As for platform remuneration, there are different contracts for each company: “It is not a closed model. Each partner, especially the big ones, already has its format and there are many different models between them. It has VASs that work by active user; others negotiate the entire base, and we are charged whether the user uses it or not ”, he comments.
For TIM, the biggest gain is in generating value for the customer: “We perceive and analyze that the customers engaged in SVAS have a churn (cancellation fee) much lower. We work hard on engagement and communication. Often the customer finds it strange, does not know what he has and starts using it because he is paying for it ”, says Stricker.
A true app fair
The most expensive postpaid, TIM Black Família, was recently launched with a peculiar difference: in addition to traditional SVAs, the customer can choose a video streaming service to include in the plan. The catalog currently features Netflix, HBO Go or YouTube Premium.
This collection of SVAs should change in the future: “We evolved with the launch of the new TIM Black Família because we launched a content store, a marketplace. The customer can enter My TIM [aplicativo da operadora] and buy loose content, ”says Stricker.
On expanding this marketplace with services premium for other types of plans, such as individual postpaid, control or prepaid, Stricker says that this is being seen by the operator. “One of the things that TIM has is the ability to negotiate these services, so I get a better cost and take the solution to the customer at a lower price”.
The benefit to the customer would not always be at lower prices: “With the marketplace, I can negotiate a longer tasting time, for example”, comments the executive.
Another advantage mentioned by Stricker is the concentration of subscriptions in one place, in order to facilitate management: “I subscribe to almost everything, I have Netflix, HBO, Amazon, Adobe and it is difficult to manage that. I don’t know if the monthly fee was charged, if I change the card I have to change everything individually, the password for each platform is different, it is difficult to control. In this marketplace, we want to have a place where the customer can buy the services cheaper and also manage the content in a simple way, in one invoice ”, he comments.