Mobile was kept waiting by Milind Kangle, Lycamobile’s CEO, but for what appeared to be a good reason. When he walked into our scheduled interview, some 45 minutes late, he said he’d been putting the finishing touches to a deal. ‘We’re entering a new continent. It’s something we have been working on for the past five years.’
Kangle spoke with a quiet intensity throughout our interview. Usually when chief executives take a swipe at their competitors, it’s with a mischievous grin or an immediate plea for the comment to be treated as off the record. Kangle eschewed this convention as he reflected on the challenges facing the MVNO sector.
‘The MVNO market is a very tough business. You need to have very deep financial pockets. There have been successes – and I’m proud Lycamobile is one of them – but also numerous failures. Alpha Mobile is one that has recently gone under.’
According to Kangle, Lycamobile has no such worries. In addition to its recent deal, the MVNO is targeting expansion into another territory by the end of May. When 2012 comes to a close, the business expects to be trading in at least 25 markets.
Kangle claimed the business is adding a new subscriber every four seconds. By the end of last year, Lycamobile had 14 million subscribers on its books, and it plans to have 20 million subscribers in place by the end of this year. Kangle sees geographical expansion and winning market share as key areas of growth, as opposed to acquisition.
He said: ‘We feel there’s still a long way to go with the business. There’s no competitor that we can acquire as we have a very, very different strategy to our competitors.’
Kangle is coy about Lycamobile’s finances, only choosing to reveal revenue was up 48% last year on 2010. He described 2011 as a ‘turning point’ for the business and said he feels Lycamobile is in the right place to benefit from further investment, whether through staff, technology, distribution or marketing. To date, it has invested around £150m in the business. ‘Because of our rapid expansion during the past few years we have built up momentum and invested quite heavily in our business’, said Kangle.
‘I feel all parts of the business are now very well oiled, whether it’s technology or distribution for example, and the back-end of the business is running very smoothly.
‘We’re in a position now where we can respond and make changes very quickly. I feel we can now react almost overnight to any changes or challenges and be in full control of our destiny.’ He added: ‘We can cut any carrier we feel is producing a substandard line for our customers.’
One area where Lycamobile is more cautious is acting as an MVNA for other companies. Two years ago it launched an MVNA service in collaboration with O2 with a view to help other companies launch their own MVNOs. Lycamobile is continuing to seek business in this area – Kangle said he was in discussions with two organisations, both of which are based outside the United Kingdom – but he appeared less enthusiastic about the business model than he was two years ago.
He said: ‘It’s not as important a revenue stream for us right now but I feel it will grow to become one over the next three years as the market matures.’ So why does he feel it has not capitalised on the revenue stream? ‘I think people need to get more confident with our technology and the platform we can offer,’ he replied. ‘But I feel they will come to realise its benefits.’
So Lycamobile will in the main stick with its policy of growing through geographical expansion and acquiring new customers. Kangle said it is ‘customer loyalty’ that is the most important factor in winning new customers, explaining that without keeping its existing customers happy, Lycamobile would lose them and thus find it difficult to gain footholds into new territories and win new customers.
He said the company will continue with its loss leader approach to winning new business, snaring customers with cheap deals and then moving them onto a more expensive offer.
No roaming charges
Kangle declined to give specific figures but said the marketing spend across its territories would be ‘quite substantial’ this year. The company plans to push its Toggle Mobile service, which launched in 2011. The service gives each customer a local number for every territory they visit, eliminating roaming charges. Customers can currently use the full service in six countries –Australia, Denmark, Norway, Spain, Sweden and the Netherlands.
Kangle predicted the challenges that saw Alpha Mobile go out of business earlier this year would continue during 2012. He said: ‘I feel some of our direct competitors will eventually get squeezed out. This happened with the calling card market. The key thing for us is to have a niche [product] in key countries and that is fine. It’s unreasonable to target 50 million subscribers in the UK, or in Germany, or in Spain. But when we combine what we do have in those three markets and all the others that we trade in together on a global scale then that is huge.
'There are many small players who will be able to make a reasonable margin from the business but they may have to curtail their ambitions.’ Again, he said this without even the hint of a smile.