Base: A Challenger in the Belgian Market

 

The Belgian mobile market has become more competitive with the entry of more MVNOs and the implementation of a new telecom law that allows customers to end their contract after six months. Base is the third largest mobile operator in Belgium and a subsidiary of the Dutch operator KPN. To deal with increased competition, Base launched an LTE network in October 2013 and is now Belgium’s second operator to offer 4G. ZTE TECHNOLOGIES talked to Jos Donvil, CEO of Base, about the challenges it faces and its challenger strategy. Donvil also talked about Base’s LTE plan and its partnership with ZTE.

 

Q: What are characteristics and trends of the Belgian telecom market?

 

A: If you look over the past two years, the Belgian market has become much more challenging. There are a few reasons for this.

First, four MVNOs entered the market and changed pricing in a way that seriously impacted all operators. Prices have decreased across the board.

The second thing is that the new telecom law in Belgium was implemented in October 2012, and this meant some customers finished their contracts early. In most countries, a mobile contract lasts for two years. In Belgium, the maximum term of a mobile contract is now six months. This has stimulated people to look at all the alternatives on the market, and the number of people who have moved from one operator to another has increased. Newcomers to the market have stimulated more people to look at price. This immediately impacted churn, and prices went down. For example, the top tariff plans have halved in price, and the market is shrinking by 10% annually. So clearly these things are challenging. No other country in Europe has been more challenged than the Belgian market over the past year. Saying that, these kinds of events have already happened in other countries, and pressure already exists in those countries. If you really compare the prices, those in Belgium are the lowest in all of Europe.

 

Q: What makes Base Belgium stand out in the industry? What is the major challenge for Base in the Belgian market?

 

A: We entered the market about 14 years ago. At that time there were two main players. It was difficult for a newcomer to enter a market dominated by two strong players. The only way to succeed was to do something different. We are always positioned as the challenger. In fact, we are always focused on two things: being the price leader and providing superior customer experience. Being a challenger means trying to convey new things that challenge the market. We now have more than 20% of the market in Belgium, and we are growing fast. Even though the market is decreasing by 10% (our figures are also negative for the moment), we believe that the future will be better.

We have taken a position and worked on three different levels.

First, we are known in Belgium as the price leader, so we decreased our prices and immediately took back leading position on price.

Second, customer experience has always been one of our strong points. We are the only operator with a positive home network score. Customer experience is crucial to get right.

Third, our network gives us a competitive advantage. In the past, Base was seen as an operator with the best price but a lousy network. We put an end to this. In recent years, we have worked with ZTE and can say with confidence that now we are at least on par with the number one network in the market. We have clearly shed our negative image and have turned our weakest point into one of our advantages. To give you an example, in the last few months, we moved into the leadership position after the entry of four players. We have never had so many new customers coming to Base. We win in the market and we win for everybody in the market. The proportion of new customers as a proportion of churn is extremely high, and we are extremely happy to now be seen as a good player in the Belgium market.

Nevertheless, we aren’t growing in terms of revenue or EBDA. So our profit is not increasing. This is a challenge for us, but we believe our business fundamentals are strong and we are on the right track. Our shareholders expect us to deliver good financial results, but to ensure our future, we need the money to invest in our network. We have committed to providing a good network, and to do this, we need to invest. It is extremely challenging to invest when revenues are declining. This is a difficult situation. Luckily, more and more customers are coming on board. We know that if we execute well, we will get there in the end. Of course, we need to be extremely cost-conscious. We need to do everything possible to make sure that our operations are the cheapest in the market because only then can we afford to provide the cheapest price to the customer. These aspects are important for us.

 

Q: Does Base Belgium intend to provide full LTE coverage in Belgium? Does it have a similar strategy to E-Plus Germany?

 

A: First, our vision is to be recognized by Belgian customers as a mobile specialist. We have to be focused on mobile. If you want to be a mobile player in today’s environment, you will never win wiothout LTE. We will buy an 800 MHz license next week in order to deploy LTE. The objective is to provide full indoor LTE coverage in Belgium. We are going for deep indoor coverage because at that moment you can compete with fixed. That’s also the reason we are in discussions about improving our network. We need to be a mobile-centered player and lead the game. That is only possible if we have a partnership with main suppliers. We believe that ZTE is the right partner to help us achieve our mobile goals.

I think the objective of E-plus is the same, but our starting points are different. Our network is much more developed than that of E-plus. We already provide 81% 3G indoor coverage, and every month this is increasing. Germany is not yet in the game of LTE. They started later and are a bigger country. We are third in the market and also a challenger. The way we decribe our challenger model is the same as E-plus.

 

Q: What are the difficulties in providing LTE coverage? How does Base Belgium overcome these difficulties?

 

A: We have so many difficulties. Radiation is one. Brussels imposes strict  regulations in terms of radiation. But we can meet this challenge. Getting building permits is probabaly the biggest chanllenge we have. Over the past few years, we have not been able to easily acquire new sites, and at the sites we have acquired, getting the necessary building permits takes so much time. This is really a big issue.

We will buy an 800 MHz license next week. This helps a lot because the number of sites needed to provide full coverage is lower than what we currently have. So this is an opportunity. We will have discussions with all operators to see if we can do some sharing.

 

Q: Base is aiming to be the top mobile operator in Belgium. How can ZTE help you achieve this aim?

 

A: We believe that if you want to be successful you need to have a clear objective. As I said, we want to be recognized by the Belgium mobile consumer as a mobile specialist, and this means we have the best network. If you want to have the best network, you need to have the best partner to support you. We believe ZTE is the best partner for us.

ZTE has knowledge and a lot of expertise. I believe that ZTE can help us demonstrate to Europe how to run a network. ZTE and Base have the same objective of becoming number one. We have the right partnership and the same mindset to achieve our goal.

 

Q: How will the ZTE-Base partnership evolve in the future?

 

A: The best thing is to look backwards. What we have done recently has been fantastic. We have rolled out 3G, 4G, and LTE together in a very short time. We decided in August 2012 to launch LTE in 2013, and we launched it on time. That doesn’t mean we don’t have challenges on both sides. We are now close to being number one after we launched LTE in the highest number of cities. Clearly, we are in very good position, and I believe we have the fundamentals to go further. I am convinced that if you do it well, ZTE will be proud to have Base as a customer and we will also be proud to have ZTE as a partner because you enable us to achieve our goal. The key is to have the same view about what we should provide in Belguim and how the partnership should evolve. We have the right people to make it happen on both sides.

 

Q: What steps will you take to improve your position in the future?

 

A: There are three crucial elements. We are now building a very good network. That’s the primary goal of any mobile operator. Second, we know what we have to do operationally. We have a brand that is highly appreciated in the market. We are a price leader and we provide good customer experience, so we have the basics to be successful. However, the challenge is to make sure that revenue also pick up. This is crucial because recently another operator announced that it will reduce prices even more. Generating revenue through additional services is something we need to explore with ZTE. We need to identify the services that help us increase consumption. If we are able to do this, then we can achieve our goal.

 

Q: Could you introduce your multibrand strategy?

 

A: Base is our main brand, but we believe in partnerships. How can we continue to be successful when we started in Belgium 14 years ago? A mainstream brand takes time to grow. What we have done is to identify specific target groups that can help us grow faster and create different brands for them. If you look at our brands, we currently have BASE for mobile and SNOW for broadband. All the other brands we sell are those of our partners.

We have adopted a multi-brand strategy that involves using our partners’ brands on our own network. We draw on the brands and marketing power of our partners to  reach specific segments. By doing this, we can be more successful. You don’t need to permanently adhere to what you’re doing, but at the moment, the brands we are promoting have been successful.

Apart from the brands of three main operators in Belgium, there are the brands of our partners. Establishing partnership is not easy because there may be different mindsets in different companies. You need to develop certain things on both sides. Not every company is able to do this, but we can. In the beginning, this is how we started and it’s still the case now. If companies want to learn something in our market, they always come to us first. This is normal because we are open for partnership. We do not establish partnerships for a day. We only believe in long-term partnerships.

 

Q: What are the most popular services and applications for your local customers?

 

A: In Belgium, the services that customers are looking at are still extremely limited. Take data penetration for example. Only 50 percent of custmers are really using data. Half of the people are still using mobile for basic calling or sending SMS. We need to  significantly promote the use of data, and this goes hand-in-hand with smartphone penetration. I prefer large screens because we know there is a close relationship between the size of the screen and data consumption. The key point is to make sure that we stimulate data penetration. If everything goes to data, prices go down. Of course, we need to develop services. I believe the opportunity is bigger if we can  encourage our current customers to use data on smartphones. On the service side, we will watch very carefully and that’s the reason why we are here. What I’m looking at is other kinds of services we can offer to our customers in the near future. We need to get a feeling for what will be successful in the future. On the other hand, we also need to encourage people to use data.