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VNI Service Adoption Forecast

Tele2’s +46 Application

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VoIP Over Wi-Fi

Overview

Tele2 launched the +46 VoIP application to enable its Swedish customers to make and receive calls while travelling without incurring roaming charges, for the price of a normal mobile voice call. Forty-six is the country code for Sweden. The service requires a Tele2 subscription, a Wi-Fi connection, and the app.

Service Innovation

Tele2 launched the +46 VoIP app in July 2012 to enable its Swedish customers to make and receive calls while travelling without incurring roaming charges. The app is available for free on both the Android and iOS platforms. But only customers with a Tele2 Sweden number can activate it.

Customers using the app rely on Internet access via Wi-Fi to make and receive calls when they are outside Sweden. The application is different from other over the top (OTT) voice over IP (VoIP) applications because the called or calling party does not have to have the application. Instead, calls made to the roaming user’s Tele2 number are answered on the application for free. Roamers can make a call from the app to any phone number, paying only what they would have paid if they were making the same call from their phone in Sweden.

The +46 application deviates from today’s norm where operators impose a significant mark-up on roaming services and use it as a high-margin service to support lower margin domestic services. Tele2 is using the application to reinforce its reputation as a market disruptor. Not only is this strategy in line with the European Union’s push to force down roaming prices within the region, it also enhances the customer loyalty. It addresses customer concern over high roaming charges when using their phones abroad. Even though the application was not heavily marketed by Tele2, much of the response on Swedish forums has been complimentary about the offer.

While the +46 application remains important for roaming outside the EU, its benefit for roaming inside the EU has gone down because of recent changes to the EU’s regulatory framework.

The European Commission proposed new rules in September 2013 as part of the “Connected Continent” package that reviews the whole regulatory framework for telecoms:

The objective is to allow citizens to “roam like at home”, making use of their phones in the same way as they do in their own countries.

Under the proposals, the price for receiving calls is likely to be zero as of July 2014.

There will also be rules and incentives to encourage operators to reach “zero roaming” prices.

As such, the +46 application can be seen as a prelude to the eventual removal of roaming charges within the EU.

Opportunities

Tele2 sees an opportunity to differentiate itself in the Swedish market by championing low-cost roaming solutions for its customers. Since Tele2, like other telcos, already misses out from roaming revenues (see challenges below), it can afford to launch the +46 app without worrying too much about overall revenue reduction from its own product. Accordingly, Tele2 has opted to accept the potential loss of roaming revenues that it would have incurred from customers. But it is using the +46 application to derive some positive benefit from what is in effect already a lost cause.

Challenges

Telcos miss out from roaming revenues because customers avoid using their phones while abroad. According to Magnus Larsson, the head of Comviq, Tele2 Sweden’s sub-brand, “Our statistics show that seven out of ten Swedes turn their data roaming off completely while travelling. They're afraid of using their phones abroad”.

Ovum forecasts that Sweden’s mobile operators will lose US$230 million in 2014 to OTT Voice services. This includes use of OTT voice services within the country, and more importantly, use of OTT voice services while roaming outside the country.

Figure 1. Revenues Lost by Swedish Mobile Operators to Customers’ Use of OTT Voice Both within and Outside Sweden (Including Roaming)

Strategic Partnerships

Tele2’s partnerships for this innovative service include:

The +46 app uses technology supplied by OptiMobile, a Sweden-based provider of converged communication solutions.

Tele2 has leveraged the mobile application ecosystems of Apple and Google to deliver custom solutions in the market.

Normally, operators have roaming agreements with operators in other countries to facilitate roaming for traveling customers. These agreements are often reciprocal deals and are usually more lucrative for operators in destinations that receive large numbers of tourists or business travellers. However, by leveraging the application ecosystem, Tele2 is moving some of this roaming traffic away from the network of its roaming partners. Instead, it is transferring the traffic onto the Internet via Wi-Fi networks. Tele2 is relying on the growing availability of (often free) Wi-Fi hotspots around the world. The +46 application specifically mentions Wi-Fi access at hotels because this is the likely location from where travellers will want to make and receive calls.

Monetization

The +46 application is free for customers to download on both the iPhone and Android platforms. However, the application costs SEK 49 (US$7.50), a one-off lump sum to activate. This price is added to the customer’s bill. The application was initially offered for free for about 12 months after launch.

Success Metrics

More important than the short-term revenue generation, the service is meant to improve customer loyalty at Tele2, which in turn leads to longer-term revenue benefits. At the same time, providing customers with its own brand of low-cost roaming service will help prevent Tele2 customers from using OTT rivals. This tactic will help Tele2 to differentiate itself against its competitors and help it to gain an advantage in the Swedish telecom market.

Also, +46 application helps to strengthen Tele2’s reputation as a market disruptor and a customer champion. The application has also helped Tele2 better understand what their customers need while roaming. For example, in December 2013, Tele2’s Swedish sub-brand, Comviq launched “Fastpris EU”, the first ever flat-rate price plan that covers the whole of the European Union.

For More Information

To find out more about Tele2’s +46 service, go to
http://www.tele2.se/mobilabonnemang/plus46.html.