Euskaltel: Dreaming Big

Euskaltel was founded in 1995 and has its headquarters in Derio, which is in the Basque country of northern Spain. Compared to its competitors, Euskaltel is small; however, it has competed strongly against the giants Vodafone, Orange, and Telefonica and carved out a place for itself. ZTE Technologies recently interviewed Fernando Ojeda, CEO of Euskaltel. He shared with us Euskaltel’s market presence, main challenges, development strategies, and the partnership with ZTE.

Close to Customers
Q: What kind of market presence do you have in the Basque country?

A: Our main business is our residential customers, small businesses, and large businesses. So we cover all kinds of customers. We have a very good presence in the three main markets: residential, small and medium-sized businesses, but we also have some large corporate, government and institutional customers. In the three main markets, we compete strongly with Telefonica, and are the market leader. We have been successful because our network covers 95% of Basque population. That has given us the technological advantage. We deliver services in a way that Telefonica has been unable to do. Our highest-level call centers are located in the Basque country. We know our customers and understand what kinds of problems they may have. What’s more, we help all kinds of associations and sponsor all kinds of local activities and professional sports, including football, surfing, museums, arts and universities. We try to invest a lot in this community.
In the Basque country, I think we have several advantages. First, we are close to our customers. Second, we have a high-quality network and have been very fast to develop and launch services. Third, we deliver residential broadband, fixed broadband, fixed voice and TV services. We are a mobile operator, so we also have 3G mobile services and will be looking into the future of 4G.

Q: Since its beginnings in 1995, Euskaltel has had some very prestigious shareholders from different sectors. How have you benefited from having leading businesses as your shareholders?

A: When we started a new business from scratch, it was very difficult. Telecom was a new business in Spain 70 years ago. In Spain, there was only one operator, Telefonica, and it was owned by the government. The only way to deploy a network was to have solid, powerful investors. It was not only a matter of money but also a matter of having strong institutional backing. So among our shareholders were leading utility companies. They were important because we needed them to help us deploy our networks. We also had local savings banks as shareholders, and they gave us financial security and support. We benefit from having strong backing because to deploy a network you need to put a lot of money on the ground and you might not initially have a customer base. So that initial investment is very important; it made us creditable and gave us enough time to invest heavily without looking for short-term benefit. That’s the main impact of these shareholders.

Growing Outside the Basque Country
Q: The global telecom market is constantly changing. In a climate of uncertainty, what are the main challenges you are facing?

A: I think the first challenge is expertise. We are the leading operator in the Basque country. With 2.2 million inhabitants, that’s our market. We compete against global companies who have expertise and resources. For them, rolling out new services and continuing to evolve is something natural. While for us, the more the world becomes global, the more difficult it is to remain competitive. So that’s our biggest challenge. I don’t think our competitors are better than us—we know our customers better than they do.
The second challenge is growth, that is, how to compete in the global world with giants who are maybe twenty, thirty, fifty times bigger than we are. However, we have to face this challenge. We are small, but we are flexible. We are very good at what we do, but we need to be able to grow.

Q: How do you overcome challenges?

A: Well, that’s why we have signed the agreement with ZTE. The way to overcome challenges is to benefit from partners that can give us the expertise and allow us to have the technologies that our competitors have. We look for partners who are global, who are leaders, and who can help us deliver services to our customers.

Q: What are your new opportunities?

A: We have been very focused on our network in the Basque country. We want to deliver cloud services, smart cities or whatever independently from our network outside the Basque country. We want to grow in this country, but we also want to grow outside the country to the rest of Spain. For this, we are also looking to ZTE, which was a small company that has grown to be very big. We hope to find partners that have the vision and ambition to grow and take on bigger companies.

Service Oriented Transformation
Q: Many operators are transitioning from being a product company to a services company. What do you think about this transformation? Do you have any strategies for such transformation?

A: It’s a good question. I think that the world is moving from networks to services, but I’m not sure that many telecom companies are capable of this job. In this world, we have telcos and all other kinds of companies that deliver services, but there are few telcos that can deliver services in a competitive way, so the competition is coming more and more from service companies, not from telcos.
For Euskaltel, being a service-focused company is our goal for this year. We are look at delivering cloud services for small and mid-sized companies. The other area we will focus on is residential. We are delivering all kinds of smart services around the home, including home security. Smart home means to take care of your home. It’s a package that gives you security and makes your life much more comfortable. The third area we are exploring is smart city based on big data. In China, there are five to ten million people in a city, which is more than in the entire Basque country. Euskaltel doesn’t talk about smart city; we talk about smart country. We will make the Basque country the first smart country in the world.

Q: Euskaltel signed a ten-year network-wide managed services contract with ZTE recently. Why did you choose ZTE? How do you think the partnership will evolve?

A: We signed the contract with ZTE in December 2014. The idea was not only to look for a partner that would give us managed services but would be with us over the long term as we evolve the company. We wanted someone who could provide us with expertise. Two years ago we started looking for a partner who would deliver managed services, rollout a network with our people, and go the distance with us in the coming years. We wanted a partner who had the same mentality and DNA as Euskaltel. Technically, ZTE is as good as the top companies in the world. The main reason we chose ZTE is that in ZTE we saw a company that was ambitious and aggressive, that wanted the contract with us, that wanted to be in the Basque country. Everyone from ZTE came to visit us and was really hungry for the contract. They really wanted to help us grow. We found there were many similarities between us in terms of culture and people—the culture of ZTE was very close to ours. We understand that we are very small, but from day one, ZTE treated us as if we were important. So we believe that we will never have a problem; we will always find new ways of delivering additional services because we have the same interests. We want to grow Euskaltel, but we also want to develop the Basque country. For us, it is very important that ZTE said it was going to make the Basque country the main service center for southern Europe. That indicates commitment, which we like very much.
The relationship between Euskaltel and ZTE is just beginning. Our project this year involves deploying a 4G network that will cover the whole Basque country. We own the 2.6 MHz license, and we want ZTE to do this project. I’m sure ZTE will do a great job. Actually, the contract is about network cooperation shared services, but for me, it is more than that. It is about having a partner that will work hand in hand with us over the long term to improve our operation in the Basque country.

Q: Euskaltel is always striving to be different. What kind of customer experience would you like to create?

A: I think the best customer experience is the one that allows customers to do what they want, when they want, how they want. By that I mean, if we have customers who don’t want to talk to a machine or access a web page or login for help, we have person-to-person services for them. We have hotlines specifically for business customers and hotlines especially for residential customers.
However, we have other customers who just want to go to a web page to solve their problems. If they want to configure their TV, they can use the services of the mobile phone. I think it is important to make our web page clear for them.
In addition, we have sixty-five stores where you can go in person to configure your mobile phone, get help with your TV, or get advice about what price you should pay for international calls. There are always people who would prefer to get face-to-face help in a store. We try to give all our customers different options and approaches. We spend the necessary time to solve your problems and meet your requirements.
We don’t forget customers who want the personal touch. We also provide a very simple digital way. In the Basque country, we have two languages: Spanish and Basque. We have everything in Spanish and Basque. That’s also something that differentiates us from Orange, Vodafone and Telefonica. It enables us to be more local.

Q: Who are the main users of your services?

A: We do have a very young customer base. We provide home, TV, fixed broadband, and mobile services. Young people are heavy users of TV and mobile services. Now we are deploying our Wi-Fi network in Basque cities to make our TV available across all devices. You can see young people with their mobiles watching TV or using our services to download or send messages. That’s why we also support things like surfing schools, pop concerts and football games. We try to go where young people are.

Consolidation and Convergence Trends
Q: What trends do you foresee in the global telecom market over the next few years? How will these affect your company vision?

A: I suppose that the telecom market will consolidate even further. In Europe, there are too many local operators, and there is potential for more consolidation there. In Spain, there will be more consolidation too. We have three major players—Vodafone, Orange and Telefonica—but in northern Spain, there are also three smaller cable operators. The biggest of these is Euskaltel, and the other two are smaller than us. Potentially, there will be consolidation between the big operators.
Globally, I think convergence of mobile and fixed networks will push consolidation of global players, but we are already a much-converged company. Our residential customers have more than three services with us. We have been very fast to deliver services, and the Spanish market is much converged. The market in Europe also has a high level of convergence. Very few people only have mobile services; in Spain, they buy mobile and fixed together in packages. We will continue pushing convergence. I think the challenge over the next two years is to sell more TV services. Convergence has begun around mobile and fixed, but TV still is not totally part of this trend. I think the challenge with TV (ok, let’s call it media) over the next eighteen months is how to make TV a real necessity in Spanish households.
We have launched many TV programs, but only 40% of our customers pay for TV services. For Euskaltel, that number should be at least double; it should be 80%. I think we just need to push it more. I mean, our customers can watch Euskaltel TV or pay TV at home or on the move. As we know, 80% of our customers have mobile and fixed broadband, and 100% of our customers have fixed voice. How can we push paid TV? I think that the technology (i.e. 4k compression) will help us. We also need our customers to be using these more and more. That’s why we’re beginning to deploy a Wi-Fi network in the Basque country this year, and it will be completed soon. I believe Wi-Fi will help give our users a better experience when they use our services over 3G.