Mention the name Brazil and many people in other parts of the world think carnivals, dancing and one of the world’s greatest national football teams. And yes, that is part of the story. But Brazil is also an enormous country with a large part of the population living on a very low income. Operators in Brazil have traditionally chosen to focus their business on subscribers who can pay more money for more advanced services. Local is one operator that has done just opposite.

Local’s CEO Denis Côté explains that his company soon realized that the competition in this segment was not very tough. And the strategy was clear from the very beginning. “The business model that we implemented was directed at remote villages with low-income earners and these people’s primary need was to get limited mobility in their village. To address that, we decided to go with a low-cost structure by being decentralized and having more people working in the villages, as opposed to having people working in the headquarters.”

One example of the company’s new way of doing business is taking place in a small city named Quixadá, in the rural state of Ceará. There, the average annual income is about USD 1000 per capita. Working in such a place is very different to how other big operators work. “Typically, a big operator will put about 85 percent of its resources in the main quarters, whereas Local has 85 percent of its resources in the villages,” Coté says.

Ericsson worked together with Local and its management team on the strategy planning and setting up the business model as well as providing the communication infrastructure. Jesper Rhode, vice president Multimedia and Consulting at Ericsson in Brazil, says he thinks Local’s business model is truly scalable and that the operator can easily replicate it to other areas in Brazil as well as to other countries. “The secret behind Local’s success may well be because it chose not to copy the big operators and compete in the highly populated centers, but to focus on remote areas and low-income earners,” he says.

“More specifically, you can say that the main reason behind our success is that our investment is lower than what most operators would invest,” Coté says. “And the reason for this is that our license is relatively low. Another key benefit is that, in Brazil, the regulator allows us to use mobile frequency for our fixed license, so if you combine these together your initial investment is very low. We also don’t need to subsidize handsets.”

The handsets people are using, he explains, already exist in the market.

What makes Local unique is the way the operator keeps in contact with its customers. Sending information by mail is one thing, but Local does so much more. The most common subscription in Brazil is a pre-paid card. When the operator notices that a customer’s card is running out of money, the customer gets a personal call and a suggestion to refill the card. “On average, we probably talk to our customers once a month,” Coté says.

The personal contact brings with it other benefits, both for the operator and the customer. “It allows us to understand their needs, to tailor the product as we go and to adjust the credit of our offer if we need to,” Coté says.