Phone Start-Up Seeks Latinos on the Move
“For English, press 2.”
That’s the mantra of Movida Communications Inc., a mobile phone company that is putting the Spanish language first as it starts selling its pay-as-you-go service today in the Greater Los Angeles area, the nation’s largest Latino community.
Movida, which loosely means “on the move,” is aiming its brand at a potential market of 12 million Latinos in California.
“What we offer is content that is totally oriented to the Hispanic community,” said Movida Chairman Enrique J. Garcia Viamonte. “That is the draw. We want to be known by Hispanics as their phone company.”
Movida, based in Coral Gables, Fla., is offering cellular phone service with features such as text messaging, news and music from Mexico City and other Latin American cities, a “saint of the day” feature and, in five or six months, segments from Latino soap operas.
Much as with so-called affinity credit cards, Movida is a new brand name with its own sales, billing and customer service operations. But it is riding on the Sprint Corp. network and offering handsets programmed in Spanish from Nokia Corp. and Kyocera Corp.
Movida joins a growing crop of providers known as mobile virtual network operators -- including Walt Disney Co. and its ESPN sports arm -- that are trying to carve out markets among like-minded consumers or to offer more services to an existing group of customers.
“Everybody wants to become an MVNO,” said industry analyst John Strand of Strand Reports in London.
Around the world, virtual operators abound, he said. In South Korea, one company caters only to women. In Europe, several sell only on the Internet, enabling them to cut costs so much that only 150,000 customers are needed to make the operation profitable, Strand said.
Said John A. Garcia, Sprint’s senior vice president for wholesale business: “We’re pretty bullish on how Movida might turn out. They are very focused on their target market, and they were able to garner a strong distribution channel to reach that market.”
That channel is Wal-Mart Stores Inc., the nation’s largest retailer, which is the primary seller of the Movida handsets and service.
Sprint, in particular, has been aggressive in courting virtual operators. It upgraded its back office and network to make it easier for such businesses to flourish. Disney and ESPN will be rolling out their Sprint-backed phone service next year. Virgin Mobile, partly owned by Sprint, is the largest virtual operator, with 3 million customers.
Sprint, the nation’s third-largest mobile phone company, gets about one-sixth of its 26.6 million customers from wholesale operations. Among its more than two dozen virtual operators are several cable companies, which are testing Sprint service now.
Many others have found the task of operating a virtual network too daunting. About 90% of those that want to use Sprint’s network drop the idea after initial talks, Sprint’s Garcia said.
“They find it’s not as simple as getting an affinity card,” he said. “It’s a pretty complicated endeavor and takes a lot of business savvy, a lot of money and a lot of telecom experience. There are significant risks. You drain dollars for the first several years.”
Movida, which launched operations in mid-April in San Diego and Phoenix, is no communications novice.
It is 80% owned by Cisneros Group of Caracas, Venezuela, which has stakes in media, entertainment, technology and consumer products companies. Holdings include Los Angeles-based Univision Communications Inc., the largest U.S. provider of Spanish-language television programs.
Movida’s Garcia would not reveal sales or customer numbers for the service’s initial launch or its later rollout in Texas, where it serves Dallas, Houston, Austin and San Antonio, as well as El Paso and other border towns.
He said his company was on track toward reaching its goal of having 1 million customers by 2007 and $500 million in revenue within three years. Its rollout in Los Angeles and Orange counties this week and in San Francisco and Sacramento next week should add a significant number of customers.
“Movida can do very well with a small portion of the market,” analyst Strand said.
Like most virtual operators, Movida offers strictly prepaid plans -- or, as it prefers to call them, pay-as-you-go plans.
Costs in such plans are typically higher -- Movida is charging a flat 20 cents a minute -- but users don’t lose minutes as they do with most post-paid plans when they don’t use their allotments in a given month. Post-paid plans can cost as little as 5 cents a minute, as long as customers use their entire allotments without going over the limit.
For its Los Angeles rollout, the company is offering a new plan that costs 10 cents a minute on weekdays and 5 cents a minute on weekends, with a 50-cent charge for every day the phone is used. Calls to Latin America cost 25 cents to 35 cents a minute.
Garcia said Movida’s cachet in the community came from its own background.
“We are a Latino company, owned by Latinos, and most of our employees are Latinos,” he said. “We know the needs of the Latino population, which are different in the U.S. When we come to the States, we develop traits that are uniquely Latino American. We want news and music from Los Angeles as well, for example.”
In much the same way, Telscape Communications Inc. of Monrovia has been offering land-line-only service to the Latino community in Southern California. It has to rent lines to customers’ homes from SBC Communications Inc. and Verizon Communications Inc., a much riskier business given regulatory rulings that have raised wholesale rates.
Like Telscape, Movida faces its stiffest competition from major network owners such as SBC, which gushed last week that Hispanic magazine had named it one of the top 100 companies for promoting the advancement of Latinos. SBC also owns 60% of Cingular Wireless.
Garcia isn’t worried, though. He’s “really looking forward” to the competition for customers.
“We’re very happy,” he said. “If we provide good service, they’ll go with us.”