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Oi Telecom - Supporting social responsibility and identifying sustainable growth

Oi Telecom is the largest telecommunications operator in Brazil, following its acquisition of Brasil Telecom in 2008. It offers a range of services including mobile and fixed line telephone, broadband and pay TV to more than 60 million consumers across Brazil.

Oi is the largest fixed line operator in South America in terms of total number of lines in service, and in 2008, was included in the Brazilian Corporate Sustainability Index (ISE), a benchmark for socially-responsible investment and a driver for good practices in the Brazilian corporate sector.

With a belief that education and culture are the best means of transforming the country's social situation, Oi Telecom identified a goal to help reduce social gaps in Brazil by promoting digital inclusion programmes. Through an initiative the business set up, Oi Futuro, specific projects that focus on these particular social improvements have been sponsored.

Oi Telecom recognised that lower income households were underserved in the marketplace in terms of telecommunications services. One particular focus was the fixed line market, which is in a mature state in many segments but is still experiencing demand from these lower income households.

However, the demand is coming from customers with a potentially higher credit risk and poorer payment profiles. Therefore the business recognised that this opportunity could only be capitalised on with the right credit strategy.

To address the demand for fixed line services from lower income households, Oi Telecom used Transact SM to implement a new credit strategy targeted to these customers. This included introducing a new post-paid fixed line for customers who already had outstanding debts with Oi Telecom or another operator.

The new credit strategy included utilising a range of data such as; fraud and credit blacklists, internal consumer behaviour data, which also includes past debts and using credit bureaux data to get a wider picture of the customer's outstanding commitments and payment behaviour. An assessment of the number of products consumers held was also undertaken, as well as a geo-demographic evaluation of risk was made before offerings were tailored to individual customers.

Following implementation of the strategy through Transact SM, as expected, bad debt had increased, however the high approval rate and additional customers were generating the additional revenue expected. Oi Telecom was able to demonstrate that the new strategy had delivered positive net present value (NPV).

The low income fixed line services sector now represents 10% of Oi Telecom's customer based and 6% of the fixed line services segment's EBITDA margin.

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