T-Mobile MVNO Solavei plans to expand to Mexico, launch new social commerce tools this year

T-Mobile US (NYSE:TMUS) MVNO Solavei, which is seeking to emerge from bankruptcy protection in the next few weeks, plans to expand to Mexico and other Latin American markets later this year, according to CEO Ryan Wuerch. The company also plans to launch new offerings on its Solavei Marketplace program by the end of June.

Earlier this month Solavei revealed that it would merge with ASPIDER, a Netherlands-based Infrastructure as a Service provider that works with mobile operators, as part of its bankruptcy reorganization plan. 

Solavei last year revealed plans to focus more heavily on the Hispanic market, but those efforts were delayed by its bankruptcy proceedings.

In an interview with FierceWireless, Wuerch said 80 percent of the new members Solavei gets each month are Hispanic or Latino, up from a rate of 70 percent in August 2014. Fully 68 percent of the company's total customer base is Hispanic, he added, and he said Solavei is the fastest-growing carrier in Puerto Rico. "Being able to continue the expansion with our members in other Latin American countries is just natural," he said.

"Obviously, with everything that is going on with the company, we continued to be focused on that market and that demographic, certainly here in the U.S. and Puerto Rico, while we were in the process of doing this deal that will allow us to expand globally, and particularly into the Latin American market," Wuerch said.

Wuerch called the Latin American expansion a "high priority" for the company. He declined to say when exactly it would happen this year but said the expansion will include multiple markets, with Mexico being one of them.

In September, Wuerch had also indicated that Solavei would integrate payments and rewards more tightly into its social commerce system, and to allow users to easily enter their existing credit cards into the Marketplace in order to more easily receive discounts and rebates. However, that effort also got delayed because of the bankruptcy process.

"We've had to be obviously very focused on specific areas, as it relates rollout, product development, etc. of the new products," Wuerch said, adding that the company is close to releasing the updates. "I've got what I believe is a really transformational marketplace, social commerce capabilities sitting in an app integrated into our system right now on my phone." He said the updates will come sometime in the first half of this year.

Solavei launched in 2013 with a $49 per month unlimited voice, text and data plan on T-Mobile's network (the company has a range of plans now). The company designed its service as a referral program, rewarding customers with monthly service discounts if they sign up new customers to the service. However, the firm filed for bankruptcy protection in May 2014. Wuerch declined to say how many active customers Solavei currently has, citing contractual obligations. As of May 31, 2014, it counted 101,500 customers.

In terms of the bankruptcy process itself, Wuerch said Solavei expects the restructuring to be completed by the end of April. The company's restructuring plan calls for several things to happen, according to a filing unearthed by GeekWire.

ASPIDER will acquire almost all of Solavei's assets and form a new company, which will then give Solavei cash to pay its creditors. The new company will pay $4.75 million in the form of a promissory note to Opus Bank and T-Mobile. The new company will also make available 40 percent of the ownership interests in it, with an estimated value of $1.77 million. Then, the new company will assume and pay Solavei's debt claims of around $1 million to $1.4 million. Further, the new company will also assume and pay a claim to T-Mobile of around $1.5 million. T-Mobile has agreed to waive a $1.4 million unpaid "Administrative Expense Claim" that accrued prior to Dec. 31, 2014.

According to the filing, Solavei ran into financial trouble because it wound up paying out more of its gross profits to its members in commissions than it had anticipated, as members found ways to maximize their commissions in ways the company hadn't expected. The company was actually paying around 83 percent or more of its gross profits to members compared to the 50 percent level it had envisioned.

Wuerch said in October 2014 Solavei implemented a new compensation system. "We don't have to be concerned how big the company grows, how much is actually happening and, are we going to repay," he said. The new system is a "bounded" system that he said allows Solavei "to put our focus on growth and know that growth is healthy growth." Wuerch said Solavei can add thousands of new members per day "and not be concerned it's going to go over what the target payout should be."

Basically, there is now a specific payout range within the compensation system. Individuals who refer friends and family members will be compensated based on their activity, such as whether they are personally recruiting, helping to grow a network or manage some parts of the network. "All of those activities that happen will have a specific economic benefit attached to it," Wuerch said. "But because it's all based on a percentage of activity, it doesn't go above that."

Solavei will have "somewhat of a clean balance sheet" when it emerges from bankruptcy protection. Over the next six months Solavei will integrate APSIDER technology like "in-network" international calling, global roaming, mobile payments and other services. In turn, ASPIDER, which works with more than 100 mobile operators around the world, plans to leverage Solavei's social commerce platform and let other carriers use it to build their own social commerce sub-brands.

For more:
- see this GeekWire article

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