Originally published by the Wall Street Journal
Alo Communicaciones SA burst onto the Spanish telecommunications scene aggressively. They priced their services at half of market share dominator Telefonica, ran a series of high profile ads, and took steps to bring free local calls to the local scene. Things are going to slow down for Alo, however. Management at Alo recently submitted a buyout proposal to RSL Communications Ltd., its parent company. RSLCom recently filed for Chapter 11 bankruptcy in the United States, rendering it incapable of financing the Spanish upstart division.
Alo hopes to save the company with the move by gaining autonomy. They also will hopefully be able to separate their brand’s reputation from the reputation of the parent company and reduce its overall dept if the deal is accepted. The move would benefit RSLCom by allowing it to recover at least part of its initial 70 million dollar investment into Alo. The buyout is being backed by a number of investors, both local and foreign.
What becomes of Alo is uncertain, but what is certain is that Alo’s aggressive rollout of plans and advertising will have to be scaled back if it is to remain profitable under tighter financial restriction. Alo has, in its short lifetime, run aggressive and expensive ad campaigns and even gone to court with Spanish telecom giant Telefonica in an effort to win market share. Failing that, Alo may not survive. There has reportedly been expressed interest in the 88% of Alo owned by RSLCom by other companies.