SOUTH AFRICA: VIRGIN MOBILE SEEKS 10% MARKET SHARE

Telecoms

Fourth cellular network operator Virgin Mobile planned to win a 10% share of the market within five years by creaming off the most lucrative clients who were discontented with the existing players, its CEO said last week.

The operator would launch in June or July, targeting well-heeled consumers who wanted better service than they got, said CEO Sajeed Sacranie. Virgin Mobile will sell pre-paid and contract cellular services by opening 12 dedicated retail stores in upmarket shopping malls. Discussions are under way to sell its packages through some retail outlets but not in the mass market chains favoured by Vodacom, Cell C and MTN.

Virgin Mobile does not expect a huge migration of discontented customers from the existing networks but it expects to win a material share. By targeting only top-tier consumers it would not rival even the smallest existing player, Cell C, in size "but we expect 10% of the market within five years", Sacranie said. There are about 30-million cellphone users in SA, with Vodacom claiming to have 18-million, MTN 9-million and Cell C 3,2-million. Analysts expect the market to reach 40-million in the next few years. "There is not going to be an avalanche of people saying 'here's Virgin, let's all go'," said Sacranie. He said this was because the other networks were doing their jobs "reasonably well".

The new company is a 50-50 joint venture with Cell C and will operate over the Cell C network. That has allowed the creation a fourth player without a new licence -- no fourth licence is available in SA -- and without building new infrastructure.

That vastly mitigates the financial risk, as Virgin Mobile can debut for less than R700m using network facilities that have cost Cell C upwards of R10bn. The deal gives Cell C a chance to earn 50% of the profits from users who have shunned its cheap and cheerful image. The newcomer has no intention of sparking a price war, and analysts have speculated that Virgin may even charge a premium to capitalise on its brand.

Sacranie said they would take the middle ground by offering easy-to- understand packages at competitive prices. Virgin Mobile's trump card may be the ability to offer customers a range of deals and discounts with its sister companies, the Virgin Active gyms, Virgin Atlantic airline and Virgin Money financial services to be launched in SA later this year. Sacranie would not say exactly how many customers it expects to win, nor how much it expects its users to spend each month.

Cell C's average revenue a user is the industry's lowest at R120 a month, with Vodacom reaping R147 and MTN enjoying the highest at R168. The tie-up with Cell C has been under discussion for more than a year, but Sacranie said the lengthy process was not caused by any concern about the network's quality or capacity. "Cell C has been upgrading its network and it's been implicit in the deal that they met certain minimum standards. They have delivered the desired level of service," he said.

Business Day