Red Bull Mobile, Virgin Mobile and Cell C

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MyBroadband’s Staff Writer is directly plugged into the South African Internet backbone, and spits out press releases and other news as he receives it. ...

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Cell C has been shaking up the local mobile market with its fast and affordable mobile broadband services using the company’s growing 21 Mbps HSPA+ network.

Good news for consumers is that Cell C’s continued 900MHz HSPA+ rollout is progressing well, and the company has recently confirmed that they have ‘met and exceeded’ their national coverage target.

With a growing high speed national network Cell C is also growing its capacity to offer voice and broadband services, and unsurprisingly the company is looking to expand its existing distribution channel.

Cell C recently confirmed that they have partnered with Red Bull to add ‘an exhilarating new energy to the South African mobile environment.’ It is likely that Red Bull will become South Africa’s second mobile virtual network operator (MVNO), joining Virgin Mobile which launched in mid-2006.

Virgin Mobile, which is a 50-50 venture between Cell C and Virgin Group, was not as successful as expected, and was forced to restructure and retrench staff to contain costs.

In November 2009, Virgin Mobile announced that they generated a positive operating profit at the end of October 2009 and expected to remain EBITDA positive going forward.

Despite the better financial outlook of Virgin Mobile, rumours are still floating around that Cell C is looking to offload its stake in the company.

The latest speculation links Altech to discussions about a potential purchase of Cell C’s 50% stake in Virgin Mobile, but both Cell C and Virgin Mobile dismissed these rumours as incorrect.

One saving grace for both Virgin Mobile and the soon-to-be-launched Red Bull Mobile may be competitively priced data services on Cell C’s network.

Virgin Mobile said that they will be launching mobile broadband on Cell C’s network, but could not provide a firm launch date. “I expect we will be saying more [regarding] this quite soon but I cannot comment further right now,” said a Virgin Mobile spokesperson.

Red Bull Mobile

So where does this leave Red Bull Mobile as a new MVNO in the country?

Red Bull will most likely trade on its well known brand to try to compete in the South African market – a very similar strategy to Virgin Mobile.

However, Virgin quickly realised that a few well publicised stunts by its founder Richard Branson were not enough to do battle with the likes of Vodacom and MTN.

In the latest Sunday Times Top Brands survey, Vodacom was once again rated the top network provider, followed by MTN, Telkom and Cell C. Virgin Mobile was not even featured in this survey, pointing to a significant lack of brand power in SA.

Cell C on the other hand has been successful in rebranding and lifting the company’s profile, helped by innovative data offerings.

This begs the question as to whether or not Red Bull will give Cell C a significant boost in terms of sales and distribution.

According to one industry player, who asked to remain anonymous, Red Bull is likely to go the same path as Virgin Mobile and will not help Cell C much. He said that a well known brand name like Red Bull is simply not enough to compete in the mature local cellular market, as proved by Virgin Mobile’s failure.

World Wide Worx MD Arthur Goldstuck concurs, saying that the Red Bull brand on its own will not gain enough traction to justify an investment in such a venture. However, Goldstuck added that in combination with a compelling offering and a major marketing campaign, it definitely has potential.

“The difference between this and the Virgin Mobile launch is that Red Bull already has brand loyalty and a brand proposition – i.e. a message, culture and awareness of what the brand represented. Virgin Mobile had neither in this country. But even with all of that, Red Bull won’t give cellphone users wings unless it also gives them unbeatable deals in a way that is easy to understand,” said Goldstuck.

BMI-T director Brian Neilson said that the success of the Red Bull Mobile venture would depend on how the deal is structured with Cell C.

“Red Bull need not spend heavily on infrastructure, as is possible in some MVNO models, and should also be leveraging their MVNO development investments in other countries,” said Neilson.

“Marketing would however still be a large cost. One thought in this regard is that Red Bull could carve off some of their existing above and below the line marketing expenditure which is substantial to support the launch marketing expenditure.”

“Bottom line is that profitability is by no means guaranteed and they will have to be creative or respect of cost structure and marketing,” Neilson concludes.

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