Cell C mum on potential Virgin Mobile sale
Virgin Mobile launched in South Africa in 2006 through a 50-50 joint venture with Cell C and Richard Branson’s Virgin Group. At the time Virgin Mobile planned to shake up the market with value for money offerings and great customer service, but despite the usual antics which accompany any Richard Branson and Virgin launch, the company failed to gain significant traction in the local market.
In 2006 Virgin Mobile SA planned to gain a 10% market share, but has recently revised this rather aggressive target to less than 1%. In late 2009 Virgin Mobile SA CEO Steve Bailey said that they are now looking at signing up 500 000 customers in two years time.
Cell C also seems to have changed its strategy concerning Virgin Mobile. Former Cell C CEO Jeffrey Hedberg said that Virgin Mobile would target the higher income (LSM 8-10) market while Cell C would focus strongly on the LSM 3-7 market, but Lars P. Reichelt, the new CEO, said that Cell C is now targeting the full spectrum of income groups.
Cell C’s planned investment in a 3.5G HSPA+ network is another sign that Cell C plans to compete more effectively against Vodacom and MTN in the corporate and contract market.
To date Cell C has only offered relatively slow EDGE data services, but with a growing Smartphone market and an increased need for fast mobile data Cell C had to change tact if it wanted to target higher income groups.
With its new strategy it is debatable whether Cell C has any need left for Virgin Mobile. The company has failed to capitalize on its strong international brand, and has forced Cell C to go after the high-end market themselves.
It is well known that Virgin Mobile has cost Cell C a bag full of money, and that Cell C is already not in the best financial shape. It therefore makes sense for the company to offload Virgin Mobile, and unsurprisingly market speculation is rife that Cell C’s Virgin Mobile share is up for grabs.
Cell C would not comment on the potential sale of its stake in Virgin Mobile, and Reichelt merely said that they are unable to comment on rumour and speculation in the market. “Should a development arise involving Virgin Mobile that we believe is in the public interest, we will issue a statement,” said Reichelt.
Virgin Mobile CEO Steve Bailey said he could not comment on a potential sale of Virgin Mobile.
Cell C mum on potential Virgin Mobile sale << Discussion
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