Virgin Mobile wants rules changed

CELLULAR operator Virgin Mobile is lobbying for regulatory changes that would help to grow its business and encourage new players to enter the market.

SA’s smallest cellular operator celebrates its second anniversary this week with 495000 customers — up from just 100000 after its first year. There are about 44,5-million SIM cards in SA, giving Virgin Mobile 1,1% of the market. It expects a profit in 2010 or 2011.

CEO Peter Boyd said he was happy with its growth so far, but legislative changes would open up the market, cut the cost of calls, and make it easier for smaller players to grow.

Virgin Mobile runs as a virtual mobile network operator, using Cell C’s network as its backbone and reselling airtime under its own brand. Technically that is illegal in SA, as operators must hold a network licence of their own, so Virgin Mobile had to be a joint venture owned by both Virgin and Cell C, which holds a licence.

In almost every other country virtual operators are perfectly legal, and 185 are active in Europe and Russia. That had invigorated those markets and given consumers more choice and lower prices, Boyd said.

Yet Virgin Mobile is the sole virtual operator in Africa, where the population of 800-million needed cheaper communications, Boyd said. Since virtual operators piggyback on existing networks, their cost of entry is cheaper.

The host network benefits by selling spare capacity to the newcomers, giving it a new source of income.

Boyd would like to see companies such as Discovery Health or Kulula airline become virtual operators. “Other companies could do the same as us if they found a network that wanted to provide them with wholesale minutes.”

Boyd hopes the Independent Communications Authority of SA (Icasa) will force down the interconnection fees that operators pay each other when a call made on one network goes to a user on another.

Since Virgin Mobile has so few customers, 99% of its traffic goes to users with MTN, Vodacom or Cell C, racking up high interconnection fees. Although the fees are passed on to consumers, Boyd said small players were disadvantaged as they had to hand over much potential profit to bigger rivals.

Icasa first debated intervention in 2005, but was thwarted by changing legislation. Last year it held public hearings into the fees, which have risen 600% in recent years.

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Virgin Mobile wants rules changed