Exploring Virgin territory
BILLIONAIRE Richard Branson’s Virgin Group is looking to go big in SA in the coming years, investing hundreds of millions of rands in a range of new businesses, including financial services and possibly even a new low-cost airline. It’s the Virgin way — find a new market, expose it to the power of the Virgin brand and exploit it to the fullest.
And Branson has a soft spot for our country.
“SA is an adopted country of mine. I love it; as you know, I have a home here. Our current investments will keep us busy for the next six months but we’ve got a few things planned in SA,” says Branson. Most immediately, these include this weekend’s launch of Virgin Mobile in SA as a joint deal with Cell C; and offering Virgin Money products and services as part of a joint venture with Absa.
More initiatives will follow, but details remain sketchy.
In an interview this week, Branson says SA represents a great opportunity for Virgin, being well run, both politically and economically.
Asked whether he has followed the succession debate and how important political stability is for investment, Branson says any country is as good as the person who is running it.
“That person needs to have the blessing of his own community, but it’s also important that he has the blessing of the international community.”
Branson, who visits SA at least four times a year, says former president Nelson Mandela did an incredible job in SA, as did President Thabo Mbeki, apart from “the situation” over HIV-AIDS, which seemed to have been dealt with. “I hope whoever takes over does as good a job so SA can grow as it is.”
Virgin’s entrance into the local cellphone market fits into the philosophy of the business. At its core, that philosophy is to take on industries that are fat and bloated with the aim of bringing a fresh approach and doing so with “panache and style”.
Branson is critical of SA’s cellphone companies, saying contracts are so complex you need a degree in quantum physics to understand their tariffs. And it’s “just incredible” SA doesn’t have number portability, which allows users to change cellphone companies without losing their number. “It’s an anticompetitive device operators use to hold on to customers. Every other country changed years ago. It’s a very simple thing and can be done in four weeks.”
Once a market has been identified by Virgin, the tactic is to go in hard, using the Virgin brand, Branson’s name and charisma, and delivering a clear message to the market of what is on offer.
The success of the strategy has been patchy, although Branson has claimed that about 90% of the group’s businesses, which will generate about $20bn turnover this year, are profitable.
However, the group has failed to make inroads into some of the key areas it targeted — Virgin Cola’s planned toppling of Coca-Cola and Pepsi flopped, while Virgin’s performance in running privatised train services in the UK has been roundly criticised.
Virgin is often reproached by the financial community for a lack of transparency in its financial results, and for having an unwieldy ownership structure.
Nevertheless, Branson has delivered on his promises in SA. One of his first forays was in the fitness sector, when Virgin Active baled out the failing Health & Racquet clubs in late 2000. This it did after Mandela phoned Branson to ask for his help, and today it has 78-odd gyms and fitness centres in the country.
Filled with enthusiasm about the venture, Branson made seemingly sweeping promises to invest in SA’s cellphone and financial services sectors too.
All of this he has now achieved, with the biggest commitment coming from Virgin Mobile.
The cellphone group has come into SA as its multibillion-rand merger with UK cable company NTL is still being bedded down. NTL agreed to buy Virgin Mobile in April. Branson retains 10% in the group, making him the largest single shareholder, with the integration of the two companies only due to be finalised next year.
The combined group will offer a “quadruple play” service of cellphone, fixed line, broadband and television. The experience gleaned from implementing this convergence of technologies may help Virgin Mobile in SA, where telecoms companies are still grappling with implementing a triple-play group of services.
Its experience of piggybacking off networks elsewhere in the world has certainly played a key part in its venture with Cell C. In the UK, Virgin Mobile uses the T-Mobile network, in the US, it’s Sprint, in Australia it’s Optus, in Canada it’s Bell Mobility and in France it uses Orange.
Virgin Mobile CEO Sajeed Sacranie says subscribers will be able to roam internationally, as Virgin has the full array of international agreements. Virgin’s target market is any “heavy user” of cellphones — someone who uses more than R300 a month, he says.
Looking ahead, Branson’s next big passion is the environment.
First and foremost, any Virgin company involved in activities that may harm the environment — such as planes and trains — needs to redress that damage.
Further, the Virgin Group is using a lot of its resources to invest in industries focused on tackling global warming.
The organisation will be investing in about 10 ethanol-producing plants, which will be built over the next four years, and a couple of solar companies.
The Virgin way of doing things is to start in new countries and new markets, as opposed to expanding further into the things Virgin already does.
Branson argues that by global standards, Virgin is still a small group, but the brand is a major multinational one. “That gives us lots of opportunities to create a truly global presence, and to do some good, too.”
Inet-Bridge || Discuss this article
Loading ...