Has Virgin Mobile hit a wobble?
The three network operators – Vodacom, MTN and CellC – share an estimated 29m subscribers and claim and entrenched presence in both the pre-paid and the lucrative post-paid markets, making it a daunting task for any new predator to consider launching in this market. Add to those factors the widely held perception that the SA market is racing towards saturation, it would seem an expensive gamble for an outsider to consider investing here.
Almost 100 days since launching, neither Virgin Mobile SA’s (VMSA) promised radical market shake-up, nor its “true” competition virtues espoused by Virgin founder Richard Branson have come to pass. Analysts thus far agree that VMSA’s launch has had no material effect on subscribers. However, those in the know agree that Branson’s brazen propensity to publicly slam his competitiors’ products while touting his own as the greatest alternative is a trademark of the Virgin group’s product launches.
VMSA communications manager Nicholas Maweni says that it has delivered on its promises. Say Maweni: “What subscribers in the local market want are cheaper calls, handsets unbundled from airtime and an end to mandatory two-year contracts.”
Unlike competing networks, Maweni says that Virgin offers month-to-month contracts. “It’s freedom of movement and transparency on pricing that were missing in this market before we came on board.”
Despite Maweni’s upbeat tone, recent media leaks suggest a wobbly take-off for VMSA – formed from a 50:50 joint venture with CellC, SA’s smallest network operator. Pressed to provide an update on subscriber figures, Maweni declines, saying that VMSA is a private company. “I’ve seen media reports suggesting that since launch we’ve managed to only attract a paltry 15 000 subscribers. That figure is way below our projection.”
He further argues that Virgin isn’t focused on subscriber figures but the quality of its subscribers’ average revenue per user (ARPUs) – the standard measure for cellphone revenue.
Compared to Vodacom, MTN and CellC subscribers (who’s blended ARPUs are sitting at around R135), Maweni says that Virgin subscribers’ ARPUs range between R290 and R300. With Vodacom, MTN and CellC literally handing away free SIM packs, the cost of a Virgin access pack is R89. “It doesn’t help to have plenty of non-income-generating SIM cards in circulation. That’s why our target is the high-end market.”
As part of its strategy to augment its distribution channel, Virgin recently added a Durban flagship store to the one already trading in Johannesburg, plus bringing the 700 retail outlets under the Edcon group on board.
With number portability set to take effect on 10 November, Maweni is upbeat about VMSA’s fortunes. “It’s too early to write us off yet. Rather give us enough time to put our house in order.”
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