Thursday, 4 October 2012

How Virgin RSA missed the boat first time round...and why it will again

Virgin Mobile South Africa is re-launching itself. After six years ago, it has failed to win the hearts-and-minds of mobile phone users. With the emphasis on ‘per second’ billing, it set-out to capture 10 percent of the local market within three years, but has found itself with just 0.6 percent.
But now it plans a fresh start, with a new - majority - shareholder in the form of Middle East-based mobile virtual network operator FRIENDi, and with a new CEO. With the first month completed, Jonathan Marchbank is implementing a three-year plan.

This time he only wants 1.5 percent of the current mobile market, with some 600,000 new subscribes to lift Virgin’s total to the one million mark. New and improved voice and data packages, as well as the introduction of new loyalty programmes and value-added services are seen as the key.

AMETW’s Roy Johnson cites three, related reasons why Virgin has not become a major player in the South African market.

These are: slow progress in removing the primary obstacle of high interconnect fees; a failure to capture or possible overestimation of the youth market potential; and a slightly uncomfortable fit between Virgin’s disruptive business approach and the local conditions of consumer and regulatory attitudes.

It is not Virgin’s fault that ICASA is under-funded, under-staffed and not as authoritative as a regulator should be. Without timely and assertive support from regulators, an MVNO model is disadvantaged.

The youth market was essential to Virgin’s success in the UK and the company has sought the same opportunities in other markets. In South Africa, there is an affluent youth market but it is niche. Assumptions about the developing middle-class segment were made that have not been validated in practice, thanks to global recession.

Finally, South Africa is not a mature market where Virgin’s ‘shake up the market’ approach yields a unique advantage. Arguably Knott-Craig’s deployment at Cell C – the hosting mobile network operator and one time share holder in Virgin – has taken on this mantle. Virgin has had little to offer that had not already been seen from Cell C or which could not be negated in impact by reactive price-cutting or new service offerings from the incumbent MNOs. An MVNO’s success depends on beating prices.

The MVNO Directory lists six mobile virtual network operators active in South Africa, although it notes that two are more correctly resellers or branded operations. For more, see

For more about Virgin's planned relaunch - and why Cell C is now a real threat to Virgin -  see 'Virgin readies to sell its new vision thing' in 'Africa & Middle East Telecom-Week' dated 4 October 2012. 

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