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Why Virgin Mobile is failing in South Africa

June 10, 2013 • Mobile and Telecoms

Out of the major mobile operators in South Africa, MTN, Vodacom, and Cell C have the market squarely in their sights. However, there is another mobile operator that is flirting with obscurity.

Virgin Mobile South Africa CEO Jonathan Marchbank (image: Virgin Mobile)

Virgin Mobile South Africa CEO Jonathan Marchbank is convinced that Vodacom and MTN is to blame for Virgin not gaining enough traction with consumers in South Africa.

“Because Vodacom and MTN have an existing base, it’s clear they basically control the retailer. If you as a smaller player go to retailers to offer choice to consumers, the retailers say it will take away from the trailing revenue stream that they already have from Vodacom and MTN because they’ll be dividing sales into four different carriers rather than two different carriers,” Marchbank told South Africa’s Sunday Times.

As a smaller player, Marchbank said that the other mobile operators are making it extremely difficult for Virgin Mobile, and called their strategies “unregulated, anticompetitive behaviour”.

In the Sunday Times report, Dobek Pater, an analyst at Africa Analysis, commented that when Virgin Mobile launched, they were already on the back-foot, as they only now have around 500 000 subscribers.

“When you are a smaller operator, you cannot offer those economies of scale and be able to develop products and services that appeal to that particular market segment, so the retailer would be reluctant to sign a contract with you,” Pater said.

Currently Virgin Mobile does not have their own network infrastructure and piggy-backs on Cell C, to whom they pay a fee. But Marchbank added that they have re-negotiated their currently terms and conditions, as he would like to make a bigger push for data.

“If I can drive more data, I can get much better pricing from Cell C. So it’s enabled us to go out with data bundles and we’re up to 300MB of data,” he concluded.

Virgin Mobile in 2012 said that it would close 30 of its 38 stores in the country as part of a restructuring phase, while the parent company was in the process of securing up to $100 million from investors and private equity groups to expand into new markets.

Charlie Fripp – Consumer Tech editor

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