A new deal

Last June, Dubai-based FRiENDI Group entered into a strategic partnership with Virgin Group, which saw the UK conglomerate combine its South Africa mobile virtual network operator (MVNO), Virgin Mobile South Africa (VMSA), into FRiENDI Group’s portfolio of MVNO operations. The creation of Virgin Mobile Middle East & Africa (VMMEA) resulted in the VMSA management reporting line being extended to VMMEA’s Dubai headquarters, from where operational and strategic direction has been rendered, and the results on the ground have been nothing short of exceptional

Anton Landman was appointed CEO of Virgin Mobile South Africa in July 2013, having previously been the company’s CFO

Before the deal with FRiENDI Group, Virgin had penned its MVNO agreement in South Africa with the country’s third network operator, Cell-C in 2006, and Virgin Mobile South Africa (VMSA) commenced operations in June that year. On paper, it appeared the MVNO would do well in the country, given the aspirational, youth-oriented image of the Virgin brand, which was already positively associated with the Virgin Active fitness clubs and Virgin Airways airline.

However, VMSA’s operational reality did not match expectations, with the company struggling to gain traction. It was against this backdrop that a new management team was identified and put in place following the combination with FRiENDI Group last year.

This new experienced management team is led by Anton Landman, who previously held the position of CFO until being appointed CEO in July. A number of further key appointments include VMSA’s COO, Jason Hair, who was previously with Thomson Reuters as MD for the Direct Sales Business for Europe, Middle East and Africa; and who also previously served as director of Customer Care at Virgin Mobile Australia.

VMSA’s financial director, Lance Wayne, is a chartered accountant with 17 years of post-qualification experience in the advertising, media and travel sectors in South Africa and the UK.

Since the middle of last year, VMSA has been focussed on improving the all-round experience to its customers, and in order to achieve this has gone about replacing its billing, CRM, ERP and collections systems. This has allowed the MVNO to go-to-market with an enhanced product offering, enhanced self-help facilities via USSD and web, plus improved billing and collections capabilities.

VMSA asserts that its renewed focus on customer experience is because this is one of the areas the company believes it can differentiate and offer a true Virgin experience.

The company has improved its customer experience and service at every touch-point across the business with the idea being to make the relationship as easy as possible, so that customers enjoy doing business with VMSA.

In early 2013 VMSA launched a revamped product set, the main focus being on its prepaid offer.

For people wanting a new phone, VMSA introduced rate plans for its post-paid subscribers that were simple and offer great value. The company also offers a range of Bring Your Own price plans.

The addressable market in South Africa is also of significant strategic importance given that it is estimated that just 25 per cent of the total market earn more than ZAR10,000 (US$1,000) per month, with a large percentage of this market having a predisposition to VMSA. The MVNO has segmented this demographic and aims its products and services in a targeted way to its identified segments.

VMSA has also reviewed its channel strategy and overhauled its distribution channels across the board, in order to identify commercially viable partnerships.

The MVNO’s own stores have remained a focus as the company can offer a full service experience for its customers as well as showcase its entire range of products and services.

This year the company developed a new store design blueprint and launched a flagship store in Braamfontein, Johannesburg with another to follow in 2014 in Cape Town. VMSA is refurbishing all of its existing stores to adhere to the new blueprint, with key store locations in Gauteng; Western Cape; Kwa-Zulu Natal; and Limpopo.

Virgin Mobile South Africa unveiled a flagship store in the Braamfontein district of Johannesburg earlier this year, which stands as a blueprint for all its future outlets

Supporting the brand on the ground is another area of heightened activity, with VMSA undertaking customer activations in key catchment and high traffic areas. The company also makes extensive use of media including PR, social media and word-of-mouth to generate a buzz around the brand.

These measures appear to be generating the desired positive results with VMSA having disclosed that from losing over US$1 million per month prior to the formation and involvement of VMMEA, the MVNO has now become EBITDA positive on a monthly basis, with a forecast that it will reflect positive EBITDA for the year for the first time ever in 2013.

Other encouraging metric improvements include the fact that post-paid ARPU has increased by 9% while prepaid ARPU increased by 30% as a result of the implementation of the aforementioned measures. Operational costs have also reduced by 20% due to various operational efficiencies being introduced.

Having attracted around half a million customers in its first seven years of operation, VMSA’s local leadership team believe the MVNO is now capable of growing its installed base to over one million in the future, and will be able to sustain that number of users on an on-going basis. It will be interesting to follow VMSA’s further developments, and there are definitely encouraging early signs that the turnaround strategy driven by VMMEA is reaping positive results.