Virgin to launch in SA 'soon`

Johannesburg, 23 Jun 2005

Talks between Cell C and the Virgin Group are going well, and the companies expect to soon sign a deal that will see them launch a 50/50 partnership.

According to Cell C`s head of strategy, Jonathan Newman, Virgin will enter the South African market as an enhanced service provider, rather than a mobile virtual network operator, as many have previously speculated.

"Because the deal is a joint venture (JV) process, we have jointly taken a decision not to make any public comment until after the agreements are signed and a date has been set for the launch," says Newman.

"What I can say is that the negotiations are ongoing and have been progressing well and we expect to be able to launch within the next few months."

It is anticipated that Cell C will leverage the partnership to allow it to chase the more affluent consumers and business users who have traditionally shied away from the third cellular operator.

Increased competition

According to Andre Wills, a telecoms analyst at Africa Analysis, it is a deal that will be good for the country, as it will increase competition in the telecoms arena.

"It is not surprising that Cell C is trying to tie up a deal with Virgin, as it is a strong and well recognised global brand which the operator will be able to leverage off of," says Wills.

"It must also be remembered that Virgin will not own its own network, it will increase its market share through a stratified range of products, as its forte has always been the prepaid market."

Asked whether he thought the advent of mobile number portability (MNP) - which had been mooted as occurring before the end of the year, although this appears to have since been delayed - would help the Cell C/Virgin JV to capture customers from the other operators, Wills says it is possible.

"However, one needs to remember that MNP works both ways, so it is also possible that the JV will be the one that loses customers.

"MNP hasn`t fundamentally changed most markets where it has been instituted, with the net gains and losses not being very big for operators in these regions. It has, however, allowed greater choice for customers, which is the most important thing."

BEE stake

In other Cell C news, the Independent Communications Authority of SA (ICASA) has granted the company permission to sell 15% of its shares currently held by black economic empowerment (BEE) consortium CellSaf.

According to Cell C, the sale will reduce CellSaf`s shareholding from 40%, leaving it with a 25% debt-free and unencumbered stake in the company.

The 15% shareholding is expected to be sold to the newly formed Middle East-based group, Lanun Securities, although Cell C still needs approval from ICASA for the actual transfer of shares, as the regulator must decide whether it is happy with the company purchasing the shares.

However, the operator feels that, since there were no initial objections to the alterations to its licence conditions - which required a 40% BEE shareholding - it sees no reason why ICASA would take issue with its choice of buyer.