Virgin Mulls S.African Airline; Eyes Mobile Growth

By Reuters Posted 08 August 2006 @ 05:03 pm EET     Print     Reprint     E-Mail     Comments

JOHANNESBURG (Reuters) - British entrepreneur Richard Branson's Virgin group may launch a South Africa-based low-cost airline and hopes to open Virgin Megastores in Africa's biggest economy, the head of Virgin Mobile South Africa said on Tuesday.

Chief Executive Sajeed Sacranie also said in an interview the music-to-airlines group had signed up just 12,000 customers to its six-week old South African mobile service but hoped to win 10 percent of the 30-million strong market within three to five years.

"There are two areas I would say are looking interesting -- one is a regional low-cost airline and the other is Virgin Megastores," Sacranie told Reuters. "Africa is gradually coming out of the doldrums and there is huge growth potential."

Sacranie said the airline, which he described as still "a twinkle in my eye", would link South Africa with other countries in southern and central Africa, undercutting national carriers and competing with no-frills South African airline Kulula.

Virgin runs an airline in Nigeria.

The company already operates upmarket gyms in South Africa and its mobile business secured a long-coveted foothold in the country when it launched a joint venture with unlisted operator Cell C in June.

It has also launched a credit card joint venture with banking group Absa, South Africa's biggest retail lender, majority-owned by Barclays.

Sacranie hopes to bolster the world-famous brand in South Africa by launching four flagship music and entertainment Virgin Megastores in Johannesburg, Pretoria, Cape Town and Durban. He did not give a timescale for the project.

As South Africa's fourth mobile operator, Virgin Mobile piggybacks on Cell C's network instead of building its own and aims to lure upmarket customers from other networks with simple pricing structures and superior customer service.

"We feel the market lends itself to the Virgin way -- which is shaking the train up a bit with a much more customer-centric approach," Sacranie said.

Virgin has signed up 12,000 customers since launching on June 22 -- a fraction of South Africa's 30 million subscribers but in line with expectations, said Sacranie, who expects the company to break even in two years.

The company offers one flat rate for peak and off-peak times, one-month contracts, per-second billing and a pledge not to ratchet up call costs to subsidise free handsets -- an accusation levelled at other operators by consumer groups.

Sacranie says existing operators Vodacom -- owned by Vodafone and fixed-line company Telkom -- MTN and Cell C have already hit back with offers of their own, but said he did not predict an all-out price war.

Virgin has no immediate plans to muscle in on new mobile markets on the world's poorest continent after a failed attempt to buy Nigerian network Vmobile with Vodacom, but Sacranie said the company was keeping an eye out for other opportunities.

"Africa is an intriguing place but there are a lot of risks out there," he said. "We are actively looking at this kind of stuff but not taking active steps."