The cellphone and financial service sectors are in for a shake-up following the entry of Virgin into both markets. Virgin launched its mobile offering on Thursday and next week will see the unveiling of its credit cards.
Virgin Mobile CEO Sajeed Sacranie says help is on the way for consumers who are fed up with South Africa’s existing mobile operators, which use a minefield of tariff packages, long-term contracts and handset subsidies to disguise the actual cost to the consumer.
“Consumers are currently locked into contracts where they are offered bad service, uncompetitive rates and think they’re getting a free phone, but are actually paying for it through the nose,” says Sacranie. Virgin Mobile plans to tackle these operators head-on through three simplified, transparent tariff packages, month-to-month contracts and top-notch service. “Currently it’s a take it or leave it attitude,” says Sacranie about South Africa’s mobile operators.
Virgin’s entry into the mobile market occurs against the backdrop of investigations into excessive pricing and a lack of transparency in the sector by the South African regulator.
The Independent Communications Authority of South Africa held public hearings into mobile phone pricing in May this year, and handset subsidies in August last year.
Mobile number portability is expected to be introduced later this year, which will allow consumers to switch operators while retaining the same number, but Sacranie says Virgin has not based its entry into the market on this alone. “We see [number portability] as an opportunity; we are not predicating our business on that. We feel there are still enough people who would move anyway, given that they are getting such bad service and crap rates.”
Virgin’s value add will come with its per-second billing. “You are going to be billed per second from the first second, which means we never really steal your seconds. We don’t round up without you knowing it,” says Sacranie. “A huge number of packages in this market are based on a per-minute or per-half-minute round up, which means the consumer ends up paying about 20% more than they should be or they think they are. It can be up to 50%, depending on the types of calls they make.”
Consumers are often overwhelmed with the “fog” that is the hundreds of tariff offerings. “Pro Call 100, My Weekend, Your Weekend, Every weekend, Business Chat, Casual Chat, never chat, always chat … We have three rates and that is where we stop,” says Sacranie.
Virgin Mobile’s three packages require a monthly spend of R500, R100 or a tariff option that requires no monthly spend commitment. Each package has a different call rate for the first five minutes of every day but, after the subscriber has used their first five minutes, the calls are billed at R1,55 whether the call is off-peak, on-peak or cross-network.
Pre-paid customers will be billed at the same rates as contract customers and Virgin’s voice and data traffic will be carried on the Cell-C network, following the setting up of a 50-50 joint venture.
Sacranie says Virgin is targeting a 10% market share within five years and has its eye on other lucrative mobile markets in Africa, such as Nigeria. But it aims to perfect its model in South Africa first, the only developing country market it has entered so far.
Virgin Mobile, which currently boasts more than 8,5-million subscribers worldwide, first launched in the United Kingdom in November 1999, and has subsequently launched in Australia and the United States.