There cannot be many executives who can boast that they pulled in one million customers in their first year of operations, especially in such a notoriously difficult market as Saudi Arabia.
But Mikkel Vinter, founder and chief executive of the Virgin Mobile telecoms company in the Middle East and Africa, is taking great pride in his achievement in the kingdom. He opened up there in 2014, when the Saudi regulators freed up the market for mobile virtual network operators (MVNO), and was able to announce last October that the 1 millionth subscriber had signed up for the service.
“It was a major breakthrough. We got one of two licences, and we partnered with Saudi Telecom [STC]. The regulator did a good job getting the framework just right. It shows that our model can work in the region in the toughest markets, and we can roll it out here and in North Africa. There is still lots of growth to be found,” ” says Mr Vinter.
The MVNO model is the next generation of mobile service providers. Instead of building an expensive infrastructure like the traditional operators such as Etisalat and STC, Virgin and other MVNOs rent capacity from them and concentrate on providing more focused services.
“It’s all about segmentation, providing the services for specific parts of the market. That’s the way we see the market going. Compared with the traditional operators, which use a shotgun, we use a sniper rifle to zoom in and target specific parts of the market,” he says.
Following an early career in management consulting, Mr Vinter got involved in telecoms “when I had thick hair “, he says. He honed his shooting skills around the world with mobile companies in Europe and Asia, before seeing an opportunity in the Middle East with the MVNO Nawras in Oman, where he built up a 20 per cent market share in the first 12 months of business. The business was based in the UAE from 2009.
The Middle East held a particular attraction for him. “The demographics are amazing for a youth-orientated brand. All the social changes that are going on, and the proliferation of social media and mobile data needs make it really very special. It was just a wave that swept across the region over the past few years.
“The European MVNOs are all pretty mature, and growth is flattening out. But here there is lots to go for, particularly in the next wave of expansion in services. The trend is away from network competition and into service competition,” he says.
He sees great growth opportunities especially in North Africa, where he is bidding for a licence in Tunisia, and other parts of the region, where he hopes to get to a target of 5 million subscribers in the next few years. The business also has operations in Jordan and Malaysia, but the huge markets of China and India are not targets for the time being.
“There are 50-odd countries in the Middle East and Africa, so there is plenty of potential. This has everything we would look for in a region in terms of potential growth.” he says.
The business took a gigantic leap forward in 2012 when he clinched a deal with Sir Richard Branson’s Virgin company to take over responsibility for all its mobile operations in the region. “Effectively we took on the Virgin brand in the region, and it was a major advance for us. It’s such a wonderful, aspirational brand, and well recognised in the region already, via the megastores, the airline and radio stations,” Mr Vinter says.
Virgin is the biggest shareholder in the Middle East business, along with some pretty prestigious and successful telecoms investors, and takes a very active interest in the business. “Richard Branson is very much involved in it, I see a lot of him,” he says.
So given his track record of growth, his relationship with such a well-known brand as Virgin, and Mr Branson’s good standing in the UAE, surely it can be only a matter of time before Virgin opens for business in the UAE?
“What we need is an MNVO licence, and none have been awarded here yet. We need permission from the regulator and the government to open up for business.
“The UAE is a market we feel is very interesting, and we monitor it all the time, but I’ve no idea on a timeline of when it might happen,” he says.
So while he is waiting for that market opportunity, he is happy to base the Virgin business in Dubai’s Media City. “It’s a great place to do business. We travel a lot and there’s great connectivity here. There’s also a good quality of life, which can help attract good talent from around the world,” he says.
He believes the MVNO business model is the future for the mobile business.
“The revenue stream is the same as for any traditional mobile company. Customers buy a pack and a SIM card. But we don’t have the costs of building a network. We don’t have a physical infrastructure that costs billions. We are essentially a sales, distribution and marketing machine.
“We buy spare capacity from the big companies wholesale, and then sell it retail. We buy in bulk, which gives us the ability to get a good deal, and then market out the product to different segments of the market. For example, we provide services in six different Asian languages,” he explains.
There is plenty of capacity on the networks of the Arabian Gulf countries, he says, but Sub-Saharan Africa occasionally presents challenges. “But they are adding capacity there now and it’s rarer for there to be a problem,” he says. Expansion there is also on the horizon.
“The big value now is with smartphones. We’ve moved away from the desktop and pretty soon you’ll be able to do everything on your smartphone. We’re going heavily digital and data, although voice traffic is still holding up. People are still making phone calls,” he says.
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