Brazil approves Virgin Mobile venture with Telefonica

RIO DE JANEIRO Wed May 28, 2014 7:10pm EDT

RIO DE JANEIRO May 28 (Reuters) - Regulators cleared Virgin Mobile Brasil on Wednesday to market cell phone plans in the country using Telefonica Brasil SA's mobile network, adding competition in a stagnant telecommunications market.

The local unit of Virgin Mobile Latin America, run by Richard Branson's Virgin Group, struck a deal in January to lease capacity from Telefonica and plans to start operations early in 2015, Phil Wallace, co-founder and chairman of the Virgin unit, said in an interview on Wednesday.

Wallace said the company was targeting 15- to 30-year-old consumers with prepaid plans, a strategy that has yielded 1 million Latin American subscribers since Virgin started Chilean operations in 2012 and arrived in Colombia last year.

Virgin is launching its Brazilian venture as the country's crowded wireless market slows sharply from a recent boom, when falling prices and low unemployment fueled service growth to more than 270 million mobile connections in a country with fewer than 200 million people.

Revenue growth has slowed to a crawl over the past year, due to tighter credit and eroding consumer confidence, reinforcing expectations among some analysts of consolidation among Brazil's major four mobile carriers.

In coming years, Wallace said he expects 10 to 15 percent of Brazil's mobile subscribers will use so-called "virtual operators" such as Virgin, which use third-party networks to sell plans under their own brands.

Virgin Mobile Latin America recently raised $86 million in fresh capital and took out a $42 million credit line to start service in Brazil and Mexico, which it will launch this year, the company said. (Reporting by Luciana Bruno; Writing by Brad Haynes; Editing by Richard Chang)

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