Money News

Virgin Mobile France targets first profit - CEO

PARIS (Reuters) - France’s biggest mobile virtual network operator (MVNO) Virgin Mobile’s push into high-end packages in June has boosted its profitability and will help it post its first operating profit next year, its CEO told Reuters.

Chief Executive Geoffroy Roux de Bezieux said in an interview on Thursday that Virgin Mobile would reach 10 percent EBIDTA margins in a few years.

“The launch of our Paradyse offers, which include unlimited mobile Internet, is part of our strategy to move into higher-value market segments,” he said.

Virgin Mobile’s move out of its traditional youth niche comes as France prepares to approve a fourth mobile phone licence on Friday, bringing more competition to Europe’s third-largest telecom market.

Internet service provider Iliad is expected to receive the licence. Virgin Mobile had considered bidding for the licence along with cable operator Numericable, but pulled out in October citing regulatory concerns.

The arrival of a fourth operator in France will create another rival for Virgin Mobile by around 2011 when Iliad is expected to launch its service. Although Virgin is France’s biggest MVNO, its 3 percent market share, or 1.6 million clients, is dwarfed by the three main operators.

Like other MVNOs, Virgin Mobile does not own its infrastructure. Instead it negotiates wholesale rates and pays operators like France Telecom Vivendi’s SFR and Bouygues Telecom to move voice and data traffic on its behalf.

In theory, MVNOs are supposed to spur competition in the market, by launching niche offers and pushing down prices for pre-paid services.

But since MVNOs were introduced in France in 2004, they have struggled to carve out a place in the three-player mobile market hampered by unfavourable regulations.

As of September 2009, MVNOs only held 5.4 percent of France’s mobile market, according to France’s telecom regulator ARCEP.

That is low compared with other countries in Europe, such as Germany and the UK where MVNOs have around 15-20 percent market share.

But conditions for MVNOs in France have improved in recent years, said de Bezieux. With its move up-market and into unlimited voice and data offers, Virgin Mobile hopes to grow to 2 million customers next year.

The arrival of Iliad may even end up helping Virgin Mobile, he argued, by pushing down the wholesale prices it pays to the larger operators to move its traffic.

“The wholesale prices are continually declining in mobile, and that will accelerate with the arrival of Iliad,” he said. “There will be more competition for the subscriber on the retail end, but I hope it will be offset by lower wholesale prices.”

Already Virgin’s move up-market is bearing fruit. Average revenue per user (ARPU) is usually between 25-30 euros ($36-$43) per month, he said, while Paradyse subscribers spent about 35-40 euros.

“Our brand is identified with youth but not with teenagers,” he said, adding that the typical client was 29 years old. “We are a global brand that can appeal in all market segments.”

Virgin Mobile is a unit of Omer Telecom, which is owned by shareholders Virgin and Carphone Warehouse.

Reporting by Leila Abboud and Marie Mawad; Editing by Sharon Lindores