Gulf States Buy Stake In Virgin Mobile’s Middle East Unit

Gulf Investment Corp (GIC) will invest $50 million in Virgin Mobile’s Middle East operation, a sign that the region may be ready to open up to more competition as the company looks to expand into new markets.

Richard Branson’s Virgin Group and GIC will be the joint largest shareholders in Virgin Mobile Middle East & Africa (VMMEA), which holds mobile virtual network operator (MVNO) licences in Oman, Jordan and South Africa.

GIC is wholly and equally owned by the Gulf Cooperation Council (GCC) countries – Saudi Arabia, Kuwait, Qatar, Oman, Bahrain and the United Arab Emirates.

So far, however, only Saudi and Oman are open to MVNOs, which lease excess capacity from conventional telecoms operators, usually in return for a percentage of their revenue.

“We expect at least one new launch in 2013 and we have pretty interesting pipeline for 2014 as well,” VMMEA Chief Executive Mikkel Vinter said.

VMMEA is among the bidders for three MVNO licences up for grabs in Saudi Arabia. The kingdom has set a bid deadline of May 4 and will announce the winners 12 weeks later.

“We are putting a lot of resources behind it,” Vinter said. “Part of this new funding will be allocated to Saudi.”

Such virtual networks are widespread in Europe, but regulators in the Gulf have been reluctant to open their markets to increased competition because most of the 15 mobile operators are ultimately government-controlled and are often a key source of state revenue.

“Timing can be debated and there are country-specific considerations, but a few years down the road we expect all GCC markets to have MVNOs and for it to spread further out into the Middle East and Africa,” Vinter said.

VMMEA was created in June 2012 when Virgin Group and Friendi Group combined their regional businesses. It has a little more than a million customers, but Vinter says that it aims to raise this to 10 million within five years.

The company operates under the Friendi brand in Oman and Jordan, while Virgin Mobile is used in South Africa.

Though GIC and Virgin will hold an equal share in the company, Vinter declined to reveal the size of their stakes.