Seven years have passed since Virgin Mobile landed in Mexico. It was the first virtual mobile operator (MVNO) in the country and came with the plan of having at least 10% of the total mobile market in its possession. Not only did it slip from his hands, but today it is far from being done.
Juan Vélez, CEO of the virtual mobile operator (MVNO) in Mexico and Colombia, owned by the American businessman Richard Branson, assures that his arrival did not turn out as the company imagined because, contrary to what they thought, it was not simply a matter of entering and selling, but to understand the peculiarities of the local market.
They learned their lesson. Or, at least, that’s what the executive says, who for three years has implemented a strategy that focuses on two variables, the distribution and communication of products, which has not only allowed him to increase his number of users, but also also your income. In addition to getting out of the financial downturn caused by COVID-19.
In 2019, Virgin Mobile had a growth of 5% over the previous year. 2020 was the worst moment for the OMV, as the health crisis generated a 30% drop in income. But his forecast for this year is to generate an increase in sales of more than 25% this year and, by 2022, achieve growth of up to 60%.
Regarding the number of users, the telecommunications company closed 2020 with 235,000 clients, which corresponds to 11% of the total market that MVNOs have in Mexico, according to data from the Federal Telecommunications Institute (IFT). This percentage places it as the third player in the segment, behind FreedomPop, which entered Mexico in an alliance with Dish (35%), and Oui, Elektra’s virtual mobile operator (29)%
The goal, says Vélez, was to finish 2021 with 356,000 users, which meant a 50% increase over the previous year, but by May this goal had already been exceeded with 374,000 registered customers, so now the expectation is to close with a more than 450,000 telephone lines.
Expansión: What happened after your arrival in Mexico and why was the business objective not met?
Juan Vélez: At the beginning there were expectations regarding the Mexican market, given its size, that many people would expect was simply to enter and sell. We went through a very noisy and little nutty moment, I would say. It was about understanding that the conditions for virtual mobile operations at the time we entered were much more difficult, limited, and less understood than they are now. Understanding the weight of the idiosyncrasy and the particular characteristics of the Mexican market is a fundamental principle, a virtual mobile operation can only be successful if it has operational excellence taken to the extra, that is, operating costs are very important, but important than in any other type of telecommunications operation.
This led us to enter with very high expectations, then crash into reality and land. From that learning we are, precisely, in this second wave of Virgin Mobile in the market. We have been implementing changes in the last three years that have allowed us to carry the business at the pace that we have at the moment.
E: What are the goals that you seek to achieve in the new stage of Virgin Mobile?
JV: The fundamental objective for this 2021 is to be able to return to the levels we were before the pandemic. 2020 was a very difficult year, in which our income and the number of clients decreased due to quarantines, restrictions and more. In the hardest months of the confinement, given that we have a service that is fundamentally prepaid, since we cannot move, our sales fell by up to 80% in April, May and June, the second quarter of the year, the hardest for the industry in general.
2021 is the year of recovery. Fortunately, we are doing well, we expect to be growing 25% compared to 2020, with that growth we would be a little above what we did in 2019. By 2022 we expect to be growing an additional 60%. The trend we are going on shows us that these are achievable goals at the moment.
E: What is your new value proposition for the Mexican market?
JV: A customer can be sure that by approaching Virgin they will find a competitive proposition against any other, even superior to what they can find on the market. That has not changed and that is the basis of our value proposition.
But now there are two additional variables that we have worked on and delved into. One is distribution, which is to allow customers to find our products or services where they usually are, where they usually look for them, that is why we speak of the ‘Virgin for all’. This is a service that if you go to the web you will find it, also in our mobile application, and Walmart, you will get them, in the same way if you go to the street vendors. We are a service that is available, basically, on all channels.
The other variable is the emphasis we are placing on communication. We are aware that there are still many people in the Mexican Republic who do not know about our services and products, so we are working on communicating. We have an excellent offer and the best service, but if people don’t know it, they won’t be able to enjoy it. We are combining all forms of struggle: digital campaigns, billboards on the street, point of sale material, radio commercials and event sponsorships, all obviously at our scale and within our possibilities.
E: Does the opening of the market after the deployment of the shared network modify Virgin Mobile’s strategy in Mexico?
JV: Competition is always good. The competition ends up getting the best of you, we welcome it and then we will see each other in the market. This does not represent a change within our strategy, we believe that our value proposition is based on what the client wants, not on how many competitors are offering the service. Therefore, that does not change anything for us, what is that the appearance of new players leads us to be much more alert to ensure that our value proposition, having a competitive offer, we are fulfilling at all times.
E: Why is the increase in OMV not reflected in their dominance of the market?
JV: Mexico has a peculiarity, which I have not seen in any other market, and that is that the large number of competitors that have come out in a period of between 12 and 18 months is very high, while their participation is miniscule. In Chile, for example, there are three operators that could be called virtual, which have emerged in the course of eight years. In Colombia, another market where we operate, there are three representative MVNOs that emerged one and two years apart. In the last eight years, three new ones have emerged that, in total, have more than 5% market share. In Mexico, as of today there are more than 50 and it is not enough to have 2%. I think the quantity is something very particular to the country.
In Mexico, the shared network has helped increase the number of MVNOs in the country. However, it is not so clear that it helps your profitability. But let’s say that in Mexico the regulation and state of the market still favors the established. It is a market that has permanence clauses, in which the service is not independent of the telephone terminal, and it is not difficult for people to discern what they pay from the telephone service, but they feel that while they pay, everything has to be at the service . That does not happen in other markets. As has happened in these, it is a matter of time, and that the market forces themselves, together with regulation, lead to a greater openness and possibility of play.
E: What must happen for MVNOs to take market away from traditional operators?
JV: For MVNOs to be more relevant in Mexico, there must be differentiated offers. Going out to do more of the same and things similar to what a network operator does does not bode well for virtual future. That is why, almost like any industry, after a boom and an emergence of operators everywhere should come a consolidation and stay in the market who are really offering a differentiator for their customers.
But, rather than taking the market away from the traditional ones, the role of virtual mobile operators is to better serve certain consumer segments. When you are a traditional and you have to go absolutely to the entire market because you have a network and spectrum to pay, you must be in everything and, as the saying goes, ‘he who covers a lot does not squeeze’ There are market segments that are likely to have better care than a traditional one could give you. That is where the role of MVNOs comes in, as a more specialized complement.
