Virgin Mobile enters into the MVNO friendly Malaysian, via the Friendi brand | Image: Friendi.

Virgin Mobile’s entry into the MVNO friendly Malaysian market, via its Friendi brand, not only brings up some interesting issues from past Virgin Mobile endeavors in Southeast Asia, but also the question, is the Malaysian MVNO market becoming too bloated?

Virgin Mobile Middle East and Africa made its debut in East Malaysia last week, via its Friendi brand, in a bid to expand its operations in the South East Asia region.

Virgin Mobile Middle East & Africa (VMMEA) is the holding company for Virgin Mobile’s expansion into the Middle East and Africa regions. VMMEA was first formed in 2006 and is headquartered in Dubai.

The company was renamed in 2012 when Virgin Group and Friendi Group combined their shareholdings in Virgin Mobile South Africa and Friendi Mobile businesses. The company manages two consumer facing brands: Virgin Mobile and Friendi Mobile.

Back then, Friendi’s CEO, Mikkel Vinter told Reuters "We have a target of growing to 5 million customers by 2015, so adding about a million customers per year for the next three to four years, partly by growth in existing markets, but also reasonably fast expansion across new markets. We have an ambition to get to 10 markets from the four we have today within a three- to four-year timeframe. We are looking at some markets in the Middle East, North Africa, Sub-Saharan Africa and in South Asia,"

Today VMMEA has operations in South Africa, Oman, Jordan and now Malaysia. It also operates an outsourced B-brand in Saudi Arabia.

Friendi in Malaysia is leasing capacity from Maxis and U-mobile (3G service), since the two local operators made a network-sharing pact last year. Its local Malaysian partner is Kumpulan Perangsang Selangor Bhd, the Selangor State Investment Arm holds 30 percent.

Second try in Southeast Asia

It is not the first time that Virgin Mobile enters Southeast Asia. Virgin Mobile Singapore was the first, of what was supposed to have been a pan-Asian mobile rollout for Virgin Group Ltd.

In a 50:50 joint venture with Singapore Telecommunications Ltd. (SingTel). The two companies had earmarked U$1 billion to roll out services in Hong Kong, Taiwan, Malaysia, India and China through a company called Virgin Mobile (Asia) Pte. Ltd.

Virgin Mobile Singapore started operating as an #MVNO (Mobile Virtual Network Operator) in October 2001, leasing network from SingTel and SingTel services that were rebranded in Virgin's youth-oriented style.

Managing Director of Virgin Mobile Singapore back in 2001 was Jonathan Marchbank, who today is in charge of the newly opened operation in Malaysia, where he holds the position as Friendi’s mobile Malaysia Chief Executive Officer.

Despite an investment of U$100 million the MVNO managed only to sign up around 30,000 subscribers, or around 1 percent market share and operations were closed down by October 2002. Failure of the joint venture was attributed to a saturated mobile market, Virgin Mobile's positioning as a "premium" brand while Singapore’s young consumers, (or their parents who paid for the services) preferred the lower prices (especially on SMS) of the existing operators.

Déjà vu

Interestingly the idea about a regional MVNO was picked up years later by a former Malaysian CFO of Richard Branson’s Virgin Records, - Tan Sri Anthony Francis "Tony" Fernandes.

Tony Fernandes is the co-founder of Tune Group Sdn Bhd., a Malaysian leisure and entertainment corporation. Its subsidiaries include services modeled after Virgin e.g. Tune Money, the budget airline Air Asia, Tune Tone, and the MVNO Tune Talk.

Tune Talk is a Malaysian MVNO launched in August 2009, on the Celcom (Malaysia) Berhad network. Technically, Tune Talk is an MVNO although Celcom controls the largest equity stake in Tune Talk with over 38 percent while 35.7 percent is held by Tune Ventures Sdn Bhd, of which Tony Fernandes and Dato' Kamarudin Meranun jointly holds a 70% stake.

Upon launch in 2009 Tune Talk’s CEO, Jason Lo told Business Times that Tune Talk hoped to sign another mobile virtual network operator (MVNO) deal with an overseas operator over the next 12 months, followed by another MVNO deal with a foreign operator every six months. "We are looking at Indonesia, Singapore, Thailand and other Southeast Asian countries".

However, as of 2013 the MVNO has so far launched in Indonesia and through a joint venture with the MVNO iKool in Thailand.

Same same but different

Although the main business of Virgin and Tune Group seems to be based on a similar model, Friendi has chosen a different strategy for its entry into the backyard of its former employee, and Tune Talk is choosing countries for MVNO launch based on Air Asia landing permits, as it relies on its bonus/reward program.

It will be interesting to follow the two brands as they try to expand to other countries in the region. MVNO’s is still considered “new” and a “trend” by many of the mobile operators in the region and best practice seems to be to ignore its existents, while others are just interested in selling airtime without any co-operation at all. Tune Talk hit the latter of those in Thailand ending up on a network that wasn’t.

Culture and user behavior is very different in the region. Virgin Mobile’s “Rock star” approach might not fly in Bhutan, while young professionals in Thailand probably don’t care about Tune Talk/Air Asia’s rewards program when they are used to high class products and services. On a similar note we saw religious issues when one of the two telecom licenses in Myanmar was awarded to a company with headquarter in Qatar. This will not be an issue for Friendi as Malaysia already has strong cultural and trade links with the Middle East markets where VMMEA has the bulk of operations.

Malaysia: MVNO Friendly but fast becoming bloated

With the entry of Friendi along with Clixster and Teline last month, the Malaysian market is slowly becoming bloated with 14 MVNO’s and four MNO’s fighting for market share among the 40+ million mobile subscribers.

Host: Celcom

• Tune Talk (Celcom 38%)
• XOX
• Merchantrade (Celcom 20%)
• Redone
• Smart Pinoy (PLDT 51% - Celcom 49%)

Host: DiGi

• Happy Prepaid (owned by DiGi)
• Tron
• SpeakOut Wireless (7-Eleven Malaysia)
• Clixster
• MY Evolution (M2M MVNO)

Host: Maxis

• Salamfone
• Telin Malaysia (Telkomsel Group Indonesia)
• Friendi

Host: U Mobile

• Buzz Me
• Friendi

According to Malaysian Communications and Multimedia Commission, the mobile penetration rate was at 143.4% in the second quarter of 2013.