Virgin Mobile SA has been placed under business rescue, a company filing at the Companies and Intellectual Property Commission (CIPC) has shown. 

Virgin Mobile is a mobile virtual network operator (MVNO), which leases the network infrastructure of an existing and established mobile operator to offer data and voice services to customers. It does everything except run its own mobile network. 

Virgin Mobile’s business status has been changed to “business rescue” in the CIPC filing, indicating that the company is financially distressed because it is under a process to restructure its affairs. The objective of business rescue allows a company to continue operating while it is being rehabilitated, cutting costs and saving jobs in the process.

Registered companies are required to submit a notice to the CIPC when embarking on a business rescue process. The CIPC is responsible for the registration of companies in SA. 

According to the Virgin Mobile CIPC filing, which was seen by Business Maverick, John Henning and Peter Thompson were appointed as business rescue practitioners on 23 September. The reason for Virgin Mobile’s business rescue process is unclear. Virgin Mobile, Henning, and Thompson were not immediately available to comment. 

Virgin Mobile confirmed in the statement on Friday 6 November that it has voluntarily submitted itself for business rescue, blaming the Covid-19 pandemic for worsening its financial situation. Virgin Mobile once had close to 500,000 subscribers but this is now estimated to be at less than 200,000.

“Although we were making good progress [to stabilise Virgin Mobile], the business was already in a vulnerable position when the pandemic hit,” it said. 

“Covid-19 has exacerbated the issues we were facing and unfortunately, we have been left with no alternative but to apply for voluntary business rescue in a bid to protect all our stakeholders and to create a structured environment within which the company can safely continue its growth.”

Virgin Mobile is hoping to have a business rescue plan ready in November and have it approved by creditors during the same period. 

Virgin Mobile was the first MVNO launch in SA in June 2006 by piggybacking on Cell C’s network. It was launched as a joint venture between Richard Branson’s Virgin Group and Cell C. Branson and his Virgin Group are no longer shareholders in the company. 

Virgin Mobile was the first MVNO launch in SA in June 2006 by piggybacking on Cell C’s network. It was launched as a joint venture between Richard Branson’s Virgin Group and Cell C. Other MVNOs have since launched, including FNB Connect, Standard Bank Mobile, and Mr Price Mobile.

But MVNOs have not had resounding success in SA. The Competition Commission launched a two-year investigation into SA’s mobile network market in an attempt to lower data prices and promote fair competition. The commission’s final report found that MVNOs have struggled to grow because larger mobile operators charge them high and unfair prices to access their network –  resulting in skewed barging power dynamics that are in favour of larger operators.  

“As a result, MVNOs are simply not a material feature of the South African market and have remained niche operations designed to provide benefits to support the retention of other customer bases,” the competition watchdog said in its final December 2019 report. 

The commission recommended that larger mobile operators reduce roaming fees, including those of MVNOs. DM/BM

• Story updated to include Virgin Moblie’s comment.