French virtual mobile operator Virgin Mobile, long a bit player in Europe's third largest telecoms market, aims to grab a bigger slice of the pie by pushing smartphones and launching its first all-inclusive bundle of mobile and fixed broadband.
Chief Executive Geoffroy Roux de Bezieux said in an interview that Virgin Mobile had crossed the mark of 2 million clients by the end of August and posted its first operating profit.
Virgin Mobile has benefited from the tumult underway in the French market as the three current mobile players engage in price wars to lock up clients ahead of the upcoming entry of a new mobile operator Iliad .
France Telecom , Vivendi's SFR , and Bouygues Telecom have also started to offer so-called quadruple-play bundles of broadband, TV, fixed and mobile calling as another way to woo and keep clients.
The moves have weighed on profit margins transforming what were once seen by analysts as the most comfortable in Europe.
"The French market has turned into a bloodbath. It has become the most competitive market in Europe," he said, adding that prices have fallen 4-5 percent every quarter since middle 2010.
In contrast, prices for mobile dropped 2.8 percent a year between 2006-2009, according to France's telecom regulator ARCEP.
In such a climate, Roux de Bezieux said Virgin Mobile, which does not own its own physical network and instead pays other operators to carry its voice and data traffic, is sticking to its strategy of charging low prices and subsidising phones when linked to contracts.
It has traditionally aimed at younger users from ages 18 to 35, creating an edgy brand image via zany ads like its latest campaign featuring a chihuahua donning a red wig named Kiki.
The approach has made it the most successful of the virtual operators with roughly 3 percent of the country's 64 million mobile users, but still far behind the third biggest mobile player Bouygues with 17 percent shares.
Analysts say the impending arrival of Iliad's Free poses a real risk to Virgin Mobile, as does the recent launch of low-cost brands by France Telecom and Bouygues aimed at the same young, web saavy users that Virgin has long courted.
But Roux de Bezieux says that important differences exist between Virgin Mobile's approach and that Iliad is expected to take. Iliad has said it will prioritise on-line sales and not subsidise phones.
Roux de Bezieux said he thinks helping customers pay for mobiles remains crucial, adding that some 80 percent of its new clients sign up for contracts with subsidized phones.
While Iliad is building out its network and putting up its own antennas, Virgin Mobile plans to invest in expanding its network of stores and launching new quad play offers that bundle fixed and mobile services.
The CEO said he aimed to have about 100 stores in the next 12 to 18 months from 40 today.
Virgin Mobile, which is 47.5 percent owned by the U.K-based Carphone Warehouse, brings in 80 percent of sales in its network of 40 stores.
As for expanding into fixed-line services, Roux de Bezieux said Virgin would launch its Virgin Box quad-play offers early next year as a way to match what its rivals all already offered.
"An important part of client renewals and new recruitments are now being done via quad-play offers," he said. "You really need to have these bundles in your portfolio."
