SingTel Mobile and Virgin in billion dollar cellular venture

Virgin Mobile (Asia) will have an initial war chest of $100m and function as a regional virtual mobile network operator

With an eye for the combined 55 million strong cellular market of Singapore, Hongkong, and South Korea, SingTel Mobile and Virgin Management Ltd (Virgin) have signed a Memorandum of Understanding (MOU) to create a billion dollar venture to offer cellular services throughout most of Asia and Internet services in Singapore.

SingTel Mobile and Virgin will negotiate and finalise definitive agreements by August 2000. SingTel Mobile and Virgin will each have a 50 per cent shareholding in a new enterprise, Virgin Mobile (Asia) Pte Ltd, to be headquartered in Singapore.

For the purposes of the MOU, both parties have agreed to an initial start-up valuation of $1 bn. The first tranche of $100m (£67.36m) will be provided equally by both shareholders on completion of the definitive agreements. It is expected that Virgin Mobile will introduce services in the first quarter of 2001.

The initial target markets are Singapore, Hongkong and South Korea. These are three of the most developed economies in Asia where demand for cellular services remains high. The combined population of these three markets exceeds 55m and the average cellular penetration of less than 50 per cent still lags behind the 70-odd per cent found in Scandinavian countries like Finland and Norway.

Virgin Mobile will function as a regional virtual mobile network operator, buying cellular airtime, on a wholesale basis, from a leading local cellular service provider in each market. It will, however, manage its own marketing, billing and customer care functions.

"Virgin Mobile in the UK launched last November as the world's first virtual mobile network operator, and it is this model that we are going to use in the Asian market, with a strong emphasis on customer service, value, and product innovation," added Branson.

According to a local analysts, besides this being a marriage of Virgin's strong brand name and SingTel's technical expertise, the fresh branding would also avoid the government stigma which plagues the SingTel brand. The union will also allow SingTel to propel its presence in other markets without buying telecom assets.

In the future when SingTel does acquire cellular companies in regional markets, it will already have an entity (Virgin Mobile) that will buy some cellular capacity.

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