Richard Branson, Britain’s most famous entrepreneur and founder of Virgin Group, was most likely sporting his characteristic grin as he jet-skied into Doha as part of the publicity drive for his latest venture, the launch of the Virgin Mobile brand in Qatar earlier this month.
The launch certainly merited the fanfare. Virgin Mobile Qatar, which was launched as a “brand licensing partnership” with Qtel, is likely to have a significant impact on the country’s telecoms sector, which remains at an early stage of development, with just two mobile operators, and a second fixed line operator only planned for the end of the year.
The Qatar launch of the Virgin Mobile brand, which is an established part of the mobile landscape in countries including the UK, Canada, South Africa and India, caused quite a stir, with even some senior members of the Qtel team admitting that they had been kept in the dark about the launch.
But it did not take long for the excitement to give way to a more sober appraisal of exactly what had happened. And with a degree of ambiguity over the exact definition of what an MVNO is, the decision to let Virgin Mobile into Qatar – whether under a brand licencing agreement or as a fully-fledged MVNO – was always going to upset the apple cart.
It was certainly no great surprise that Grahame Maher, CEO of Vodafone Qatar felt cheated enough by the development to take legal action against the regulator, ictQatar. As head of the country’s second telco, which launched its operations in the middle of last year, Maher and his team have worked hard to establish the company as a credible competitor against the might of incumbent operator Qtel.
Despite having gained more than 470,000 subscribers since launching, Vodafone Qatar remains at an early stage of development, with profitability some way off, which makes it easy to understand Maher’s annoyance at a disruptive model appearing in such a small market, especially when that model could potentially be in breach of licencing agreements.
Add to this the fact that MVNOs and “brand licensing agreements” such as Virgin Mobile Qatar really do have the power to change market dynamics, and it is easy to see why the development merits further scrutiny. Take Friendi Mobile in Oman for example. The company has gained some 150,000 customers since it launched last year, and the company’s CEO, Mikkel Vinter, thinks the operator could ultimately achieve a market share approaching 10%.
After paying $2.1 billion for its licence, it is vital for Vodafone Qatar to gain traction quickly, and facing competition from a powerful brand such as Virgin Mobile is unlikely to help.
Certainly, if Qatar’s regulations are proven to allow for such as venture, Qtel’s decision to enter the brand licencing agreement with Virgin will be vindicated, and the operator has a good chance of halting the decline in growth it has experienced since Vodafone Qatar entered the market.
If taking legal action fails, Vodafone Qatar may have to follow suit and look for a “brand licencing” partner to help it address segments of the population that it otherwise misses.
But whatever happens in Qatar, the development is a stark reminder to any telco, whether MNO or MVNO, of the risks they can face when entering new markets where regulations are open to widely varying interpretations.