P4 entered into a preliminary agreement for the sale and acquisition of shares in Virgin Mobile Polska. The transaction price was set at PLN 60.7m. Virgin Mobile is one of the largest MVNOs on the Polish market. However, the operator has recently experienced problems with profitability and customer outflow.
P4 buys Virgin Mobile Polska for PLN 61m
In an investor announcement, Play Communications announced that on April 22nd, its subsidiary P4 concluded a preliminary agreement for the sale and purchase of shares in Virgin Mobile Polska – a virtual operator based on the Play infrastructure. The transaction price was set at EUR 13.4m (PLN 60.7m). The purchase of shares in MVNO will be financed from the company’s own resources and based on available Play external financing. The acquisition of Virgin Mobile Polska by P4, in accordance with antitrust law, requires the approval of the UOKiK. According to the information of Rzeczpospolita, after the successful acquisition Virgin Mobile will retain its brand.
As early as in the beginning of 2018, the Play network announced in a communiqué that it signed a number of agreements with Virgin Mobile Polska, which provided financial support to MVNO in difficulty. The signed agreements also granted Play, among others, an option to acquire all shares in Virgin Mobile Polska by mid-2020.
The purchase of Virgin Mobile Polska is an opportunity for the shareholders of P4 to recover some of the money invested in MVNO. According to the financial statements for 2018, the company had over PLN 90m in debt to them.
Virgin Mobile Poland: problems with profitability and customer outflow
Virgin Mobile Polska is one of the largest MVNOs in Poland, which has managed to build a subscriber base of several hundred customers over the years (the brand is present on the Polish market since 2012). This is a kind of success, taking into account the fact that the market of mobile services provided in the MVNO model is not a business-friendly market. The strong, monopolistic position of infrastructure operators creates a barrier to the development of this type of services. However, Virgin Mobile Polska has recently struggled to maintain financial profitability and the outflow of customers.
Various information indicates that at the end of 2018 Virgin Mobile supported 390,000/ 415,000 SIM cards, down by 40,000/15,000 cards compared to 2017. VMP’s management announced that it will exceed the threshold of 0.5 million users in 2018. In 2019, the operator continued to lose customers. At that time, about 20 thousand customers were lost. The vast majority of SIMs in Virgin Mobile’s base are pre-paid cards (ca. 85%), which do not guarantee the operator regular revenues.
Virgin Mobile Polska showed a slight revenue growth in 2018. The company’s revenue was then less than PLN 98.4m, 1% more than in 2017. For comparison, in previous years the company achieved revenue growth: 18% i 120%. At the same time, Virgin Mobile generated much better operating results. The company’s operating loss shrank from PLN 22m to PLN 3m, and at the EBITDA level the company managed to generate a positive result in contrast to the three previous years. However, Virgin Mobile’s net result deteriorated significantly – in 2018 the company reported a loss of PLN 40m. This was a result of high financial losses.