Virgin Mobile Middle East & Africa (VMMEA) has launched virtual telecom services in Malaysia, teaming up with the south east Asian country's No.4 operator U Mobile and stepping up competition in an already crowded market.

Dubai-based VMMEA, part-owned by British entrepreneur Richard Branson's Virgin Group, is a mobile virtual network operator (MVNO).

These do not own the networks they use to provide communications services but instead lease capacity from conventional operators, usually paying them a percentage of their revenue as well as fees.

VMMEA - holder of MVNO licences in Saudi Arabia, Jordan, South Africa and Oman - will operate under its brand Friendi in Malaysia, which usually targets foreign workers.

"Malaysia has strong cultural, trade and tourism links with the Middle East markets where VMMEA has the bulk of operations," VMMEA chief executive Mikkel Vinter said in a statement.

The company enters a crowded Malaysian telecoms market, which already has four mobile operators and other MVNOs. Mobile penetration was 143 per cent at the end of June, according to data from the country's telecom regulator. This is little changed from the end of 2012, indicating stagnating subscriber growth.

Yet the prospects for MVNOs in Malaysia are promising, according to Paul Budde, the managing director of Sydney-based telecommunications consultancy BuddeCom.

"There is a supportive regulator, an open market and mainstream operators prepared to work with MVNOs," said Budde. "The prepaid tourist market looks to be promising for MVNOs," he added.

Friendi launched services on U Mobile's network this week. U Mobile has 7 per cent market share according to BuddeCom.

Maxis is the market leader with 37 per cent, Celcom - a unit of Axiata Group - has 34 per cent and DiGi.Com 28 per cent.

VMMEA owns a controlling stake in Friendi Malaysia, with state investment fund Kumpulan Perangsang Selangor, a minority stakeholder.

Vinter declined to provide further details, but a September report from Business Monitor International (BMI) said VMMEA owns a 65 per cent stake in the MVNO, with 30 per cent held by Kumpulan Perangsang Selangor and the remainder by Samena Telecom.-Reuters