One of the world’s most savvy and chic brand names is coming to the U.S. mobile-phone market next year.
Virtual network operator Virgin Mobile USA said it plans to ink an agreement with a carrier in the United States and offer nationwide service by the end of 2001.
“We’ve talked to all the operators in the U.S., and there is a high level of interest,” said John Tantum, president of Virgin Mobile USA. “We are engaged with a number of operators and in some cases in fairly detailed negotiations about what sort of relationship Virgin will have with a network operator.”
Virgin, which sells everything from airline services to books, has caught the attention of carriers around the world. Some 30 network operators reportedly have approached the company to broker VNO deals. They are excited about the enormous revenue prospects the Virgin name can bring to the wireless industry, especially in the third generation, where revenue prospects aren’t so certain. Virgin has deep pockets, extensive distribution channels and a large appeal to newer demographics like teenagers.
Virgin founder and Chairman Richard Branson formed his first 50-50 joint venture with U.K. operator One 2 One last year, offering innovative service offerings such as no line rentals, no monthly fees and cheaper prepaid offerings. Within seven months of launching service, Virgin added 325,923 customers.
Subsequently, Virgin has signed similar joint-venture agreements with Cable and Wireless Optus in Australia and Singapore Telecom to expand the service throughout Southeast Asia. Virgin will continue expanding in Japan, Europe and the United States, leveraging its strong brand name and unique service offerings. Branson’s goal is to become the world’s first global VNO, likely within the next 15 months.
Virgin’s strategy isn’t much different in the United States. Tantum said Virgin is searching for an equity relationship with a nationwide carrier. SingTel, for instance, agreed to contribute $450 million to its joint venture with Virgin, while Virgin Mobile put up $50 million and its brand name. The venture is valued at around $1 billion.
“There’s been a range of reactions to that,” said Tantum. “But we are very likely to have an equity relationship with a carrier. We are discussing a range of options. The appealing thing of the 50-50 arrangement to us is that it aligns the incentives. We both have the same interests in making the company successful.”
While the Virgin name receives a higher brand recognition in Europe for the variety of products and services the company sells there, it’s largely associated with the 20 Virgin Megastores in the United States. As a result, Virgin will heavily target the youth market, ages 15 to 30, through affordable prepaid offerings sold over the Internet, in Virgin Megastores and some retail outlets.
“In general, Virgin is a brand that represents youthful fun, innovation and value, and we see that the strongest market in the U.S. is in the youth market,” said Tantum. “All aspects of the proposition will be oriented toward younger people, their lifestyle and habits. In our research, the existing operator brands don’t have appeal to young people.”
Wireless Internet offerings such as entertainment news, music offers and connections to other parts of the Virgin group also will appeal to younger consumers, said Tantum. Each of Virgin’s phones in the United Kingdom come with a host of WAP services called Virgin Xtras. Customers can receive discounts on CDs, DVDs, videos and computer games as well as on appliances like dishwashers and blenders. Virgin earlier this month launched an integrated MP3 mobile phone at its V2000 music festival in London.
“Pricing and handsets will be relatively inexpensive, but fashionable and sexy,” Tantum said of the company’s plans in the United States. “We’re trying to bring in the Virgin brand and the fun and excitement to challenge the incumbent companies.”
Virgin has kept a low profile so far in the United States, establishing a small development team in San Francisco. The company took prepaid experts from former operator AirTouch Communications Inc. Tantum comes from consulting firm McKinsey & Co. in London.
Though Virgin has signed agreements with GSM carriers worldwide, Tantum said the company is open to signing agreements with carriers that use other technologies. Most of its customers won’t be globe-trotting around the world, he said.
