As Virgin Mobile USA Inc. has endured, even thrived, over its five-year life, it has seen its customer base transition from a play for the 18- to 34-year-old crowd to a substantial proportion (nearly 50%) of over-35 subscribers.
The mobile virtual network operator itself has grown up too: with an initial public offering in October it has seen its freshly minted stock tumble from around $15 at its outset to about $9 last week, in the rough-and-tumble markets where the big dogs play.
Setting aside the disturbing question of whether over-35 is the “new 18,” how does an MVNO keep pace with such a shift in its subscriber base?
At the high end of its portfolio, Virgin Mobile USA has upgraded its QWERTY device offering to Kyocera Wireless Corp.’s new Wild Card handset. Kyocera also made the preceding QWERTY, known as the Switch Back (which remains in the portfolio) but, with a need for an increasingly sophisticated look, the partners forged ahead on Wild Card, which sells for $100.
More for less
That’s down from the early Switch Back price of $130, but following the principles of consumer electronics, Virgin Mobile USA’s subscribers would receive more functionality for less cost, according to the carrier.
“Our basic philosophy is to offer a range of phones,” said Jayne Wallace, Virgin Mobile USA’s VP for media relations. “We’d like to keep them priced at or below $100.”
Despite the carrier’s shifting demographic, Virgin Mobile USA’s subscribers “continue to be heavy text users,” Wallace said. And they’ve been with the company long enough to be upgrading their handsets. Virgin Mobile USA has been aggressive in luring the text-heavy crowd by first offering its “penny-texting” plan that included 1,000 text messages for $10, and more recently with an unlimited texting option for $20 per month.
The fourth quarter was a promising opportunity to offer a sleeker-looking QWERTY to music and messaging-centric subscribers who had outgrown the Switch Back, which has a “polarizing” design akin to the shape of a pickle, according to one analyst. (The Switch Back, launched in spring of 2006, was due for a redesign after a year-and-a-half on the market.)
Customizing for the customer
Wallace called Kyocera a “terrific partner” that produced the first and several subsequent Virgin Mobile USA devices over the years. As is often the case, Kyocera’s willingness to customize an iteration of one of its established handset platforms to meet Virgin Mobile USA’s specifications landed some business for the vendor, which has seen its share of the top-tier carrier portfolios vary disconcertingly over the years.
“Kyocera has been great in customizing their phones to provide the services we want to deliver to subscribers,” said Matt Berberian, director of customer experience at Virgin Mobile USA. “They respond to what our customers want.”
Kyocera, in turn, has leaped at the broader co-branding opportunities that Virgin Mobile USA offers its partners, according to both companies.
Pricing challenges
Where typical, top-tier carrier offerings tend to lure consumers with highly subsidized handsets and recoup costs on service plans, the MVNO model is somewhat different, offering handsets with lesser subsidies and luring would-be subscribers with service freebies-Wild Card purchasers get the second month of their $20 per month unlimited messaging service for free.
For Kyocera, Virgin Mobile USA offers a chance to be a recognized player in a smaller pond.
“Our sweet spot is in the regional carriers and the MVNOs,” said Tom Maguire, VP for global marketing at Kyocera.
(Split-second review: Kyocera, founded in Japan in 1959, had a diverse manufacturing beginning. The name is derived from “Kyoto” and “ceramics.” Kyocera purchased Qualcomm Inc.’s CDMA handset business in 2000. Kyocera currently supplies seven of the 13 handsets Virgin Mobile USA offers.)
“We kept hearing Virgin say it wanted a QWERTY device but not a business-like BlackBerry,” Maguire said. “We noticed that Virgin’s customer base was skewing older, perhaps based on the Virgin brand’s other businesses.”
Designer duds
The result was the more sophisticated design and added functionality of the Wild Card, which hit Virgin Mobile USA’s retail stores in mid-October and, a couple weeks later, the MVNO’s online offering.
Dedicated keys to Virgin Mobile USA’s revenue-generating services is one basic approach. The four-way button in the center of the Wild Card’s keypad offers, for instance, “VXL” for VirginXL Access (games, graphics and ringtones), “$” for topping up your prepaid account and an envelope icon for e-mail.
The Wild Card has added Bluetooth, pre-loaded a range of popular e-mail applications and is Virgin Mobile USA’s first streaming music phone. The carrier’s “Headliner” service is a mobile music magazine that offers subscribers an opportunity to learn about new music and click and play it. A “Jukebox” service offers browse-and-play a streaming track for 25 cents per track.
The exterior’s colors, materials and finishes (CMF) are customized for Virgin Mobile USA as well, Maguire said.
“There’s a lot of clarity to who they’re targeting,” Maguire said of Virgin Mobile USA. “We both use focus groups and compare notes. The ability to work hand-in-hand makes them a good partner.”
Hitting the mark
Analyst Avi Greengart at Current Analysis said “this is a strong contender by any measure,” meaning that a $100 QWERTY music and messaging offering would fly with consumers whether prepaid at an MVNO or postpaid at a tier-one carrier.
The device, when closed, has an external alpha-numeric keypad. Open, it offers its horizontal QWERTY layout with letters in black and uppercase symbols in white, the analyst noted. Where Kyocera executives said the design was intended to make backlit letters “pop,” the analyst found the arrangement “counter-intuitive.” But Greengart found it did not interfere with the effectiveness of his blazing thumbs.
In the larger pantheon of consumer phones, the Wild Card “isn’t very high end for a high-end phone and Virgin could go higher.”
Of course, Kyocera will be hoping to get that call.
