Virgin Mobile Comes to America

Virgin Mobile has announced it will buy bulk minutes for voice and data from Sprint PCS and resell it as a cellular phone service in one of the first U.S. examples of the emerging Mobile Virtual Network Operator model.

Parent company Virgin Group has pioneered the service in Great Britain and Australia, offering its customers wireless in direct competition with existing wireless operators.

In the United States, Virgin Mobile USA will sell the cellular service on a prepaid basis with a single service plan, charging 25 cents for the first minute and 10 cents for each successive minute.

"Today the market is like a big black hole, where 90 percent of the users don't know what they are paying for wireless service. The current providers draw people into hidden charges, expensive monthly bills, and other gotchas, so the youth has little affinity for a wireless brand," said Dan Schulman, chief executive of Virgin Mobile USA.

Unique Features

Among the features Schulman believes will allow Virgin Mobile to tap into a market in the United States that is far less saturated than in Europe and Asia are Rescue Ring and the Balance Button.

The Rescue Ring service is geared to young people on a blind date, said Schulman, and allows a user to receive a call at any time of his or her choosing with a message that will provide a built-in excuse for cutting the date short. Schulman added that it might be useful during business meetings as well.

Balance Button allows Virgin Mobile customers to check their account balance and calling history in real time, with a single press of one key on the phone.

"We intend to use our customer service as a competitive advantage," said Schulman.

The live call center will be dubbed Central Intelligence and will be available 20 hours per day, seven days per week.

In its nationwide launch, Virgin Mobile will use Kyocera as the cell phone manufacturer and BEA as the application service provider on the backend, with the phones and service distributed in about 11,000 retail locations through major retail convenience stores like 7-Eleven, electronics outlets such as Best Buy, and general merchandise retailers like Target.

Schulman said that the operating system for the handsets had not yet been selected and that the company was looking at Microsoft, BREW, Sun, and others. However, the fact that a Java 2 Enterprise Edition application server from BEA is being used might indicate that a compatible operating system will be selected for the handset.

California, Ohio First

Sprint PCS also participated in the announcement. Charles Levine, president of Sprint PCS in Kansas City, Kansas, responded to questions about Virgin Mobile cannibalizing its own customer base.

"We focus on the middle market. We will get the young Republicans, but we won't get the hip, the edgy, the skateboard market," said Levine.

The service will be launched in Sacramento, California, and in Columbus, Ohio, next week with a national launch expected at the end of July and available only to the Sprint PCS and affiliate network. Roaming across other networks will not be available.

While Virgin Mobile is a pioneer in the United States for this model, other companies will follow, according to one industry analyst.

"Virgin Mobile is clearly an excellent example of a company that can pull this off. Other companies that could be successful might be those with a strong brand that fits with a differentiated mobile offer, a presence in a related or complementary area, and strengths in distribution channels, managing customer relationships, managing partnerships, and marketing skills," said Bjorn Kilburn, senior consultant for Mercator Partners in London.