CTIA: Virgin Group CEO defends MVNO model

LAS VEGAS--The mobile virtual network operator (MVNO) handset model remains a viable, low-cost alternative for consumers faced with economic downtimes, according to Sir Richard Branson, CEO of the Virgin Group. Branson’s keynote address at the CTIA Wireless conference today focused more on the Virgin Group’s evolution and mounting environmental issues than any substantial wireless announcements from its Virgin Mobile USA division.

Branson, who landed his hot air-balloon--his traditional mode of transportation--on the Palms Hotel, said that Virgin Mobile, one of the few successful MVNOs in existence today, will continue to focus on being the consumer’s champion committed to flexibility and responsiveness.

While Branson, who owns a 35% share of Virgin Mobile, acknowledged that it is a tough time economically to be in the wireless business, he did not refer specifically to how the company plans to address its struggling mobile brand. In the US, Virgin Mobile’s stock price remains low. Even Branson reportedly lost $250 million in the USA mobile division of Virgin since the firm went public last October. In an earnings report last month, Virgin reported a net loss of $14.7 million during the fourth quarter of 2007 and reported adding fewer net new customers than expected. On a conference call discussing the earnings, Schulman was quick to blame economic conditions for the loss.

With a prepaid strategy and reputation for being hip and edgy, Virgin’s target market has always been the often price-sensitive youth sector. As such, Virgin’s decision not to reduce its low-end handset pricing to match that of its competitors was surprising and a likely cause of Virgin’s poor performance. Going forward, Branson said the brand will focus on customer feedback and being responsive to their changing desires.

“Companies have to withstand tough times, harsh critics and skeptics and remain true to what they believe in,” Branson said. “We believe in flexibility, something customers need in all parts of the globe, especially in these economic times.”

Branson added that Virgin continues to see opportunities as it builds key partnerships with major realtors and operators. The only real wireless announcement Branson shared was that the MVNO will be launching a new handset to complement its Virgin Mobile Festival in August. He also announced the show’s entertainment lineup to varying degrees of applause for headliners Foo Fighters, Jack Johnson, Kanye West, Nine Inch Nails and the Stone Temple Pilots.

Branson also called on the entire wireless industry from scientists to CEOs to encourage environmentally sound practices and products. He is the head of Virgin Unite, a non-profit foundation to develop new approaches to social and environmental issues through business and social sector partnerships and is offering any individual who can find a way to reduce the carbon footprint $25 million.

“The loss of life in our generation will be devastating and our children’s generation, catastrophic,” Branson said. “There needs to be far more emphasis on finding technological solutions to environmental problems. All must play a role to find a way to extract carbon from the environment.”

Virgin Group started as a record label and through branded venture capitalism, Branson – a self-proclaimed “hippie record label owner” - has grown the name into a successful cross-Atlantic airline, trains and entertainment, all with an environmentally friendly focus. Branson said that every time he entered a different market sector, he was faced with the same question of if he was attempting to stretch the delicate Virgin brand too far. His answer was clearly no, as he now envisions creating a “giant Noah’s Ark” to take consumers to Mars. As of now, it is a one-way trip, he joked, soliciting audience members to sign up. Entitled Project Virgle, the ambitious initiative is focused on establishing permanent human settlement on Mars. As Branson said, with a name like Virgin, customers can only hope they will go all the way.