Like a Virgin

The auditorium audience sat in dark silence waiting for Sir Richard Branson, chairman and founder of Virgin Group, to appear behind the spotlights. After the moderator asked a few times whether Branson was there, a loud music video appeared on the screen, and when it was all over, Branson rushed in. He had been out late the night before partying, he explained, overslept and literally had to run to the convention center.

It's just this sort of edginess that Virgin is bringing to the global mobile phone industry. The company has built a business in the wireless industry by forming partnerships with existing operators to sell mobile services under the Virgin brand name. Branson has taken this concept, known as the mobile virtual network operator (MVNO) model, to the United Kingdom, Australia and Asia, with plans to expand into the U.S. this year. Branson's goal is to make Virgin the world's first global MVNO.

“No traditional self-respecting GSM or W-CDMA operator for that matter can afford to be without an MVNO strategy,” Branson told attendees of last week's GSM World Congress in Cannes, France.

Many of the world's operators have settled for what Branson calls the Mars bar syndrome when marketing services. Mars, which is now branching out to sell other types of candy bars, had traditionally sold one candy bar: the Mars bar.

“Different brands attract different people,” explained Branson. “As the industry hits a saturation point, two brands working together have a better chance.”

Carriers' core competencies lie in network management, not branding, he said, adding that an MVNO strategy is more customer-focused and can increase a carrier's share of revenues.

MVNOs present a cost-effective strategy for growth and a quick way to get to market, concurred Hans Snook, former CEO of France Telecom's Orange. “It's more relevant now than ever before, especially with investor sentiment at its lowest,” he said.

Branson made his first MVNO deal with One 2 One in the United Kingdom in 1999. Virgin, which now supports more than 750,000 subscribers there, set out to differentiate itself by offering innovative services such as no line rentals, no monthly fees and cheaper prepaid offerings. Although it doesn't operate its own network, Virgin recently won an award that ironically gave it the distinction of the best wireless network operator in the U.K.

“Three years ago, I was asked by Vogue why I chose to call the company Virgin,” said Branson. “I explained that it was a sexy idea and stood for the idea of us being virgins in every business we enter.”

Virgin, analysts note, has the deep pockets, extensive distribution channels and a large appeal to newer demographics like teenagers. In the U.S., where Branson said Virgin will sign a deal shortly, Virgin plans to target the largely untapped youth market through affordable prepaid offerings sold over the Internet, in Virgin Megastores and some retail outlets.

Several companies such as automobile manufacturers and financial services firms are looking to set up similar MVNO agreements to create more loyalty among customers. Branson noted a number of companies will try to get into bed with carriers, but he wryly added: “It's preferable to go to bed with a virgin.”