VIRGIN MOBILE LAUNCHES IN U.S. DESPITE INTERNATIONAL SETBACKS

Virgin Mobile USA announced last week that it is making its long-awaited entrance into the U.S., targeting teens with straightforward pricing plans and age-appropriate applications. The U.S. is a critical component in Virgin Group Chairman Richard Branson's goal of creating a global mobile virtual network operator (MVNO), but Virgin's recent troubles in other regions raise doubts about whether the Virgin brand can survive in the competitive American wireless market.

It's clear that Virgin, through its 50-50 joint venture with Sprint PCS, did extensive homework before starting its nationwide launch, which it plans to complete by August. Dan Schulman, Virgin Mobile USA's new CEO, provided a plethora of statistics supporting the company's strategy to target the under-30 market with a simple, no contract, no credit check, pay-as-you-go plan.

“We went deeply into market research,” Schulman said in an interview with Telephony last week. “We wanted to make sure there were no contracts involved because they hated the fact that they didn't understand the plans that were out there. These users are very savvy. They have bullshit meters.”

Virgin plans to charge 25¢ per minute for the first 10 minutes of talk time each day and 10¢ per minute thereafter. Because its target audience tends to stay up late making phone calls, each day extends until 5 a.m., Schulman said.

Despite the simple plans, pricing should be more competitive, said Ken Hyers, senior wireless analyst with In-Stat MDR. “[The youth market] is not stupid,” said Hyers. “They recognize the value of money, and it's going to be tough to convince them that these other things are worth it if they are paying more.”

But Virgin's major proposition will be what it calls VirginXtras — targeted applications such as a “rescue ring” that users can set to bail out of a bad date, and Music Messenger, a mobile radio that lets users hear music clips by pressing a button.

“The VirginXtras offering is the value proposition,” said Andrew Cole, senior vice president of the wireless practice with Adventis. “This is not going to hurt the market with pricing pressure. What they've done in the U.K. is a good example. Customers have said they actually value the transparency and the simplicity of pricing.”

Branson said he believes Virgin will revolutionize pricing in the U.S. wireless industry. “When we launched in the U.K. market in 1999, it was full of contracts, confusing fine print and customers who were drowning under a bureaucracy,” Branson said during a press conference last week. “We've received the highest form of flattery: The market copied our proposition.”

However, Virgin's success in the U.K. hasn't always translated to other markets. The company's joint venture with SingTel is struggling. The $1 billion venture that launched two years ago was supposed to be in 10 Asian markets by now, but it is operating only in Singapore, with dismal results. The company has added only 20,000 customers since launching in October and recently disbanded its management team.

In Australia, Branson took control of the Virgin Mobile joint venture after its partner Optus refused to invest more money. Optus had lost $116 million since the joint venture began. “Every new move we make is taking a risk,” Branson said. “But if we didn't, then there wouldn't be a number of Virgin companies out there.”