VISAGE MOBILE PROVIDES KEY PIECE OF VIRTUAL PUZZLE

Start-up works to mitigate MVNO risks

Start-up Visage Mobile believes it has a solution that removes most of the economic obstacles preventing many U.S. wireless carriers from pursuing potentially lucrative mobile virtual network operator, or MVNO, deals.

U.S. carriers are embracing the idea of using MVNO partners such as Disney, Wal-Mart or Visa to increase penetration and drive data adoption, but the economics of such deals don't make sense today. These players must spend millions on their own wireless platforms and then wait to attract enough customers to get a return on their investments. And in partnering with MVNOs, carriers risk losing their investment if the deal doesn't work.

Visage believes it can solve both problems with its “MVNO in a box” solution that will be made public for the first time this week. Developed with the help of BT, this back-office platform lets MVNOs offer customized wireless offerings — from prepaid to specialized wireless data — without having to invest in wireless expertise and infrastructure to handle functions such as billing, customer care and network switching. Analysts say the lack of back-office support is the biggest obstacle to widespread MVNO deals in the U.S.

Most potential MVNOs estimate they need to spend about $300 million on back-office functions and customer acquisition costs, said Visage Mobile CEO Matt Johnson. So they must add at least 1 million customers to break even. Using Visage's outsourced platform, MVNOs can break even with about 100,000 customers and spend between $15 million and $25 million, he said.

“Thirty to forty percent of the accounts we've worked with already had people working on an MVNO strategy,” Johnson said. “They all understood what product offering they wanted to deliver but didn't know how to do it.”

Visage also helps carriers fill their segmenting gaps by matching them with the proper MVNO. If carriers can build a portfolio of MVNOs on one platform, they minimize their capital risk and grow profits, said Whitey Bluestein, executive vice president of corporate and business development for Visage.

Visage executives note that not all companies with big brands can be successful. Candidates need to show they can do one of four things: acquire customers less expensively, experience minimal churn, service customers less expensively or drive usage and revenue mix, said Tom Bobich, vice president of marketing and product development for Visage.

Visage was born out of venture capitalist firm St. Paul VC, where Johnson was a partner looking to invest in an MVNO. But he found the proposition too risky and realized this lack of back-office support was a common problem for potential MVNO players.

Visage executives spent the last year studying the exploding MVNO market in Europe and assembling a team of well-known European MVNO experts from carriers such as One 2 One — crafter of the world's first MVNO deal with Virgin Mobile — into a technical advisory board.

“Originally, there were a lot of challenges in the relationships in Europe,” Johnson said. “Virgin doesn't feel it has enough control, and One 2 One spent a lot of time to provide services to Virgin that weren't core to One 2 One's base. They really wished they had a third party.”

visage|mobile

HEADQUARTERS: Redwood Shores, Calif.

EXECUTIVE TEAM:

• CEO and co-founder Matt Johnson, formerly with Bigwords, an online source for text books

• CFO David Fraze, co-founder of Petopia.com

• Executive VP of business development Herman “Whitey” Bluestein, formerly of MCI

• VP of marketing and product development Tom Bobich, formerly of AirTouch

• VP of business development Steve Larsen, formerly of Net Perceptions

FOUNDED: 2001

PRODUCT: Back-office platform for MVNOs and wireless carriers

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