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MVNO: Asia not a Virgin Land?

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VoicenData Bureau
New Update

"I ’m free, are you? And Push me out, Put me in, Turn me on"……..Do

not misinterpret it as the lines of an X-rated movie’s dialogues. These are

the punch lines of some advertisements on vibrant red color background for the

Virgin. Again confused? Sexy models with seductive poses and such type of punch

lines on vibrant red color background were some the features of the

advertisements, when the British tycoon Sir Richard Branson’s latest Baby ‘Virgin

Mobile’ entered the Singapore Market.

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Branson:

The British tycoon’s MVNO model

remains good, despite the Singapore fiasco

"No ties, no subscription, no plans, no confusing charges. We do not

believe in locking our customers in. Which is why we won’t make you sign a

contract. You just pay for what you use." These were the catchwords of the

Virgin group when they tried to catch the young and trendy minds in Singapore

market. The expectations were high, with sky being the limit and Sir Richard

Branson, chairman and president of the Virgin group was sure to repeat his UK

success in this city-state.

It is just less than a year. And the pioneer of the Mobile Virtual Network

Operators (MVNO) model, after investing $50 million in this city-state, finally,

closed its doors on 12 October 2002, which was started from July of the same

year. The failure of Virgin Mobile in the Singapore market has also put an

immediate question mark on Virgin’s plans for the Asian market. In spite of

its big beginning it managed to get just 80,000 subscribers in Singapore.

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According to research made by Pyramid Research (the communication and

Internet division of the Economist Intelligence Unit, part of the Economist

Group), in many markets, the MVNO model is not only viable, but also inevitable.

But companies need to understand that an MVNO model that succeeds in one market

may fail dramatically in another. An MVNO is a company that provides mobile

services to end-users through a subscription agreement, but does not have its

own radio spectrum license and network infrastructure. An MVNO negotiates with

licensed mobile network operators to buy excess network capacity for resale to

customers, according to Pyramid’s Definition. Pyramid Research note also

reveals that the failure of Virgin Mobile Singapore to make a dent in Singapore’s

mobile market doesn’t invalidate the concept of MVNO.

In Singapore’s particular conditions, the Virgin train wreck was caused by

several mistakes. Pyramid Research has given the following reasons:

n Pricing SMS too high in a

market that has some of the most- price conscious SMS users in the world

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n Poor positioning by targeting a

competitive yet cash trapped segment of the market–the young and trendy–which

condemned them with low average revenue per user (ARPU)

n Lacking distribution and brand.

Virgin did not have a strong enough brand name in Singapore, and more

importantly, did not have any effective distribution system

n Conflicts of interest with its

partner SingTel. This meant that when Virgin ran into trouble with its low-end

target market, it was unable to go after the more affluent customers because

that would infringe upon SingTel’s target, i.e. the mid-range market

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Virgin Mobile entered the Singapore market through a 50:50 joint venture

between SingTel and Virgin Group of Companies.

According to an interview given to "3G Strategies for operators (issue

seven, December 2001)" by Sir Richard Branson, "The deal with SingTel

includes a remit to expand across the Southeast Asian Pacific rim region. It was

one of the predictions made by the group that Virgin Mobile would be in 10

countries across five continents by February 2002." But the failure of the

Virgin mobile in Singapore market will definitely give a break to Sir Branson’s

dreams of expanding in Asia, even though it doesn’t write off the MVNO model.

Goses Jamini

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