MVNO: Asia not a Virgin Land?

"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.

"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.

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

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

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