Analysis: Virgin’s phone connection will provide all-round link - Richard Branson is moving into mobile phones. It’s his biggest launch since the airline, but how will he fare? asks Lisa Campbell

Richard Branson loves new ventures, not least because of the PR stunts and gimmicks they allow.

Richard Branson loves new ventures, not least because of the PR

stunts and gimmicks they allow.



Donning nightcap and gown, he climbed into bed with Danni Behr for

Virgin Atlantic’s recent business class launch while Virgin Brides saw

him bedecked in crushed silk. His other companies, spanning music to

financial services, have launched with a similar bang.



Although his latest launch, Virgin Mobile, may not afford such

tomfoolery, it is perhaps Branson’s most significant. It gives the

entrepreneur a way to connect his companies for a simultaneous Virgin

experience.



A system under development will allow users to, at the touch of a button

on their Virgin phones, view their Virgin bank balance, check the

performance of their Virgin PEP, and order Virgin plane or train

tickets, Virgin cosmetics or Virgin jeans.



Details of the deal, which has still to be finalised pending Cable &

Wireless and MediaOne’s sale of One 2 One, remain scant. However, it is

understood that Virgin will source handsets from a supplier and brand

them with the Virgin logo. It will then buy airtime from One 2 One to

create a fifth mobile digital brand.



Many of Branson’s previous start-ups have met with criticism, with

observers questioning whether the brand is being stretched too far. In

some cases the doubts have been justified. Virgin Vodka has effectively

been withdrawn from public sale, Virgin Trains is proving a PR nightmare

while Victory Corporation, which runs the clothing and cosmetics

operation, issued official profit warnings last year.



The move into the mobile industry, however, appears a smart one, not

only because it is relatively new, at just over ten years old, but also

because it is booming. As Steven Day, former Sunday Express joint deputy

editor and now Virgin Mobile PR chief, states: ’More than one in four

people now own a mobile phone, with predictions that this will double by

2001. It’s a very exciting industry to be in.’



Consumer’s champion



Secondly, Virgin’s positioning as the consumer’s champion is well suited

to the mobile phone industry. In the early days, the mobile market

gained a bad reputation and was frequently accused of ripping off the

customer.



It has yet to fully shrug off this image, not helped by the confusing

array of tariffs and small-print-stuffed ads.



This is where Virgin hopes to make a difference. ’Simplicity and

competitiveness are our key propositions. Like Virgin Direct’s

simplified financial services, so Virgin Mobile will make pricing much

easier to understand. The industry is very confusing as it stands,’ says

Virgin Group director of communications Will Whitehorn.



Research from JWT Insight conducted last month suggests a significant

number of people think the Virgin brand would extend successfully into

phones. From a sample of over 1000, 27% said they would buy a Virgin

phone if available.



E-commerce is the key area of development for Virgin. It believes that,

by 2003, the mobile will become the main way to access the internet.



Next generation soon



Vodafone and BT Cellnet are both planning to launch an internet phone by

the end of the year and, like Virgin, will bid for a UMTS licence, the

next technological generation, to allow further applications, including

video and games, through phones. Virgin will also give away free

headsets.



Branson advised staff to use headsets following the death of a friend -

a heavy mobile user - from a brain tumour, although the link between

phones and cancer is unproven. Hands-free sets are also needed to let

users look at the phone’s screen and to press buttons.



Observers expect Virgin to target a currently underserved market of

young people and those outside established markets.



’Virgin’s brand image is suited to young and alternative customers. Like

banking, the idea is to lock consumers in early so they stick with the

same brand forever,’ says Jim Ross, telecoms analysts at ABN Amro.



Although Vodafone and BT Cellnet, traditionally business-focused, now

target youth with no-contract pre-pay phones, there is significant room

for growth.



’We will be targeting a broad audience,’ says Whitehorn. ’However, there

is lower penetration in the UK among young people and the elderly than

in other European countries. In Scandinavia around 95% of under-25s have

a mobile phone.’



Virgin has briefed Rainey Kelly Campbell Roalfe, Manning Gottlieb Media

and HPT Brand Response for the project.



Virgin is also trying to shake up the market by selling direct, allowing

it to undercut the commission charged by high-street retailers. This

concept has helped Virgin Cosmetics back to its feet, with direct sell

now outperforming its retail arm. In mobiles, BT Cellnet is also

expanding its telesales division and claims it now accounts for a

’significant chunk’ of business.



How One 2 One will fair through the deal is less clear. Some argue the

tie-up is a coup for One 2 One, helping it to increase market share on

the back of Virgin’s marketing muscle. It is currently the smallest

operator, despite a raft of price cuts.



Using a bigger brand to increase share is a strategy recently used by

Cellnet, which rebranded as BT Cellnet. However, the company believes

the One 2 One brand may eventually be replaced by Virgin Mobile.



Says BT Cellnet communications manager William Ostrom: ’Virgin is a

powerful brand which will exert a vampire effect on the One 2 One brand.

As the industry goes forward it’s no longer about price, it’s a brand

game, inevitably with winners and losers.’ L



MOBILE OPERATORS’ SHARE (Q1, 1999)

Brand       New connections     Customer base        Pre-pay

Vodafone            700,000      5.57 million    1.8 million

Cellnet             479,000      4.52 million        910,000

Orange              370,000      4.52 million        734,280

One 2 One           329,000      2.25 million      1 million

Source: Operators’ own figures



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