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Virgin Mobile: Youth brand value

December 07, 2010
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Virgin Mobile, a global mobile virtual network operator (MVNO), entered the Indian wireless space in March 2008 with a unique business and marketing model. It tied up with Tata Teleservices Limited (TTSL) in a 50:50 partnership to offer mobile services on both the GSM and CDMA platforms under the Virgin brand.

To stand out in India’s hyper-competitive telecom market, Virgin Mobile India has been focusing on a specific consumer segment instead of the entire market. As Sir Richard Branson, the founder and chairman of the Virgin Group, puts it, “We believe that the existing operators are all pursuing the same strategy – to get as many subscribers as possible. We want to deliver a more tailored, more relevant offering for a single, distinct segment.”

The company’s focus has been on the country’s youth segment. Virgin’s services, tariff packages, advertising and brand building initiatives have been in line with the tastes of the urban youth. The offerings are innovative and differentiated, and have an element of fun and humour designed to make a direct connect with the company’s target segment. One scheme, for example, paid the user (at Re 0.10 per minute) for incoming calls, defying conventional thinking. The “hatke” campaign that followed reinforced this point.

Market position

Virgin currently rides on TTSL’s infrastructure to provide CDMA and GSM mobile services in 18 and 17 circles respectively, and has over 45,000 retail outlets covering 450,000 towns and villages. Virgin’s entry made a big impact  initially but assessing the company’s exact consumer base is difficult as its subscriber figures and revenues are included in TTSL’s financial books.

According to company officials, Virgin contributes 10 per cent to TTSL’s subscriber base, or about 7.6 million (as of July 2010, TTSL’s subscriber base stood at 76 million). With less than 8 million subscribers, Virgin clearly is no competition to the top telecom operators, which have over 100 million users.

However, Virgin claims that its ARPUs are higher than those of most operators in the industry, especially in the CDMA segment. The company’s ARPUs in this segment are reportedly 35-40 per cent higher than those of other players. Virgin attributes its better ARPU figures to the fact that its subscribers are major users of long distance calling, SMS and data services. The share of national long distance calling in the company’s total revenues is 35 to 40 per cent higher than the industry average. Similarly, while value-added services (VAS) typically contribute around 9 per cent to an operator’s revenues, in the case of Virgin, it is 13-14 per cent.

Recent initiatives

Over the past year, Virgin’s efforts have been directed towards increasing its subscriber base. It has taken several initiatives to strengthen its position in its target market. It has tied up with mobile application store GetJar to offer services related to gaming, education, social networking, entertainment, etc.

Virgin has also introduced a “Music Unlimited” service, which provides free access to a vast music library. Its VAS offerings in the GSM segment include “Friend Circle”, “vBelong”, “vGenie”, “WOW” “vJingle”, etc., which focus on entertainment, information and social networking.

The company has also been offering a bill guarantee scheme, under which the operator is liable to waive the bill if complaints are not addressed within 48 hours.

The road ahead

Currently, 75 to 80 per cent of the company’s subscribers use a Virgin connection as the second option. A key challenge for the company is to convert these subscribers into primary users of its SIM connection. Moreover, the operator’s target consumer segment, the urban youth, has low brand loyalty and is more prone to changing networks. Therefore, Virgin needs to devise strategies to hold on to its customers. Besides, with the impending introduction of mobile number portability and 3G services, it is crucial for the operator to improve service quality and generate a pull factor in order to retain and increase its subscriber base.

Virgin aims to achieve a 10 per cent share in the mobile subscriber base in the 16-26-year age group. It has planned a capex of around Rs 5 billion, most of which would be spent on VAS offerings and customer care, as the company does not have to incur high network costs.

The operator plans to launch 3G services as and when TTSL rolls out its 3G network. M-commerce will be a key focus area for the operator once it offers these services. To ensure that subscribers use these services, the company plans to provide incentives like free talktime in lieu of purchases through the phone.

The company is also planning a co-branding initiative with about 50 brands from sectors like apparel, restaurants, electronics and consumer goods to expand its reach among the younger generation. Meanwhile, if the government allows MVNOs to operate in the country in the future, Virgin’s options will increase as it would be able to tie up with a larger number of operators.

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