Jonathan Marchbank
CEO, Virgin Mobile (Australia)
Opportunities for an MVNO in Australia
 What is an MVNO?
 The Virgin Group
 Virgin Mobile
 Current Australian market
scenario
 Future positioning and
opportunities for Virgin Mobile
The MVNO is not ‘M’ or ‘V’
Key
Overall Architecture Topology
MVNO Model
Channels
Optus
Element
VMA
Element
IVR
Web
Affinity
Voice Call
Retail
Stores
Business
Intelligence
Voucher
Supplier
VMA SIM
Campaign
Mgmt
Portal
POS
CSR
OPTUS
Service
Node
Prepay
Voicemail
CDR
Data
Warehouse
VNAS
Customer Care
Warehouse
Billing
Number Management
Service Management
AVAS
SMSC
Inventory
Roaming
and 1900
Core
Systems
HLR
Network
Elements
Financials
Credit
Check
Credit
Card
Bureau
Bureau
Bank
POPI
Bill
Printing
IPND
MVNO Definition
Network
elements
Switching
Tariffing &
billing
Customer
care
Mobile network operator
Mobile network operator
Marketing
Super dealer
Service provider
Mobile network operator
MVNOs
Access
Enhanced service provider
UK
AUSTRALIA
Mobile network
operator
Classic MVNO
Telecoms capability required and level of investment
Ability to differentiate service
Commercial control
high
med
Source: Non-Telecom MVNOs: Motives and Business Set-ups. MSc Thesis, T. Elstedt, M. Huber (adapted)
low
The Virgin Group

Well known global brand

‘Branded Venture Capital’ Organisation

200+ independent Virgin companies globally

Normally Joint Ventures with ‘expert’ partners

Companies promote consistent brand and
organisation values

CEOs act with relative independence

HQ is a handful of people

RB is passionately involved in making sure Virgin
companies ‘challenge’

People First, Consumer Champion

Entrepreneurial
Virgin Mobile Globally

1999 MVNO in UK with T-Mobile

2000 MVNO in Australia with C&W Optus

2001 MVNO in Asia with SingTel

2002 MVNO in USA with Sprint

Asia closed in 2002 – prior to incurring significant losses

UK has 3m+ customers and profitable

US has ~ 1m customers, soon profitable

Aus has 300k+ customers, soon profitable

Key proposition consistent globally:
– Different from incumbent. Young, prepay focus,
simple tariff to understand, cheeky, challenging,
entrepreneurial
Virgin MVNO in Australia

A 3-year-old wholesale partner of the
Optus network

300k+ real customers (Pre & Post)

240 staff (inc retail and customer service)

Expect to be profitable next year

Marketing ‘simple value’ to select segments
of consumers

Strong ‘non mobile’ brand

Strong distribution

Small enough to try new business models

Low cost of operations
Aussie Mobile Market
Mobile Subscribers
Millions
15.5
14.4
12.6
4.1
5.9
6.7
Prepaid
Postpaid
8.5
8.5
8.8
FY2002
FY2003
FY2004
The Current Market: Postpaid
 DVD or Playstation…now
essential!
 Heavy handset subsidy
 Optus vs Telstra
 ‘3’ raid on Vodafone
 Irrational ‘big dick’ syndrome
 Should be farming not hunting
The Current Market: Prepaid
 Plenty of gross new ads each month (200k
per month +)
 Totally different metrics to postpay ‘contract’
market…still learning
 Selling a replacement phone or selling a
new connection?
 Saturation of retail channels, distributors
filling ‘route’ channels
 Acquisition Costs vs Payback
 How to incentivise loyalty and lifespan of a
Prepay customer?
 Handset is still the driver
 Retailer still the winner
The Current Market: Summary
 5.5m handsets sold in 2003 (+20% on 2002)
 Prepaid ‘volume’ numbers and mechanics of
reporting distort true ‘market’ share
 It’s a voice and text market…services evolution
will take time & more realistic pricing
 Issues for any profit-focussed mobile SP/Carrier:
– Justifying postpaid acquisition costs
– Keeping real customers
– It’s a handset driven market
– Paying retail margins on acquisition AND
recharge/airtime
– 5 carrier products on one retailer’s shelf
– Price elasticity on tariff. Does lower price equal
more usage?
The future for Virgin Mobile
 Targeted @ specific segments
 500k+ voice customers by 2005/6
 Manage lifecycle from youth to young adult
 Combine brand, product and packaging with
alliance partners eg. Channel [V]
 Create a Virgin ‘network’… Music stores,
airline, credit card… loyalty programs beyond
telco billing and discounts.
 Not to challenge ‘size and scope’ of the big 3…
 Seek a return and profit
 Compliment network provider partner
 Investigate the evolution of mobile services
Channel [V] – Alliance partner

Alliances are critical in marketing to
specific segments

Provide differentiation

Make mobile applications appealing

Open new channels

Recognise strengths of each partner