March 2008
The UK-based Virgin Group, owned by British billionaire Richard Branson, launched its telecom brand - Virgin Mobile - in India under a franchisee agreement with CDMA major Tata Teleservices (TTSL). Under the agreement, TTSL would sell the Virgin Mobile brand and its services in the country and will pay a royalty for every customer it gets. The CDMA major will launch the services initially across 50 cities (in 17 circles) and will cover over 1,000 cities by the end of the year.
The Strategy – Branson’s words
“Virgin Mobile is targeting the youth, aged between 15 and 30 years, estimated to be around 400 million, which is almost six times the size of that in the US. The usage of this sector is also high with urban youths’ mobile usage standing at around 360 million minutes compared with the industry average of 160 million minutes, while their SMS usage is four times more than the industry average,” Richard Branson (2008).
The Pitch
The company is planning to rope in over 5 million customers in three years and is hopeful of a breakeven during the period. For achieving the target, the company has launched outgoing calls to any network at 0.50 paise a minute and users would get a credit of 10 paise for every incoming call that’s more than a minute long.
… a year later April 2009
Virgin Mobile, in contrast to its launching flurry has tepid numbers as its subscriber base in a market which is growing leaps and bounds since the beginning of the year. According to TRAI, the number of phone connections in the country-mobile and landline-crossed 429 million as of March 2009, of this mobile phone users account for close to 92 percent of the country’s telephone base. Almost 125 million people have bought a mobile connection in the 12 month period and Virgin has only a fraction of the market share so far. What are the reasons for Virgin’s inability to capture the booming market? IQ attempts answering the question:
• Virgin mobile’s strategy of targeting urban youth in the age group of 15-25 is a challenging one, as a majority of this segment already are cellular service users. The company will have to work harder to prompt a change in service providers.
• Virgin’s target segment is urban-based which is experiencing a slowdown in growth momentum and current players, in contrast, have increased their profitably and subscriber base due to the rural foray (eg: Bharti Airtel).
• GSM operators control virtually three-fourths of the market, however, Virgin entered with a CDMA partner which is a disadvantage due to the comparative small market size and presence of market leaders such as Reliance.
• Virgin although has not incurred capex due to its joint-venture, faces stiff competition on the pricing turf. The target segments deemed to be big spenders, have stringent budgets forcing Virgin Mobile to tweak its packages to attract users. The pricing strategy also impacts the overall profitability of the company; numbers for the same are unavailable. In addition, the strategy of being paid for incoming calls has not proved to be useful bait.
• A novice in comparison to biggies who have been around since the past 15 years, Virgin mobile’s advertising spend is almost a tenth of INR 300-400 crore spent by the biggies. This is probably the reason that the company has not painted the town red (its signature colour) and not created the furore on its entry. Although according to reports the company has attacked college campuses to build momentum as of now, the results of the strategy are yet to be seen.
On the backdrop of the above points, the mobile company will have to re-look its strategy to turn the tables in its favour. Each market has its distinct characteristic, which marketers attempt to tap. Thus, despite its success in the UK as an MVNO (Mobile Virtual Number Operator), Virgin Mobile’s number in India would remain busy till it manages to capture the booming wireless Indian market.
The UK-based Virgin Group, owned by British billionaire Richard Branson, launched its telecom brand - Virgin Mobile - in India under a franchisee agreement with CDMA major Tata Teleservices (TTSL). Under the agreement, TTSL would sell the Virgin Mobile brand and its services in the country and will pay a royalty for every customer it gets. The CDMA major will launch the services initially across 50 cities (in 17 circles) and will cover over 1,000 cities by the end of the year.
The Strategy – Branson’s words
“Virgin Mobile is targeting the youth, aged between 15 and 30 years, estimated to be around 400 million, which is almost six times the size of that in the US. The usage of this sector is also high with urban youths’ mobile usage standing at around 360 million minutes compared with the industry average of 160 million minutes, while their SMS usage is four times more than the industry average,” Richard Branson (2008).
The Pitch
The company is planning to rope in over 5 million customers in three years and is hopeful of a breakeven during the period. For achieving the target, the company has launched outgoing calls to any network at 0.50 paise a minute and users would get a credit of 10 paise for every incoming call that’s more than a minute long.
… a year later April 2009
Virgin Mobile, in contrast to its launching flurry has tepid numbers as its subscriber base in a market which is growing leaps and bounds since the beginning of the year. According to TRAI, the number of phone connections in the country-mobile and landline-crossed 429 million as of March 2009, of this mobile phone users account for close to 92 percent of the country’s telephone base. Almost 125 million people have bought a mobile connection in the 12 month period and Virgin has only a fraction of the market share so far. What are the reasons for Virgin’s inability to capture the booming market? IQ attempts answering the question:
• Virgin mobile’s strategy of targeting urban youth in the age group of 15-25 is a challenging one, as a majority of this segment already are cellular service users. The company will have to work harder to prompt a change in service providers.
• Virgin’s target segment is urban-based which is experiencing a slowdown in growth momentum and current players, in contrast, have increased their profitably and subscriber base due to the rural foray (eg: Bharti Airtel).
• GSM operators control virtually three-fourths of the market, however, Virgin entered with a CDMA partner which is a disadvantage due to the comparative small market size and presence of market leaders such as Reliance.
• Virgin although has not incurred capex due to its joint-venture, faces stiff competition on the pricing turf. The target segments deemed to be big spenders, have stringent budgets forcing Virgin Mobile to tweak its packages to attract users. The pricing strategy also impacts the overall profitability of the company; numbers for the same are unavailable. In addition, the strategy of being paid for incoming calls has not proved to be useful bait.
• A novice in comparison to biggies who have been around since the past 15 years, Virgin mobile’s advertising spend is almost a tenth of INR 300-400 crore spent by the biggies. This is probably the reason that the company has not painted the town red (its signature colour) and not created the furore on its entry. Although according to reports the company has attacked college campuses to build momentum as of now, the results of the strategy are yet to be seen.
On the backdrop of the above points, the mobile company will have to re-look its strategy to turn the tables in its favour. Each market has its distinct characteristic, which marketers attempt to tap. Thus, despite its success in the UK as an MVNO (Mobile Virtual Number Operator), Virgin Mobile’s number in India would remain busy till it manages to capture the booming wireless Indian market.
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