0. CEO, Virgin Mobile (Australia)
Jonathan Marchbank
CEO, Virgin Mobile (Australia)

1. 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

2. The MVNO is not ‘M’ or ‘V’

3. MVNO Definition Access Switching Network elements Tariffing & billing
Customer care
Marketing
Mobile network operator
Super dealer
Mobile network operator
Service provider
Mobile network operator
Enhanced service provider
MVNOs UK
Mobile network operator
Classic MVNO
AUSTRALIA
Telecoms capability required and level of investment
Ability to differentiate service
Commercial control
high
med
low
Source: Non-Telecom MVNOs: Motives and Business Set-ups. MSc Thesis, T. Elstedt, M. Huber (adapted)

4. 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

5. 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

6. 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

7. Aussie Mobile Market
Mobile Subscribers
Millions
15.5
14.4
12.6

8. 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
Deal Crazy!

9. 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

10. 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?

11. The future for Virgin Mobile
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

12. 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