Taking The Wraps Off Virgin Mobile

Jul 23, 2002 (08:07 PM EDT)

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Surrounded by clouds of confetti and scantily clad men wearing little but cell phones, Virgin Group chairman Sir Richard Branson descended Wednesday from a crane over the Virgin Megastore in Times Square, as he tore off his clothes to reveal a muscled bodysuit and cellular jockey shorts of his own. The stunt, characteristic of the flamboyant Branson, served to promote the launch of Virgin Mobile USA, a national cell-phone network with the motto "We've got nothing to hide."

The service, a joint venture between Virgin and Sprint PCS, will focus on younger consumers, particularly those between the ages of 18 and 24. Virgin is striving to market the service to those fickle buyers as no-commitment and easy-to-use; it will be available solely on a pre-paid basis, requires no contracts, and doesn't distinguish between peak and off-peak usage.

To further draw in a young audience, Virgin also revealed a partnership with MTV Networks, which will provide a wide range of branding, marketing, and content to the service. Features will include the ability to listen to new music, download ring tones that play current hits, and receive text messages of music news. "We want to be everywhere our audience is, and today young people are embracing a wireless world," says Tom Freston, CEO of MTV Networks.

Virgin Mobile will be the first mobile virtual network operator (MVNO) to hit the shores of the United States, meaning that it won't install a bit of hardware and will operate entirely on Sprint's network. Virgin will only be responsible for the branding, sales, and marketing of the service, as well as helping design the features and custom phones from handset maker Kyocera.

But while Virgin Mobile is the first MVNO in the United States, it might also be the last to launch for some time. The U.S. cellular market is too saturated for another big network, In-Stat analyst Ken Hyers says, and will probably see several large carriers disappear within the next few years. There's not likely to be room for MVNOs aimed specifically at other markets, he says, particularly business users. "You've got to target a very specific market segment," Hyers says. "And business is already the core market for national carriers."