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REV: FEBRUARY 17, 2005

GAIL MCGOVERN

Virgin Mobile USA: Pricing for the Very First Time

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When Richard Branson called me to discuss the CEO position at Virgin Mobile USA, I quickly considered the opportunity: a chance to be the chief executive of a newly formed start-up in an overcrowded, increasingly mature, capital-intensive, highly competitive industry. Oh yeah, I should also mention that this is not an industry known for its customer service and we’d be entering with a brand that had little U.S. name recognition except for possibly as an airline. But then I thought, “It’s these kinds of opportunities where a team can define itself, and if this could be pulled off, it would be unbelievable.” …ver más…

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In Singapore, however, the story had been different. There, the company’s cellular service—a joint venture with Singapore Telecommunications—had run into difficulties, attracting fewer than
30,000 subscribers after its launch in October 2001. The Singapore MVNO had recently shut its doors, and although both partners had agreed that the market had been too saturated to sustain a new entrant, some analysts had offered another explanation for the failure: Virgin’s hip and trendy positioning had failed to strike a chord in the Singapore market.

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Despite this setback, Virgin had forged ahead with its plans to launch a wireless phone service in the U.S. Utilizing the MVNO model once again, the company had entered into a 50-50 joint venture with Sprint in which Virgin Mobile USA’s services would be hosted on Sprint’s PCS network. (Sprint was in the process of updating its network and increasing its capacity, so that it had ample capacity to allow for additional users.) Under the agreement, Virgin Mobile would purchase minutes from
Sprint on an as-used basis.

No tC “The nice thing about this model is that we don’t have to worry about huge fixed costs or the physical infrastructure,” said Schulman. “We can focus on what we do best—understanding and meeting customer