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’

VNAS

HLR

PrepayServiceNode

Voicemail

SMSCAVAS

OPTUS

POPI

Customer Care

CreditCheck

CreditCard

Financials

Inventory

DataWarehouse

POS

BillingNumber ManagementService Management

IVR Web AffinityRetailStores

Voice Call

Portal

Bureau BureauBill

PrintingIPND

Bank

Roamingand 1900

CSR

VMA SIM

CoreSystems

Channels

NetworkElements

VoucherSupplier

CampaignMgmt

BusinessIntelligence

Overall Architecture TopologyMVNO Model

Warehouse

CDR

OptusElement

VMAElement

Key

MVNO Definition

Source: Non-Telecom MVNOs: Motives and Business Set-ups. MSc Thesis, T. Elstedt, M. Huber (adapted)

AUSTRALIA

Mobile network operator

Access SwitchingNetwork elements

Tariffing & billing

Customer care

Marketing

Mobile network operator

Mobile network operator

med

MV

NO

s

Telecoms capability required and level of investment Telecoms capability required and level of investment

Ability to differentiate serviceAbility to differentiate service

Commercial controlCommercial control

lowhigh

Mobile network operator

Super dealer

Enhanced service provider

Classic MVNO

Service provider

UK

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

8.5 8.5 8.8

4.15.9

6.7

FY2002 FY2003 FY2004

Prepaid

Postpaid

Aussie Mobile Market

Mobile SubscribersMobile SubscribersMillions

12.6

14.415.5

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 huntingDeal C

razy!

Deal Crazy!

Deal Crazy!

Deal Crazy!

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