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Virgin Mobile eyes the US 
Friday, May 17 2002
by Matthew Clark


In their attempt to attack the under-30 pay-as-you-go market in the US, Sprint
and Virgin have released details about their USD300 million joint venture.





US mobile network operator Sprint and Britain's leading MVNO, Virgin Mobile, said
on Friday that they would each fund up to USD150 million for their US joint
venture. The two firms will have an equal interest in the new firm, called Virgin
Mobile USA. 



Sprint is set to give USD150 million to the company, most of which will be in
services and the rest in cash, while Richard Branson's Virgin will give mostly
cash to the project, which is scheduled to launch in the next few months. 



"I am delighted that we have finalised the funding plan for this exciting new
business," said Sir Richard Branson, chairman of the Virgin Group. "We believe
we can significantly impact the relatively young and growing wireless telecom
market in the United States with a unique value-for-money product offer."



The deal, which was first announced in October 2001, will see Sprint sell network
time to Virgin, similar to the arrangement Virgin has with Deutsche Telekom's
T-Mobile in the UK. Virgin Mobile USA will also offer Virgin Xtras, a set of
features that will provide access to additional services and will be tailored for
US consumers. The deal could be very lucrative for both Virgin and Sprint, with
an estimated 60 million US residents who are between 15 and 30 years old, the
prime target audience for Virgin Mobile USA.  



For years the pre-paid mobile market was almost exclusively the concern of mobile
operators in Europe and Asia and, although the sector is growing in the US, it
still only consists of about seven percent of US mobile phone users. This
compares to figures as high as 85 percent in Italy, 82 percent in Portugal and 47
percent in France, according JD Power figures from 2001. 



With very little in the way of pre-paid offerings, children and people with poor
credit have not been able to become mobile users in large numbers in America. But
with teenagers representing one of the most lucrative segments of the mobile
space, there has been a push in recent months that has seen pre-paid services
launched by most operators, such as Verizon's FreeUp service. 



Forecasts vary, but it is estimated that the pre-paid market in the US is
expected to emerge as one of the largest pre-paid markets in the world, with
around 20 percent of users becoming pre-paid by 2005. Teenagers and young adults
aged 16 to 24 are a particularly lucrative group, thought to be worth at least
USD150 million in discretionary money.