Subject: [NEXTEL-1] Wireless carriers thinking young

From: Marcel <[email-masked]>
Date: Mon, 31 Mar 2003 22:52:42 -0500

Posted on Mon, Mar. 31, 2003

Wireless carriers thinking young
PREPAID PLANS, NEW IDEAS SUCCEED FOR VIRGIN, BOOST
By Jon Fortt
Mercury News

It's so cruel, but so clever. Virgin Mobile USA's ``rescue ring'' lets subscribers program
their cell phones to ring during a
bad date, providing a convenient escape.

A new breed of wireless carrier is relying on ideas such as the rescue ring and American
Idol-related polls (does Ryan
wear boxers, briefs or nothing at all?) to attract young cell phone users.

As mainstream cell phone service providers struggle to attract customers and increase
sales in the grim economy, two
maverick companies are changing the rules of the wireless game. Virgin Mobile and rival
Boost Mobile are targeting the
high school and college-age crowd with simple prepaid wireless plans, and features based
on fun and convenience
rather than just pricing.

Unlike mainstream plans that do credit checks and lock customers into annual contracts,
Virgin Mobile and Boost -- both
part-owned by major cellular companies -- let customers buy minutes through calling cards
sold at music and electronics
stores -- so even preteens could buy and manage their own wireless minutes. And unlike
existing prepaid plans, Virgin
Mobile and Boost offer cutting-edge services and a hip image.

But what makes these prepaid newcomers even more intriguing to the industry is their
ability to control costs through
simplicity. Virgin Mobile said its service plan is so straightforward, 87 percent of
subscribers added minutes to their
account in January without speaking to customer service and 50 percent activated their
phones online.

Those numbers have the wireless industry salivating because, aside from marketing, calls
to customer service are one
of the biggest costs in the business.

Andrew Cole, wireless industry analyst at consulting firm Adventis, said Virgin Mobile's
results show how prepaid
companies can make money.

``No carrier in the U.S. would have in their wildest dreams come up with the rescue ring.
It's a good example of how
these companies are important and relevant,'' Cole said. ``If it's done well, it can
actually make the market more
efficient.''

Though it might seem like a gimmick, the rescue ring is just one example of how Virgin
Mobile is trying to create a
community and a culture among its users. Here's how it works:

To use the rescue ring, a cell phone user preprograms the phone to ring at a time when the
user might need an escape.
There's even a choice of several MTV personalities to voice the rescue. When the phone
rings, the user can choose to
ignore or answer, depending on the circumstances. Virgin Mobile also has features such as
a ``balance button'' that
shows how much talk time the user has left, and message groups where users can share
opinions through text
messages.

So far, the strategy appears to be working. Virgin Mobile USA has amassed about 450,000
new customers since it went
live in August, said Chief Executive Dan Schulman. And he's on track to reach a
half-million by mid-April.

Aiming at kids

``The rock in our slingshot in this battle of David vs. many Goliaths is focus,'' Schulman
said. ``We built this from the
ground up to focus on the youth market.''

Virgin Mobile and Boost have been around for less than a year, and several young people in
Silicon Valley said they are
still skeptical of the prepaid newcomers. ``It's like, hmm, too good to be true,'' said
Hava Brchich, 16.

But competitors in the wireless market are taking notice. Analysts are whispering that
other companies, spurred by
Virgin Mobile's early success, are thinking about launching similar ventures focusing on
teens and young adults.

Particularly, some in the wireless industry now think that some of these potential young
customers -- contrarian teens
who listen to rap-metal, for instance -- would never buy a phone from the same wireless
carrier their parents use. It will
take a different brand name and a different marketing message to reach them.

It makes sense, then, that mainstream wireless carrier Sprint PCS owns half of Virgin
Mobile USA -- the other half is
owned by Virgin Group, the British travel and entertainment company. Nextel Wireless, the
business-centric carrier,
owns 66 percent of Boost Mobile.

``There are certain segments of the audience where the operator's brand is not suited to
reach,'' said Charles Golvin,
analyst with Forrester Research. ``In order to successfully reach the broadest possible
audience, what the operators
are going to need is some partners like this.''

While they are both targeting the youth market, Virgin Mobile and Boost are going about it
in different ways.

Different tacks

Virgin Mobile has a partnership with MTV that allows its subscribers to use phones for
video voting, audio postcards and
wake-up calls from reality-show celebrities; also, Virgin Mobile has attracted a national
customer base that is 55 percent
female, which is highly unusual in the wireless business. Boost has tie-ins with surfing,
biking and other extreme sports
events; its customers are in California and Nevada only, and they are about 60 percent
male.

Virgin Mobile's rebel reputation is more than just marketing; the company really is riling
the other wireless carriers.
That's because Virgin Mobile operates unconventionally. Rather than own the information
delivery system -- in Virgin
Mobile's case, the cellular towers and transmission equipment -- it leases them from
another wireless carrier, adds its
own features and brand image, and resells service to customers.

The industry calls businesses like Virgin Mobile a ``mobile virtual network operator'' or
MVNO. When Forrester Research
surveyed 30 European wireless carriers two years ago, it found that only 10 thought MVNOs
were a good thing. Most
feared the upstarts would steal customers and force down prices.

Text messaging

These days Virgin Mobile can boast a statistic that makes it the envy of the wireless
industry: It says 53 percent of its
subscribers use their phones to send text messages to each other, compared with about 20
percent for the rest of the
industry. Analysts expect services like text messaging to drive the use of data services
on phones, especially among
young people.

``Our largest users of text messaging are 16- to 24-year-old females, and then if you had
a breakdown of geography
it's spread relatively evenly,'' Schulman said. ``We thought that there would be an urban
tilt in text messaging, but we
haven't seen that.''

http://www.bayarea.com/mld/mercurynews/5523204.htm?template=contentModules/printstory.jsp

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