How does mobile fit into Virgin Media?

How does mobile fit into Virgin Media?

When Virgin Media became the first ‘quad-play’ operator in the UK, offering cable TV, broadband, landline and mobile services, spirits in the camp were high and the company began a series of large-scale advertising campaigns to drive subscriptions.

But two years down the line, have consumers got what was promised or is integrating mobile with the other services more difficult than the company initially thought?

On the high street, Virgin’s retail presence has almost completely disappeared as Virgin Megastores have been rebranded to Zavvi. To increase visibility, the company said it would open Virgin Mobile shops, but so far, only 22 standalone stores have opened around the country, although 89 of the Zavvi stores still carry Virgin concessions.

From a consumer perspective, the integration of Virgin Mobile into Virgin Media doesn’t seem to have gone much beyond a few TV ads.

However, Graeme Oxby, Virgin Mobile’s MD, maintains that the integration has gone well and opened up a number of new opportunities as expected.
Customers from elsewhere in the Virgin Media group are also taking up mobile services with the company, according to Oxby. He says Virgin has achieved what it set out to do two years ago; Virgin Mobile now runs smoothly alongside Virgin Media with its people, processes and practices all integrated and working as one team.

Oxby says: ‘By bringing our teams together, we’ve gained a fantastic, in-depth understanding of our customers. With this, we are able to provide tailored packages to suit their needs and continue to offer an exceptional customer experience across all of our services.’

Part of the win Virgin was hoping for comes through the bundling of Virgin Mobile with other Virgin products, which offers significant cross-selling opportunities. And, according to Oxby, there has been a healthy uptake of mobile packages by existing Virgin Media customers.

‘Mobile bundles include mobile, broadband and a phone for £30 and mobile, TV, broadband and a phone for just £40. Plus we have lots of special offers. By offering our services together, we are able to pass cost savings onto our customers and offer outstanding value,’ Oxby says.

Heavy on prepay

However, integrating the mobile segment further into Virgin Media may run into problems. One major difficulty is that Virgin Mobile’s customer base isn’t ideal for subscription services, such as broadband, TV and fixed-line telephony. In its latest results, Virgin revealed that almost 90% of its mobile customers are on prepay and don’t receive monthly bills.

Rob Bamforth, principle analyst at Quocirca, says: ‘I’m sure Virgin would like to bring it all together and doing quad-play, but it doesn’t fit well with a heavily prepaid mobile community when the other services are billed monthly.’

Ironically, these prepay users are, in terms of their segment profile, the target market for Virgin’s broadband and cable television too.

Furthermore, selling the quad-play services together doesn’t always make sense from the customer perspective, especially when the market is moving towards unlimited offerings.

Shaun Collins, analyst at CCS Insight, says: ‘You’ve got to say to yourself, if I’ve got unlimited offerings in my mobile telephony, why would I worry about my fixed telephony?’

Mobile broadband, for which Virgin has yet to introduce a proposition, could also be particularly disruptive as it cuts across the company’s other properties.

Operators advertise mobile broadband as a replacement for fixed-line internet connectivity, which Virgin also offers. It would be difficult for Virgin to convince its customers to buy both mobile and fixed-line broadband.

With the mobile broadband market having made inroads into the fixed broadband market, Collins says Virgin has to think long and hard about its plans.

’I think all of these things mean that their implementation has been slower than expected,’ he says. And as the hunger for broadband connectivity, both mobile and fixed, is stretched, Collins believes that Virgin may be pursuing things further on the fibre-optics front, simply because they see more value and more ROI outside of mobile right now.

Collins adds: ’As a result of that I think they are saying we’ll pursue this part of the market first [rather] than strictly multiplay including mobile.’

Customer services may also bring additional headache to the integrated services. Virgin has had problems in the past with customer services. Many are a legacy from the NTL and Telewest merger.

Bamforth says: ‘Although it [bundled offering] is seen as attractive as it extends services across multiple, different bearers keeping customers more ‘sticky’, it can be bad news if the customer has a bad experience on one of the services and wants to dump the whole lot because of it.’

But integrating mobile into the group offers opportunities beyond bundling. A few weeks ago Virgin launched the Virgin Media Mobile Advertising with advertising agency 4th Screen.

The initiative offers the opportunity for companies to advertise their brands across mobile, online and TV. This demonstrates the value of quad-play to brands, advertisers and consumers who are welcoming relevant and innovative advertising campaigns, Oxby says.

Virgin Mobile has also been active in promoting its own brand. Oxby says: ‘We’ve also been able to realise significant benefits in driving
consumer awareness and resonance by having Virgin Mobile’s distinctive brand.’

The company’s sponsorship of Big Brother has been extremely successful with the youth demographic. Oxby says: ‘The idents have communicated the distinct benefits of Virgin Media and Virgin Mobile products while still providing the connection between the two brands.’

Slowing market
A recognisable brand is not enough when the market is slowing. Some analysts believe changing market conditions may be causing problems for Virgin, and this might be the reason for a perceived lack of integration on the part of its consumers.

Collins says: ‘I think that circumstance has probably overtaken them a bit. There hasn’t been the pace we expected.’

Although GfK figures from May and June made Virgin Mobile the market leader in Sim-only contracts with around 30% of the market, it’s not all plain sailing.
Bamforth says: ’Quarterly operating figures still show flat revenues, despite growth in subscribers.’

Even with mobile subscriptions up more than 60% over the year, some of this may be down to the fact that many come from Sim-only deals, which aren’t necessarily the most profitable, easiest to target or to build brand value on. Analysts also question just how many of these will be in use several months down the line.

Virgin launched its Sim-only tariffs in June, starting from as little as £10 per month and, while these offer good value for customers, it remains to be seen how these will fit in with its new bundled offerings going forward.

Into the future
Having mobile and broadband does open up an opportunity for Virgin, which is that of fixed mobile convergence, especially the use of femtocells.

Bamforth suggests that this could also be attractive to small and medium enterprises, as it solves common problems on coverage and predictable costs for them.

He says: ‘This might be an attractive way to hook mobile into an ongoing revenue stream via a low flat fee for all the free home mobile phone calls you can eat, which also encourages handset familiarity and potentially increases use outside the home cell.’
When Virgin Media became the first ‘quad-play’ operator

Written by Mobile Today
Mobile Today


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