To those on the outside, Virgin Mobile seems to have gradually been disappearing since the £962m acquisition of NTL in 2006.
It has appeared to lose its appetite for new customers, with the cheeky adverts and PR stunts gone, and a surprising lack of activity in the industry.
Under the radar, however, Virgin Media has been busy slotting the mobile division into the broader group over the last year.
It now wants to market its mobile products to the 3.7 million broadband customers that are using its unique fibre optic cable infrastructure.
The vision of being a single provider of multi-platform content and connectivity is closer to becoming a reality.
Virgin talks of mobile as becoming its ‘third screen’, having already engaged consumers to content on TVs and laptops.
Since the NTL rebrand, Virgin Media has focused its efforts on the fibre optic cable broadband that was the main asset of its predecessor, but the priority was relaunching it as ‘Virgin Media’ and ‘super fast broadband’, getting the customer services proposition right and taking on Sky for TV and broadband.
It plans to expand cable infrastructure to reach another 500,000 properties over the coming years, giving it over 13 million potential homes that it can sell fibre optic to.
So far though, the Virgin Mobile MVNO appeared to be isolated from the broader business, not fitting with the Virgin Media customer profile, sitting as a cheap, no frills operator.
Woolies to Media stores
The vision when NTL took the Virgin halo in 2006 was clear: to lead the provision of convergent media for the consumer, with TV, broadband, fixed line and mobile.
There were ramifications for Sky, BT and the mobile operators.
A fresh start for the company began the following year as NTL rebranded and made shaking off its poor customer service image the priority.
Since then, the mobile distributor has suffered a blow to its distribution network, as two key channels became high profile casualties of the credit crunch and recession. Woolworths was struggling to secure credit insurance and collapsed shortly before Christmas, and Zavvi, formerly Virgin Megastore, followed one month later.
Virgin had 83 branded concessions in Zavvi stores. It responded by changing its direct sales strategy to start trying to increase its own store format beyond the 20 standalone stores it had.
Virgin Media now has a three year plan to increase its own stores, with an aim to triple its 33 retail shops in 2009.
Virgin has always defended its smaller retail estate by comparing itself to the likes of BT and Sky, which have millions of customers but no high street presence.
Crucially, Virgin’s store locations will be built around areas where it has cable infrastructure available.
The first phase will be new stores in London and ‘retail lite’ locations – or ‘shops without walls’ – showing the quad-play offering of TV, internet, fixed telephone and mobile, in the style of BT and Sky in the middle of shopping centres.
Bridging fibre optic with cheap £9.99 Alcatels
Virgin wants content to stand out as the centrepiece of its strategy. It has to overturn the ‘down market’ feel of Virgin Mobile through its cheap
tariffs and low-end phones, and try to better match the Virgin Media brand more associated with youth and cutting edge technology.
Virgin has traditionally sold low-end handsets, particularly from the likes of Sagem and Alcatel, with innovation limited to zebra prints on fascias.
However, that is about to change as more high-end smartphones will inevitably lead to pressure to attract high spending customers onto its network.
Virgin Mobile also has to confront the reality that TV, broadband and fixed line are ‘household’ purchases, usually made by a ‘family decision maker’. Mobile, in contrast, is a personal purchase, and Virgin Mobile in particular is a choice for someone not fitting with the profile of a ‘household decision maker’.
The Virgin strategy is nevertheless to build the business around customers with fibre optic broadband, and persuade them to sign up to the TV and mobile offerings. This ‘lock-in’ is its main distribution strategy and a means to cut churn while building a brand around content on TV, PC/laptop and mobile.
From the big screen to small screen
The company’s new retail strategy started two years ago. Virgin Media’s MD of consumer sales, Pete Taddeo (pictured above), says the company’s strategy centres around the question: ‘How do we take a mobile retail experience and make it a total digital experience?’
The shops have a laptop bay, with 50MB of web service.
Virgin Mobile now sells an average of three services per sale – usually TV, broadband and fixed, but it is looking to sell four.
The complexity of a quad-play proposition has made it difficult to sell online or over the phone. It is hoped that stores will overcome some of that complexity.
Here comes the third screen
The company plans to use iPlayer, for example, in an interactive way and take this onto mobile phones. The vision is to seamlessly carry the viewing of a programme from TV to laptop to handset.
Taddeo adds: ‘You need to segment the market – the volume side [the cheap, no frills offering] and the much higher requirements, such as the iPhone. Families have different needs from single people and students.’
Taddeo is confident that no other company can compete with Virgin Media. He says: ‘No one has the full product offering.’
And mobile is an integral part of the third screen offering, joining the other three products together. Taddeo says: ‘Think of it as a life remote – the ability for bringing things together.’
Timeline: The Virgin story
• 1999 – Virgin Mobile becomes the world’s first mobile virtual network when it launches in the UK, using T-Mobile’s network.
• 2003 – Virgin falls out with T-Mobile over T-Mobile’s attempts to change the commercial terms.
• January 2004 – Virgin Group buys T-Mobile’s share of the MVNO and floats Virgin Mobile UK on the London stock exchange, retaining a 72% stake.
• January 2006 – Virgin accepts NTL’s offer of £961m. The deal
goes through by 4 July 2006.
• February 2007 – NTL rebrands under the Virgin Media name.
• September 2008 – Virgin extends T-Mobile deal for six years to include 3G services.