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Virgin Mobile USA has a go at bedlam with $1 unlimited data offer

Richard Branson

Richard Branson has decided he wants to emulate T-Mobile US CEO John Legere in creating chaos in the US telco space with the launch of a new offer.

If Legere has shown the world anything it’s that you have to do something drastically different in a stagnant and established market to be successful. T-Mobile’s Uncarrier strategy has gained traction, as has Jio’s seemingly continuous freebie offer in India. Now Virgin Mobile USA has had a go.

For those customers who sign-up to the MVNO, buy an iPhone and join the ‘Inner Circle’, they will receive six months of unlimited talk, text and data services for $1. For those who sign up prior to July 31, this will be extended to twelve months.

It certainly is an attractive proposition on the surface, but you have to question why is this offer being put on the table now?

Firstly, Virgin Mobile USA is wholly owned by Sprint in the same way Virgin Media in the UK is owned by Liberty Media. Branson is mentioned in the press release, and will possibly be used in the marketing collateral, but he does not seem to be involved in the business.

In fact, Branson seems to be happy to peddle the brands wares throughout the world, in slight contradiction to the name of said brand. But that is slightly irrelevant. What is more relevant is the question as to whether this is a final roll of the dice from Sprint in the pre-paid market. Is this an attempt to capture some revenues under the guise of a more credible brand?

Another interesting area to consider would be the fact this is an iPhone-exclusive carrier; has iPhone pumped a bit of cash into the exercise to encourage users to upgrade current models or even ditch their Android powered devices?

But perhaps the cash is actually coming from Branson himself, in contradiction to our first point.

By creating the ‘Inner Circle’, Branson is trying to create a community which will be receptive to offers from other Virgin brands. The team can lure them in with the promise of unlimited free services (although we weren’t able to figure out when the data service would be throttled) and then spam them with discounts for the more high-value products.

As a member of the ‘Inner Circle’, you could get a 2-4-1 ticket on a flight to London, or $170 off a serious stash of wine, three nights in a Virgin Hotel for the price of two, as well as numerous other offers from ‘Inner Circle Member Benefits merchants’. Although unclear for the moment, ‘Inner Circle Member Benefits merchants’ sounds like third parties.

This is a clever move. Not only is Virgin likely to be making more money off sales through other Virgin brands than on the MVNO pre-paid side of things, it also seems to be attempting to create its own walled garden. Facebook is the master of this. Create an audience through free services and then charge third parties to access and engage this audience. The free MVNO is the bait, ‘Inner Circle’ is the walled garden and the promotions the monetization.

Sky seem to have created a similar model in the UK. If you complain or want to leave, generally your bill if reduced. Perhaps the Sky execs realize you are more valuable to the business as an advertising metric to sell to third parties, than as a single subscription. It is a move away from the ARPU business model and into the world of services.

So it’s either a desperate punt or a cunning plan. We’ll let you decide.


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