Virgin’s arrival in Canada to stimulate penetration gains: company CEO says

The head of Virgin Mobile Canada believes there will be enough new subscribers entering the market over the next several years for the company to capture adequate market share. In an interview with Report on Wireless, Virgin Canada’s president and CEO Andrew Black says there will be approximately eight million new wireless subscribers in Canada over the next five or six years and that’s a significant opportunity. There are currently approximately 14 million subscribers in Canada, equaling about 45% penetration, and with an expected penetration of 70% in about five years, that would bring an additional eight million people into the wireless world, Black explains. "That’s what’s going to happen in the next foreseeable future and if we’re lucky enough to earn the respect and confidence of enough new customers, then we should do pretty well," he tells RoW. If the experience of Virgin Mobile USA is any indication of things to come for the Canadian operation, then Virgin Canada is poised for considerable success. Since launching in the summer of 2002, Virgin in the United States has captured 3 million new subscribers. The Canadian subsidiary hopes to emulate the success of its American cousin and as such has opted to employ the same type of pricing strategy, targeting the 12-to-24 age category. Talking about the U.S experience, Black says there are a number of reasons for Virgin USA’s success. "Virgin has been really successful at getting a lot of new-to-wireless, new-to-mobile customers…We tend to have such a simple offer and have marketed it in such a way that we have tried to interest a lot of new people in the category and I think that’s why we’ve done so well (in the United States and elsewhere)," he says. Black wouldn’t talk about specific subscriber projections for Virgin Canada, only to say the company will do well. "(We) have some ambitious targets, but I think time will just tell…we’ve got to get them one at a time," he says. Virgin Canada will charge subscribers on a declining tariff basis. The first five minutes of every day are charged at 25 cents per minute and anything above the five minutes is charged at 15 cents per minute. A second option, called the monthly pass, allows subscribers to charge $25 per month to their credit card. They get the first five minutes at 20 cents per minute, or about $1 per day, and the rest of the minutes are charged at 10 cents per minute. Black suggests the room for considerable growth within the Canadian landscape given the low-level of penetration and the mix of subscribers in the market is reason why Virgin Canada’s mobile virtual network operator (MVNO) strategy will work in this country. There’s large segments of the market that haven’t purchased cell phones and those are the mass market and the youth market, he says, adding that’s a big reason why the company is focusing on those segments. "Certainly they’re not going to have the ARPUs (average revenue per user) of some of post-paid customers, but we’ve proven in other markets that you can make a business successful with the scale of the Canadian market," he tells RoW. With the splashy launches now complete, which included Virgin founder Sir Richard Branson riding a monster truck smashing three cars in Toronto, the company can now get down to the business of building its business. Virgin Canada has opted for multi-line retail strategy where it will compete head-to-head with its much larger competitors at Future Shop, Best Buy and The Telephone Booth. But the company has also decided to use outlets that have other qualities. Black notes that retailers such as HMV and Wal-Mart have their distinct advantages that will help Virgin Canada. "The experience we’ve had in other markets demonstrates that there’s certain channels where people who are in the youth market like to shop, so we tried hard to make sure that we are in those types of channels," he says, adding HMV, Future Shop and Best Buy were obvious choices. "Let’s not forget that Wal-Mart is, I think, the number one seller of video games in the country, so it was obviously an important one, and Zellers is too…But also for our $99 handset, we also have distribution at Seven-Eleven and Mac’s where a tremendous amount of foot traffic from youth goes every day," Black says. Asked whether it was important to have a unique distribution strategy, Black responds, "Out of the gate, we wanted to make sure we had an impactful footprint in Canada with some of the higher profile retailers and, I think, we’ve achieved that. And over the course of time, we’re going to continue to look at ways of growing our business, but priority one was to launch with the 12 retailers that we’re proud to say are our partners at launch." There are still some missing pieces to the company’s puzzle, however. Currently, the service is only available to residents of British Columbia, Alberta, Ontario and Quebec, but Black says Virgin Canada will soon launch services in Atlantic Canada and the Prairies. The company will have to ink agreements with Aliant Telecom in the east and SaskTel and MTS Mobility in the west to offer the service. It’s a top priority for the company to get national distribution, says Black. But he couldn’t provide details on when these announcements might be made. "We will be announcing (those agreements) at the time that it makes sense," he says.

Virgin’s arrival in Canada to stimulate penetration gains: company CEO says

News | March 8, 2005

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