Virgin's big cellular shout-out in India

Manjeet Kripalani
06 Mar 2008
00:00

On Mar. 2, after Sir Richard Branson gratified the local media with his antics"”he scaled the face of the Hilton Towers in Mumbai"”the Virgin Group founder climbed down to announce his biggest move in India yet. He has become a franchisee of Tata Teleservices, a domestic telecom player providing CDMA cellular services. This is Virgin's third India play after Virgin Air's India routes and a radio station, Fever 104 FM. And it's Virgin Mobile's seventh telecom market. Others include the U.S., France, and South Africa.

Virgin Mobile's Indian service is targeting the 400 million Indians between the ages of 13 and 30 who, Branson says, the country's current telecom operators have been ignoring. Hence Virgin Mobile 's catchy tagline: Think hatke, Mumbai slang for 'think out of the box.' The company will be offering handsets by Nokia (NOK), Samsung, and Huawei Technologies, most of them black phones with red trim that will cost between $60 and $120 each. They have full-color screens and FM radio access"”to listen to Fever 104, no doubt.

Virgin's team of 250 researchers spent nearly nine months studying their target audience. They discovered that Indian parents take away their children's cell phones at night and read the text messages they send or receive"”something kids hate. Virgin's value-added service is offering a password-protected folder to the young so parents cannot read their messages. Great for the kids, too bad for the parents.

Fastest-growing cellular market

Virgin thinks this new feature is not an obstacle. For one thing, parents can decide whether to let their children use the service. 'This is to get under the skin of our target audience, but there are other parts of the service that parents will like, particularly the affordability,' says Jamie Heywood, deputy chief executive of Virgin Mobile India. Best of all, the text messages will be the cheapest in the market, 30 paise, or less than one U.S. cent, affordable even to young rural Indians. Weekend call rates will also be 30 paise.

The market numbers are compelling. Out of India's total cellular user base of 242 million, 215 million are between 15 and 25 years old. And with India being the world's fastest-growing cellular market"”India adds 8.7 million subscribers a month, and the number of cellular subscribers grew nearly 50% last year"”the youth market should grow another 50 million by 2010, drawing revenues of an estimated $8.75 billion. 'If you can't make it in India ,' said Branson, 'you won't make it anywhere.'

In order to make it in India, though, Branson has had to forge an unusual deal with Tata. Because India 's telecom regulations do not permit Virgin to do what it does in other markets"”buy minutes from operators and resell them to consumers (what's called in industry parlance a Mobile Virtual Network Operator arrangement)"”Virgin has gone the franchise route. The partners won't discuss the financials or the revenue-sharing structure. Still, others eager to invest in India 's hot telecom market could follow that same route. Russian telecom player Sistema has just bought a stake in a domestic Indian player and Egypt's Orascom is rumored to be interested in entering the Indian market.

Lagging behind reliance

Getting the Virgin franchise could provide a much needed lift for Tata. Other companies in the Tata Group dominate their industries: Tata Steel, for instance, is the country's top steelmaker and Tata Motors has recently won global acclaim for its groundbreaking low-cost car, the Tata Nano (BusinessWeek.com, 3/10/08).

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