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Virgin Mobile off to good start

Six-month-old Virgin Mobile USA--Sir Richard Branson's cell phone company meant to crack the coveted but hard-to-reach young-adult market--appears to be quick out of the blocks.

Six-month-old Virgin Mobile USA--Sir Richard Branson's cell phone company meant to crack the coveted but hard-to-reach young-adult market--appears to be off to a good start, according to company figures released Wednesday.

More than 350,000 U.S. residents now subscribe to the company's service, Virgin Mobile USA said in its first-ever report about subscriber totals. The service also captured 6.4 percent of the total number of new cell phone subscribers during the last quarter of 2002, the company said.

"Given the fact that the economy is in poor shape, and that Virgin is not a big name in the United States, these figures are better than respectable," said analyst Alan Reiter of Wireless Internet & Mobile Computing.

Launched in July, the service, a partnership between Virgin Group and Sprint PCS, is trying to solve what's been a big riddle for cell phone providers: how to get young adults to buy cell phones.

In the past five years, cell phones have surged in popularity, with 51 percent of all Americans currently owning one, according to industry watcher Telephia. But the 18- to 25-year-old set is underrepresented, with about 41 percent owning wireless devices. Yet young adults use their phones more than any other demographic, averaging about 800 minutes of talk time every month, compared with the 400 minutes normally logged by adults, according to Telephia.

Market research firm The Yankee Group believes that 74 percent of those between the ages of 18 and 25 will own phones by 2006--the largest percentage of any market segment owning cell phones by that time. Researcher Cahners In-Stat believes there will be 43 million youth wireless subscribers by the end of the decade.

Virgin Mobile USA and its main competitior, Nextel Communications' Boost Mobile, have essentially the same formula for nabbing this juicy demographic: inexpensive, low-frill phones; Web-based ways of buying more airtime; and no long-term contracts.

"Good for them, and I mean that," Nextel Communications representative Audrey Schaefer said in response to Virgin Mobile USA's report. "When the industry is healthy, we can all do extremely well." Schaefer would not provide Boost Mobile subscriber numbers, saying Nextel plans to announce its totals later this month.

Virgin Mobile's first reports did have some down notes, though, especially about how often subscribers use SMS, or short message service--160-character, text-only e-mails that are supposed to earn wireless carriers very large revenue in years to come. Carriers sell SMS in bulk or charge a few pennies for every message sent or received.

Virgin Mobile USA users average about two SMS notes a day, which is a disappointment, Reiter said. Most analysts expect young adults, who are more prone to try new services, to lead American users in SMS usage.

"Two a day isn't very exciting," Reiter said. By comparison, European cell phone users average more than a dozen SMS notes a day.