Virgin, Sprint create teen venture

The companies have paired up to launch a mobile service in the United States for the teen cell phone market.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
3 min read
Virgin Mobile USA will debut a cell phone service Sunday that hopes to capture a share of the elusive young-adult cell phone market.

The company, a joint venture between the Virgin Group and Sprint PCS, is venturing into a market where other carriers have tried--but failed--to rule, despite multimillion-dollar ad campaigns like Motorola's recent "Get Your Modo" initiative.

Virgin Mobile USA is the first U.S. cellular virtual operator. Such operators, more common in Europe, do not own an inch of telephone network; rather than building one, they strike deals to use the property of another company. Virgin Mobile USA will be using Sprint PCS's cellular network. The two companies will split the revenues. Both have invested about $150 million to launch Virgin Mobile USA.

The young-adult market is one of the most elusive in telecommunications, especially in the United States, where about one in every four young adults owns and uses a cell phone regularly. In European countries, where cell phone penetration is generally highest, up to 85 percent of all teens own and use a cell phone.

"We all won't get the skateboard youth of America," Sprint PCS President Charles Levine said during a conference call detailing Virgin Mobile USA's plans.

"Most of us would agree that today's youth market is like a big, black hole," said Daniel H. Schulman, chief executive of Virgin Mobile USA.

But Virgin believes its service will make progress.

Alan Reiter, head of consulting firm Wireless Internet & Mobile Computing, gives the endeavor a chance, especially because of Virgin's flare for advertising.

"Considering the coolness factor of the U.S. operators, (Sir) Richard Branson (owner of Virgin Group) is a veritable icicle," Reiter said. "All you have to do is look at AT&T's m-Yawn commercials to see how a wireless operator can spend millions of dollars and bore its audience."

Simple plan, plus a bonus
The service is pre-paid, meaning customers first buy a phone and then deposit cash into an account to be spent on either making calls or doing other things, like sending text messages for 10 cents each, or downloading ring tones for $1.

Virgin Mobile USA has just one pricing plan for voice calls--the first 10 minutes spent on the phone every day cost 25 cents a minute. For the rest of the 24-hour period, calls cost 10 cents a minute. Most other carriers charge 10 cents a minute for their calls.

There are also no roaming charges or any off-peak or peak hours, something that Cingular Wireless and other carriers are now beginning to implement as they move to rate plans that are for their entire customer base. Calls on most wireless carriers' networks after 9 p.m. are considered off-peak, when network congestion is lower.

Virgin Mobile USA said it's the first to add a bonus program for callers. For every $50 a month in purchases, a customer gets another $10 a month of free airtime.

One of the two phones to be sold is named the "Party Animal," but is actually the Kyocera 2255, which is expected to sell for $99 and features ways to change its look and store 200 phone numbers. The other phone, dubbed "The Super Model," is also a Kyocera device and is expected to sell for $129.

Virgin Mobile USA will also feature what may be the first music download service for wireless devices in the United States. Its "Hit List" service will let someone listen to music over the handset.

Another new feature is a "Rescue Ring." Customers can schedule a call to their phone--for example, 20 minutes after a blind date is supposed to start. The call can be used as an excuse to leave.

Virgin Mobile USA will begin offering the pre-paid phone service in select areas, but will roll it out by the end of next month.

Some 3,000 U.S. retail outlets, including Best Buy, Circuit City and the campus bookstore conglomerate Follett Higher Education Group, will sell Virgin Mobile USA equipment.