The Prepaid Press - July 15, 2008 - (Page 15) PREPAID WIRELESS July 15 · 2008 - 15 Prepaid Wireless Roundup By Joe Pawlikowski Big Month for Virgin Mobile June turned out to be quite the month for Virgin Mobile USA. The table was set in May, when rumors circulated that Virgin was in merger talks with Helio, a US MVNO partly owned by SK Telecom, a Korean carrier. The rumors died down for a few weeks, but picked up steam in late June, as the Financial Times reported on June 24 that the two entities had an agreement in principle to the merger. On June 27, Virgin made the official announcement that they had purchased Helio for about $39 million in stock. Under the reported agreement, Virgin will absorb Helio’s subscribers. The Helio brand will then be discontinued in favor of the more recognizable Virgin Mobile USA brand. That would give Virgin an increase of about 170,000 customers. This outweighs the 130,000 to 160,000 subscribers Virgin expects to lose during the second quarter of 2008, though the deal will take some time to pass regulatory approvals. Virgin states that this will be complete sometime in the third quarter. In the official announcement, Virgin revealed that they will use Helio’s proprietary customer management system to enter the postpaid realm, a move that they said would have taken a year to implement from scratch. They will also retain Helio’s impressive array of handsets, though there is no word on the status of the Ocean II, which has passed through the FCC in the past month. Concerning their own subscribers, Virgin Mobile USA announced an unlimited calling plan to rival those of the larger national providers. While the national price point was set at $99 by AT&T and Verizon, Sprint and T-Mobile brought value-added services to the pricing tier. (T-Mobile adds unlimited text messaging, while Sprint adds unlimited text messaging, mobile Web, navigation, and other multimedia services.) Virgin Mobile will differentiate its offering by lowering the price. Unlimited calling from Virgin Mobile USA will cost $79.99. Unlimited text messaging is available for an additional $10 per month. Since there are taxes and fees involved with any cell phone plan, the total cost of Virgin’s unlimited plan, with text messaging, should fall to a final cost of about $100. The $99 price for the Big Four carriers does not include taxes and fees. Despite the seemingly positive news of the plan upgrade, analysts downgraded Virgin’s stock to “sell” from “neutral.” This reflects uncertainty of whether the unlimited calling plan, priced roughly $60 above Virgin’s current average revenue per user, will appeal to its target audience. This, however, discounts potential customers who were considering signing up for an unlimited plan through a major carrier, but don’t want to sign a two-year contract. Since no official announcement has been made, it also discounts the attractiveness of these unlimited plans to the potential incoming Helio customers. So, while losing roughly 150,000 customers is never good for a wireless carrier, Virgin did make some news to smile about at the end of the second quarter. The hope is that these developments can put some wind back under their sails and spur growth in the second half of 2008. kajeet to Concentrate Online, Downsize Workforce It seems that another MVNO is falling off every month. The list of failed ventures has become exhaustive, and we’ve seen even more casualties in the past few months: Embarq, Sonopia, and Movida just to name a few. With the rumors of Helio’s acquisition by Virgin Mobile, we will have precious few MVNOs remaining. One of them is kajeet, an MVNO which is targeted at kids aged eight to 14. While their doors remain open, they realize that change is necessary to continue doing business in this environment. CEO Daniel Neal has confirmed that the company has slashed a “reasonable number” of jobs, though the definition of “reasonable” changes from person to person. At the same time they are scaling back their physical retail presence, which includes outlets like Best Buy, Target, and Toys R Us. They won’t cease the practice entirely, but their focus is moving online. The online outlet is ideal for a small niche carrier. Scaling back physical locations means less overhead, so more revenue can be reinvested in the company’s products and services. Keeping the focus online also eliminates costs like rent, staff, product, electricity, and others, which can hamper a smaller company. kajeet has introduced a few changes over the past few months leading up to this, including lowering their daily access fee from 35 cents to 32 cents. At the same time, they raised their text messaging rates from 5 cents each to 10 cents. However, they still have text messaging bundles that amount to far cheaper than the 10 cent a la carte rate. MetroPCS introduced an AWS market in the Shreveport-Bossier City area of Louisiana. This gives Metro an additional coverage area of 600,000 people. The company also plans to revamp its network on Interstate 20 heading into Dallas, though this will be on the PCS network, not AWS. MetroPCS also gained access to a cellular tower in New Jersey, suggesting that their eventual New York City launch will extend beyond the city proper. Cricket rolled out their AWS network in St. Louis, a long-hyped market for them. This gives them additional coverage of 2.5 million people, and expands their national coverage to 61.7 million POPs. Around the same time as this launch, Cricket announced a slight change to their pricing, which added a $30 entry-level plan for local calling, as well as added features to their existing plans. Joe Pawlikowski is a Senior Editor for Prepaid Reviews, an independent website that reviews prepaid cell phone providers and reports on the prepaid wireless industry. He can be reached at info@prepaidreviews.com Cricket, MetroPCS Continue Rolling Out Networks While the MVNO business might be in trouble, regional carriers like MetroPCS and Cricket Communications seem to be doing okay. Each company won a swath of spectrum in the 2006 AWS auction, and are now beginning to roll out the new networks in markets previously unexplored by the carriers. They both offer unlimited calling services for a flat monthly rate, on average about $50. http://www.pop2call.com http://www.pop2call.com
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