NTL has at last secured Virgin Mobile, and with NTL’s infrastructure and Virgin’s branding, they make a hard-to-beat partnership. By Martin Croft
NTL’s &£962m purchase of Virgin Mobile will almost certainly be completed officially on July 4, barring unforeseen events. Over the next year, customers of Virgin Mobile and NTL will be offered a range of Virgin-branded telephony services, culminating in what the two companies – with typical Virgin cheekiness – are calling “four-play”.
Four-play is the delivery of fixed-line and mobile telephony, internet access and cable television access, in one package with a single billing point. It is likely that consumers who take up such an offer will save money/ at the very least, they are being promised less hassle and better service, as Virgin Mobile is known for achieving high levels of customer satisfaction.
Strategy Analytics senior industry analyst Sara Harris says: “NTL will rebrand as a Virgin company. It makes blindingly good sense – Virgin has strong youthful branding that communicates it’s one of us.”
Virgin Mobile has proven to be one of the amazing success stories of the mobile phone revolution in the UK. As a “virtual network” or mobile virtual network operator (MVNO), it has no infrastructure of its own, but instead buys airtime from T-Mobile, packages it with a service offering and re-sells it under its own brand name.
It has attracted 5 million subscribers to make it the biggest MVNO in the UK. The nearest UK MVNO in terms of size is Tesco’s mobile operation, with about 600,000 subscribers, according to analysts.
Industry experts agree it is a classic Virgin Group operation, using much the same irreverent, slightly edgy approach that Virgin companies favour. While Sir Richard Branson may be less visible in Virgin Mobile’s marketing than other Virgin operations, his carefully cultivated and maintained persona remains at the heart of what Virgin Mobile does.
Branson and Virgin Group have been able to apply that intensely personal brand persona to a breathtakingly diverse range of products and services. Record labels and stores, books, radio stations, mortgages, airlines, cinemas, drinks, holidays, bridal wear and cosmetics, to name but a few. Some have worked better than others; some have been quietly abandoned.
But, as Harris says, every British consumer under a certain age knows what a Virgin company stands for.
One industry figure close to the NTL/Virgin deal confirms it was the Virgin brand that NTL really wanted. And it seems to have secured it: in a separate deal with Virgin Group, NTL is understood to have agreed to pay an annual licensing fee for the use of the Virgin name or 2.5% of sales for the next 30 years. At the moment, that deal will net Virgin Group about &£9m for the first year, although that figure should increase significantly as NTL’s revenues from operations under the Virgin brand grow.
As part of that deal, the insider says, NTL has agreed to give Virgin Group a seat on the board and, perhaps more importantly, “influence on the appointment of a chief marketing officer” for Virgin Mobile, which will continue to operate as an autonomous unit within NTL. NTL has also agreed to give Virgin effective control over how it uses the brand name. The insider observes: “That makes perfect sense – it’s not anything you don’t see in similar brand licensing deals. Virgin wants to be in charge of its own brand image.”
If the deal goes ahead, Virgin Mobile brand director James Kydd will become NTL chief marketing officer, with responsibility for consumer-facing marketing. Ashley Stockwell, Virgin Group brand marketing director, will become an NTL director and will be in charge of communicating Virgin brand values internally and for issues such as packaging and retail design (MW April 13).
Kydd absolutely denies rumours that one of the pair’s first tasks will be to review Virgin Mobile’s advertising, held by Rainey Kelly Campbell Roalfe/Y&R. He says: “It’s too early to be considering such a move. We’re really happy with the agencies we’ve got on Virgin Mobile, and it’s far too early to be making any decisions about NTL’s relationships.”
NTL is still digesting its last merger target, rival cable company Telewest – bought for &£3.4bn last October. It recently announced plans to slash annual costs by &£250m, eliminating some 6,000 jobs. Analysts
agree the main problem facing NTL and Telewest was service delivery: if NTL can take on the Virgin service ethos, the newly merged company could indeed become a real rival to Rupert Murdoch’s Sky or telecoms group BT.
Virgin Group has attempted to transfer its brand equity to existing businesses with legacy problems before – think Virgin Trains – and it has not proved easy. However, one industry expert points to the way Virgin Mobile’s call centre staff work as an example of how the company could help NTL do things differently. “They don’t have scripts,” he says, “they are encouraged to be human.”
Facts and figures
â¢ November 1999 Virgin Mobile launched as a joint venture between T-Mobile and Virgin Group (VG). Other Virgin Mobile joint ventures have since launched in countries including the US, Australia and France.
â¢ January 2004 VG buys T-Mobile out, although it keeps a contract for airtime rental
â¢ July 2004 Virgin Mobile lists on the London Stock Exchange with a market value of &£500m. VG sells 25% of Virgin Mobile shares.
â¢ December 2005 NTL launches a bid for Virgin Mobile, valuing the company at &£817m. Independent shareholders are unhappy about the deal, and Virgin Mobile’s board rejects it.
â¢ April 2006 After negotiations, the bid price is increased to &£962m and Virgin Mobile’s board recommends the bid. If it goes through, VG will be NTL’s biggest single shareholder, with a 10.7% share.