The MVNO Virgin Mobile USA has launched a new iPhone-only offer in which customers will get one year of unlimited talk, text and data on Virgin Mobile’s nationwide network for US $1.00. That offer is valid through 31 July; those who join after that will get six months of service for the same price. After the promotional service periods end, the service will cost US $50.00 per month.
For a limited time, members of Virgin Mobile’s “Inner Circle” loyalty program will also be able enjoy a number of benefits including a round-trip companion ticket to the U.K. on Virgin Atlantic, one night’s stay at Virgin Hotels, savings of US $170.00 on an introductory offer to Virgin’s wine club, up to 20 percent off Virgin America flights and 20 percent off the Virgin Sport San Francisco Festival of Fitness.
With this offer, Virgin becomes the latest operator to sell its service in Apple stores and through Apple’s website, and it becomes the first iPhone-only operator in the United States.
Virgin is making a bold, attention-getting move to jump ahead in the U.S. MVNO market, in which its competitors include AT&T’s Cricket Wireless and T-Mobile’s MetroPCS. Without a doubt, a nearly-free-of-charge offer of a year’s unlimited service should make potential customers sit up and take notice, and the tight deadline for the full 12-month promotional period is obviously designed to pull in the lion’s share of new subscribers rapidly. If those subscribers can be converted to US $50.00-per-month subscribers after a year, the operator will have scored a significant victory.
In order to do that, though, Virgin Mobile will need to meet subscriber needs over time in ways other than just price. And in this respect, we are not sure whether they will be able to do so. For one thing, the term “unlimited” for this service is a bit of a misnomer—the speeds of customers who use more than 23 GB of data during a single billing cycle will be throttled as needed, depending on usage in the customer’s geographical area. In addition, there are concerns about domestic roaming: For areas to which Virgin’s coverage (on Sprint’s network) does not extend, subscribers will get 800 roaming voice minutes and 100 MB of roaming data, so subscribers would end up paying potentially hefty roaming surcharges after these modest limits are reached.
Another caveat: Until now, Virgin Mobile offered only Android phones to new subscribers, so the exclusive focus on the iPhone marks a major direction change that could positively affect the operator’s market position. However, the available iPhone models will be offered at retail price through Apple, not at a discount. In light of the extremely low introductory price of the plan, that may not be a problem, but then again it could be, simply in terms of cash flow, if payment has to be made in full up front as opposed to spread out over a 12- or 24-month period as with some of the major U.S. operators.
Finally, the incentives pertaining to the larger Virgin company’s non-mobile products and services, while no doubt appealing to some, are not likely, in our view, to be a major contributor to subscriber uptake, because of the fact that they are limited to just one brand.