VIRGIN MOBILE UK: A CASE STUDY ANALYSIS

Virgin Mobile UK: A Case Study Analysis



Virgin Mobile UK: A Case Study Analysis

Introduction

Increasingly, the core Virgin Group is positioning itself not as an entrepreneurial ideas factory, but a branded venture capital organisation. For several years, Richard Branson's preferred business route has been for joint ventures. Virtually all of his current main businesses were either launched as joint ventures under the Virgin brand, or have introduced sizeable financial partners post-launch as a way of securing additional funding. Virgin's inter-company structure is buried in a minefield of family trusts and offshore holding companies. Although it has fingers in many different pies, Virgin Group's main interests now are in travel, media & mobile telecoms and financial services.

Discussion

The group's best-known business is almost certainly the main Virgin Atlantic airline, which celebrated its 21st anniversary in 2005. It is the core brand in a growing collection of travel and tourism businesses. (See separate profile). Back on terra firma, Virgin Trains operates two rail franchises in the UK, West Coast Trains and CrossCountry Trains, operating around 1,600 services a week nationally out of London and Birmingham to 135 destinations (De Vries, & de Vitry, 2004). It claims to be the UK's only national operator. Since launch the group has faced repeated accusations of poor service. In a bid to fix this problem, Branson sold a 49% stake in the business to experienced rail operators Stagecoach in 1998. Sales for 2005 were around £590m, and the service carried 34m passengers. Internet booking service Trainline.com, wholly owned by Virgin, is closely linked to Virgin Trains.

Virgin Mobile UK: A Case Study Analysis

Virgin Group's fastest-growing business segment is mobile telecoms, led by Virgin Mobile. This was launched in the UK in 1999, originally as a joint venture with One2One (now T Mobile). It was the UK's first mobile "virtual" operator (or MVNO). Virgin has no actual phone network of its own, but instead pre-buys call capacity on the T Mobile network, which it sells on at a profit to customers under the Virgin name. Virgin markets only pre-paid connections, with no monthly charges or other hidden costs. In early 2003, Virgin initiated legal action to buy T-Mobile's share of the joint venture after a gradual falling out between the two partners. The row was finally settled out of court in early 2004 (Cahill, 2006). Virgin acquired 100% of Virgin Mobile, but agreed to appoint T-Mobile as exclusive voice carrier for at least 10 years. An IPO was issued for Virgin Mobile in July 2004, which valued the business at around $500m. Revenues for the year to March 2006 were £563m, with net profits of £45m.

Towards the end of 2005, UK cable and phone giant NTL began negotiations to acquire Virgin Mobile to form the fourth leg of a "quadruple play" offering of mobile and fixed telecoms, internet and cable broadcasting. Earlier that year, NTL had also acquired rival cable operator Telewest. A price of £962m was agreed in April 2006, and the deal ...