Virgin wireless service could hurt current operators

Virgin Mobile Canada means to shake up the telecom landscape with a youth-oriented wireless phone service launched Tuesday. The existing crop of mobile providers will feel the effect of this newcomer, according to industry observers.

In a stunt-packed event that featured Virgin’s founder Sir Richard Branson jumping from an office building, climbing into a monster truck and crushing cars, and then freeing a trio of scantily clad nurse-models or “customers” from chains binding their hands — the manacles representing wireless service contracts — the company unveiled its plan: mobility with no contracts and no covert costs.

In a press conference, the Virgin Mobile Canada team explained that the firm’s pre-paid phone service would cost 10 to 25 cents per minute. Virgin’s reps said the carrier would charge no system access fee and no additional fees for voice mail, call waiting, call forwarding and three-way calling. Virgin offers no post-paid service.

Virgin is renting airtime on Bell Mobility’s CDMA network, rather than building its own infrastructure. It’s starting the service in B.C., Alberta, Ontario and Quebec first. Atlantic Canada will get Virgin service in a matter of weeks, while Saskatchewan should be on the books by the fall.

Branson said it’s “incredulous” that Canadian service providers charge a system access fee — the controversial $7 item on mobile phone bills that carriers have said goes to the government.

“That doesn’t exist anywhere else in the world,” he said. Virgin would not charge the fee.

CEO Andrew Black said just 45 per cent of Canadians have wireless handsets, making this country a ripe market compared to the U.K., where Virgin got its start and 98 per cent of the population have mobile phones.

“There are 300 rate plans out there,” Black said, explaining why so few Canadians have cell phones. “It’s not exactly an easy thing to navigate. We plan to change that.”

Branson said Virgin expects to attract two million customers.

Virgin offers three phones from Nokia Corp. and Audiovox Corp., ranging from $99 to $219. The price seems high compared to the competition, which give users some phones for no cost. But according to Nathan Rosenberg, Virgin’s marketing leader, long contracts and hidden fees make even complimentary handsets far from free. “Somewhere along the line they make you pay for it.”

Industry analysts said Virgin could have an impact on other wireless providers’ customer counts.

“I think we will all feel the effect of Virgin,” said Iain Grant of the SeaBoard Group in Montreal. “Virgin is focusing particularly on things like contracts — the iron shackles we wear with mobile phones. They’re focused on, not hidden fees so much, but layering on charges. They’re going to be very up front about what they offer. Things will tend to be included rather than extra. And I think they really want to be sexy.”

Ronald Gruia, an analyst at Frost & Sullivan in Toronto, said that of Bell, Rogers Wireless Communications Inc. and Telus Mobility, Rogers might be hit hardest by Virgin’s advent. He pointed out that Rogers has the greatest market share with 36 per cent, so the company has the most to lose. As well, Rogers recently changed the price of CityFido, an erstwhile unlimited local calling package served up through Rogers’ Fido brand. Gruia said some CityFido customers might defect in protest of the price amendment, which essentially took “unlimited” out of the offering. Those unhappy clients might head to Virgin.

Gruia mentioned that Bell wins even if it loses customers to Virgin, thanks to the joint agreement that puts Virgin users on Bell’s infrastructure. “If Virgin is successful they’ll pay Bell,” he said.

Nonetheless, Bell has been making changes, noted Grant. Bell Mobility’s president Michael Neuman resigned late last month and Robert Odendaal, former head of Bell’s video services department, stepped up to the Bell Mobility CEO suite.

“If anything, Mr. Neuman was the architect of Virgin Mobile,” Grant said. “It was under his watch that Bell elected to do the joint venture with Virgin. He should take a couple of bows for this one.”

Rogers isn’t sitting still either. It signed a deal in February with Second Cup, the caf

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