Branson: Branding beats building

The new mobile phone businesses of the future would do better to brand someone else's network than to build their own, according to Richard Branson, the charismatic founder and chairman of Virgin Group.

With the right name, a brand can be extended into businesses as diverse as air travel, perfume, clothing, music -- and telecommunications, Branson told a packed auditorium here at the 3GSM World Congress Wednesday.

The company which he heads -- a branded venture capital firm, as he describes it -- has already lent its brand to "Britain's fifth mobile phone operator," the first with no network infrastructure of its own.

Virgin Mobile, the UK's first mobile virtual network operator, switched on for business in November 1999, making Branson a relative latecomer to the mobile industry. He was very nearly late for his 9 am keynote presentation, too, confessing in a gravelly voice that he had been sampling the delights of Cannes the night before, and had woken up just 15 minutes earlier.

Despite -- or perhaps because of -- their late start, both Branson and Virgin Mobile hit the ground running. The company is fast approaching its first million customers, barely 18 months after launch. Its competitors took much longer to reach that landmark, Branson said, soberly adding that he had spoken to delegates from China the previous night: "They probably get that many new customers every few days."

Virgin runs its service over the GSM (Global System for Mobile Communications) network of rival One 2 One, Virgin Group's co-investor in the business. The fact that One 2 One, now owned by Deutsche Telekom AG, has invested 50 million pounds (around US$80 million) in the company is vital to its success, Branson said. Without it, Virgin Mobile would be nothing more than a regular service provider, supplied by a bigger and more powerful competitor. But One 2 One's role as an investor means it owes it to its shareholders to help Virgin Mobile succeed.

A measure of Virgin's success, Branson said, is that it was voted best network for 2000 by UK magazine Mobile Choice -- although it doesn't even have a network.

Since Virgin launched its branded offering in the UK others have followed suit. Supermarket chain Sainsbury has linked up with BT Cellnet, a subsidiary of British Telecommunications PLC, and fixed-line telecommunications operator Energis has teamed with mobile operator Orange PLC. And if the rumors are true, Branson said, then another U.K. supermarket chain, Tesco, could be planning to launch a service over the network of Britain's other mobile network owner, Vodafone PLC.

In February 2000, Virgin struck a deal with Cable & Wireless Optus in Australia to offer a similar service, and Branson expects the brand to be present in 10 mobile markets in five countries, including the US, by the end of this year.

As Virgin opens up these markets, the opportunities for other companies to step in and extend their brand are multiplying. The possibilities are limited only by the number of network identity codes allowed for in the GSM standard -- but there are no signs of these running out yet.

While it might seem odd for One 2 One to help set up a competitor, the deal actually made sound business sense, said Branson. As it matures, the mobile phone market is becoming more fragmented. Having multiple brands on the same network helps reduce network churn -- the percentage of customers which switch to a rival network each year. Even if a customer leaves One 2 One for Virgin, One 2 One still gets to keep a cut of the call revenue. "It's better for One 2 One to own one and a half of the UK's five mobile operators than one of four," he said.

It takes foresight and no small amount of luck to be able to build a brand across many different industries and products. Branson's first Virgin business was almost named Slipped Disc. While that works for a record label, he said, Slipped Disc Airlines or Slipped Disc Condoms might have been less successful.

Branson described this pitfall, of associating the company's principal brand too closely with one product or area of activity, as "the Mars syndrome". The Mars bar is a great product and a great brand, he said, but it is also the name of the company. Mars made the right decision in not using the brand for its pet food business, he said.

The 3GSM World Congress, in Cannes, runs through Friday. Further information can be found at http://www.gsmworldcongress.com/.

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More about British TelecommunicationsBT AustralasiaBT CellnetCable & WirelessDeutsche TelekomEnergisOne 2 OneOptusTescoVirgin Mobile AustraliaVodafone

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