TELECOM Digest OnLine - Sorted: Virgin Mobile Introduces Ad-Subsidized Calls

Virgin Mobile Introduces Ad-Subsidized Calls

Reuters News Wire (
Tue, 30 May 2006 21:55:34 -0500

Virgin Mobile USA, a cell-phone service used mostly by teenagers and
20-somethings, said on Tuesday it was giving its customers the option
to earn free calls if they view and respond to ads on their phones.

Wireless providers are putting more and more features such as Web
browsers and video players in cell phones in an effort to expand their
revenue beyond voice. They also hope to profit from using these
advanced phones to display advertising.

Under the offer, customers of Virgin, a venture of Sprint Nextel and
Richard Branson's Virgin, can get up to 75 minutes of free calls per
month if they spend an equal amount of time looking at ads and
replying to these ads via text messages.

Virgin, one of the first providers to offer such a service, hopes the
service will appeal to its often cash-strapped customers, 65 percent
of whom are younger than 30 years old.

"Very practically speaking a lot of our customers are value
conscious. They manage budgets that are finite," said Howard Handler,
the company's chief marketing officer.

He said that while it was too soon to say how popular the service
would be he expects it to increase revenue.

"It will contribute meaningful additional top line revenue and
EBITDA," Handler said, referring to earnings before interest, tax,
depreciation and amortization.

He declined to reveal details of the terms of Virgin's agreements with
its first advertising partners Pepsi, Microsoft Corp.'s Xbox game
console unit and truth, a youth smoking prevention campaign.

Forrester Research analyst Charles Golvin believes advertising will be
"extremely important" to wireless providers as they deliver video and
news to phones.

But he said it was not clear if many customers would want ad
subsidized calls because cellphone calls are already cheap.

"If you give somebody the choice whether you can have free content
with advertising or you can pay for the content they'll chose the
former," Golvin said.

"Realistically the price of voice is pretty darn cheap on a mobile
phone these days so giving somebody three free minutes of mobile voice
is not a compelling proposition for most mobile users."

Copyright 2006 Reuters Limited.

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