Comments on: Mobile IPOs: Virgin vs MetroPCS http://gigaom.com/2007/05/02/mobile-ipos-virgin-vs-metropcs/ Fri, 10 Feb 2012 04:07:06 +0000 hourly 1 http://wordpress.com/ By: Scott T http://gigaom.com/2007/05/02/mobile-ipos-virgin-vs-metropcs/#comment-169443 Thu, 03 May 2007 17:13:33 +0000 http://gigaom.wordpress.com/2007/05/02/mobile-ipos-virgin-vs-metropcs/#comment-169443 I think the S1 will cause sleepless nights at other MVNOs. ESPN closed because they could not get to scale. Virgin is showing that even at scale this is a horrible business. $1.1B in rev and still no profit.

The other metrics are even scarier:
-3MM Gross Additions to generate 729K Net Subscribers in 2006 vs. 2.3MM Gross to create 1.4M Net in 2004. Basically they have to bring in more and more customers to keep a smaller number of net subscribers. The addressable market is shrinking and competition is increasing.
-Steady increase in churn it’s only getting worse as market gets more intense.
-I don’t understand the Virgin vs Blue Bottle holdings nonsense, but between them they are holding $1B in debt and losses! They may generate a profit in 2007 but a long way to break even!
-I usually don’t care about executive renumeration, but the management team seems to be very well paid for a company that’s bled money for 5 years.

Very scary business indeed!

]]> By: Jay (living in First Life) http://gigaom.com/2007/05/02/mobile-ipos-virgin-vs-metropcs/#comment-169442 Wed, 02 May 2007 19:13:47 +0000 http://gigaom.wordpress.com/2007/05/02/mobile-ipos-virgin-vs-metropcs/#comment-169442 Katie – thanks for the article. It will be interesting to see if MVNOs can really be profitable. Everyone is enamored with them because they don’t have high fixed costs, but they also have fewer benefits to scale and can’t always leverage the spectrum provided to them for higher-value services. Virgin’s low ARPU demonstrates that.

ESPN Mobile, another MVNO, already bombed last year. It’s still to be seen where Helio and Amp’d end up, but if Virgin Mobile is any indication, there’s not a lot of money to be made here. That being said, Helio and Amp’d have far higher ARPUs but with far smaller subscription bases. Both have spent hundreds of millions of dollars to get off the ground – mostly on marketing I would think.

It’s still great for the customers though.

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