Virgin UK Illustrates Potential of MVNO, And The Downside

It was the best of times, it was the worst of times. Virgin Mobile UK recently announced an additional 417k subs, bringing their total to 5 million. This staggering growth success is measured at a 37% year over year climb. But despite this rapid growth, churn is an abysmal 5.4% per month, up from 4.6% last year. Why the growth in churn? It’s natural as the maturity of the average Virgin subscriber escalates (maturity in the sense of how long they’ve been a customer). Virgin is showing that there is no loyalty among the most cost-conscious consumers, and that other MVNOs who offer only cost (Tesco) or distribution (7-11) as their competitive advantage will have to endure high rates of churn. That isn’t to say Virgin has no brand loyalty, but it is very little compared to an ESPN or a bundled Comcast MVNO. What happened to churned Virgin subs? They saw a cheaper deal, a cooler phone, got a job with a phone, or got on a family plan with their pater familias…either way, there is little locking these subs to Virgin. Virgin is a great business success, proving that you can make money on many segments of the market. But we need to expect different metrics from this particular segment.

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