Virgin Mobile - Case Study

1063 WordsMar 4, 20125 Pages
Problem Statement Virgin Mobil is venturing into the US market and their launch date is July 2002. The company’s goal is to have one million total subscribers by the end of the first year and three million by year four. In order to achieve their goals, the company has to come up with a competitive pricing strategy to attract and retain customers in an already mature market. Recommended course of action Despite a mature US market, the cellular service industry has a market penetration of only about 15% in the segment comprising of users aged between 15 and 19 years. This segment is characterized by inconsistent cell phone usage, low credit ratings and usage pattern different from the typical businessperson. Hence, Virgin Mobile USA is…show more content…
sion ARPU 30.5 29 32 CCPU 13.725 13.05 14.4 AC(case 1) 170 170 170 Margin 16.775 15.95 17.6 LTV 69.64285714 57.85714286 81.42857143 AC(case 2) 90 90 90 LTV 149.6428571 137.8571429 161.4285714 Exhibit-2 Exhibit-1 and Exhibit-2 related to LTV calculation pertaining to Option -1 of pricing Strategy 300 minutes No extension Extend Off Peak by 1 hr ARPU 36 31.5 CCPU 16.2 14.175 AC(case 1) 170 170 Margin 19.8 17.325 LTV 112.8571429 77.5 AC(case 2) 90 90 LTV 192.8571429 157.5 Exhibit-3 100 minutes No extension Extend Off Peak by 1 hr ARPU 27 25.5 CCPU 12.15 11.475 AC(case 1) 170 170 Margin 14.85 14.025 LTV 42.14285714 30.35714286 AC(case 2) 90 90 LTV 122.1428571 110.3571429 Exhibit-4 Exhibit-3 and Exhibit-4 related to LTV calculation pertaining to Option -2 of pricing Strategy Estimating Break-Even Arpu for ARPU for option 3 Comments LTV 0 0 0 AC 170 90 130 Margin 11.9 6.3 9.1 Calculation for 2% churn rate ARPU 21.63636364 11.45454545 16.54545455 Margin 18.7 9.9 14.3 Calculation for 6% churn rate ARPU 34 18 26 Exhibit - 5 Year 2002 Year 2003 Estimated per user Revenue from Mobile Estimated Revenue from Mobile entertainment for 2002(Billions) 30 45 Entertainment (((0.5*/135)*30,000)+((0.5/130)*45,000))/(2*12) $12 Virgin Mobile starts operation from July 2002 so assuming constant growth it will approximately have 0.5 million subscribers in 2002 and 0.5 million subscribers in 2003 July Exhibit -

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