Brands seek higher calling as 'virtual' cellphone providers

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Excuse me, your Tommy Hilfiger is ringing.

Wireless phones are high fashion among marketers ranging from cable networks (ESPN) to surfer wear (Roxy), affinity groups (AARP) and even rappers (Sean "P. Diddy" Combs) as companies look not just for a slice of burgeoning cellphone revenue but a chance to extend and enhance their brand aura. Since last August, the number of marketers branding mobile nearly tripled, from 22 to 56, according to marketing consulting firm Global Advertising Strategies.

"Cellphones are badges and tell people something about who you are," said Allen Adamson, managing director, WPP Group's Landor, New York. Any marketer "with a large loyal consumer base and a brand image" is likely to offer a mobile phone to create another consumer touch point. "I can't believe it will be long before there's a Ralph Lauren phone or a Tommy (Hilfiger) phone," said Mr. Adamson.

Four major providers-Verizon Wireless, Sprint Co., Cingular Wireless and T-Mobile-dominate a market in which 180 million Americans spend an average $50 a month on service. But other brand names are cropping up on cellphones now, thanks to a business model called mobile virtual network operators, or MVNOs, that operate through wireless carriers similarly in some ways to branded credit cards issued by Visa or MasterCard.

Many of the early MVNOs were price plays, such as Virgin Mobile, a joint venture between Virgin Group and Sprint Corp., which targeted teens and others looking for a prepaid telephone service instead of the more common post-paid contract plan. Now, however, MVNOs are being considered not just for less affluent or less-established consumers but for segments of a more mainstream consumer base.


ESPN in the next 12 months plans to launch a branded mobile phone offering scores, statistics, columns, games, information, fantasy-team trades and updates and eventually game-ticket sales, said Manish Jha, senior VP, ESPN Mobile. ESPN has a deal in which Sprint will provide wholesale network for voice and data, but ESPN will arrange for its own handsets, call centers, billing and distribution through traditional phone stores as well as big-box retailers and eventually sporting-goods stores or sporting events.

"We want to create a fan experience that is more immersive, deeper and designed for sports fans," said Mr. Jha. "We want to be there with the most compelling content we have."

ESPN recently named Havas' Arnold Worldwide, Boston, as agency for its anticipated $30 million advertising account backing the new phone.

George Bodenheimer, president ESPN and ABC Sports, in a recent keynote address to the Cellular Telecommunications and Internet Association meeting in New Orleans, stressed that the branded ESPN phone will not damp ESPN's commitment to licensing partnerships with other traditional cellphone companies now carrying ESPN content, nor does he expect it to cannibalize those partners' sales. ESPN's parent, Walt Disney Co., also is considering a branded phone.

One of the more successful MVNOs is 2-and-half-year-old Virgin Mobile's youth-targeted prepaid service, a joint venture with Sprint that recently reached the 3-million-subscriber milestone. But Howard Handler, chief marketing officer, Virgin Mobile USA, noted there's more to the business than that: While its pay-as-you go service has about 2% of all U.S. cellphone users, it also has 8% of the lucrative $3 billion ringtone market.

More are coming. Verizon Wireless has announced a deal with Amp'd Mobile to offer multimedia mobile-phone service targeting youths 18 to 25. Movida Communications is partnering with Sprint and the Cisneros Group of Cos. for a Hispanic-targeted, prepaid Movida service to be sold through Wal-Mart Stores that's aimed at the more than 40 million Hispanics in the U.S. The retail behemoth itself is said to be considering its own branded mobile-phone service, as have affinity groups such as the AARP. Internet service provider Earthlink is teaming with a Korean phone company for an MVNO and Time Warner Cable is joining Sprint PCS for a test of a telecom service bundle to include a mobile phone.

Diddy an MVNO?

"Right now it's the flavor of the month," said Mark Fewell, senior director-business development for Nextel's Boost Mobile, which has partnered for three years with Quiksilver's Roxy brand for a phone aimed at teen girls. Matt Jacobson, VP, Quiksilver Entertainment, declined to disclose Roxy's phone sales, but said his company is also considering bringing its branded Quiksilver phone from Australia to the U.S.

At the CTIA meeting, even music artist Mr. Combs told the audience, "I am an MVNO. Maybe the biggest one. I don't own spectrum. I don't have a network infrastructure. I don't make customer-service calls. But I do have subscribers. They spend millions of dollars on music, on fashion, on cosmetics, on soda, on fast-food and, yes, on consumer electronics and wireless-communications technology."

Whether newcomers to the mobile-phone business will be successful in the long term remains to be seen. Virgin Mobile's Mr. Handler cautions that MVNOs face a lot of static before targeted consumer segments will be able to hear them clearly. "It ain't as easy as it looks."

Marc Lefar, chief marketing officer, Cingular Wireless, said a successful MVNO needs access to a unique marketing segment not reached by the major carriers, or really compelling content. Otherwise, he said, "It's a lot simpler to cut licensing deals than get into the wireless business."

Indeed, it was unclear from Mr. Combs' remarks whether he actually planned to deliver a branded cellphone to market in the near future. A spokesman later said in fact, nothing specifically is the works. "It's something he's very interested in. He's always looking for what's next."

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