Forget Entertainment -- They Just Want Phones

Consumers Value Prices and Service, but Amp'd and Helio Market Multimedia

By Published on .

SAN FRANCISCO ( -- Hold the bells and whistles, please. Consumers are currently looking for good prices and service, not entertainment, on their phones.
Consumers for now are more interested in traditional wireless plans, not MVNOs such as Virgin Mobile, which has 4 million subscribers.
Consumers for now are more interested in traditional wireless plans, not MVNOs such as Virgin Mobile, which has 4 million subscribers.

Helio, Amp'd, Mobile ESPN and other new-breed mobile-phone marketers have spent more than $50 million -- including spots during the Super Bowl -- to market entertainment-equipped mobile phones.

Only 1% want to be entertained
But according to Jupiter Research, as few as 1% of the nation's 210 million mobile-phone subscribers said they choose service providers based on entertainment options. Instead, a great majority want the basics: solid coverage, reasonably priced handsets and well-priced monthly service. And of the 2.1 million or so who are interested in entertainment, Jupiter estimates only about 500,000 of those in the market to switch would be eligible, thanks to the one- or two-year service contracts required by most prepaid plans.

The new carriers, called mobile virtual network operators, or MVNOs, are primarily marketing organizations that use major carriers' infrastructure. While top-tier players such as Sprint and Cingular have 40 million or more customers, MVNOs aspire to thrive on niche markets of as few as a couple hundred thousand.

"The MVNOs position themselves as media companies, and there aren't enough consumers out there making a choice based on entertainment today," said Julie Ask, senior analyst, Jupiter Research. "Customer acquisition isn't going to be easy," she added. "Everyone can't have a million subscribers in the next two years."

Helio's potential
Helio, a joint venture of Earthlink and SK Telecom, is often considered most likely to succeed because of its deep pockets and ability to tap South Korean telecom expertise. It expects to have 3 million customers by 2009. Amp'd Mobile and Mobile ESPN decline to say how many customers they have or plan to acquire. Both have dropped their introductory phone prices substantially and are otherwise adjusting their offers.

MVNOs have continued to push entertainment in their marketing. Helio this summer began advertising itself in humorous TV spots from Deutsch, Los Angeles, tagged "Don't call us a phone company. Don't call it a phone." Helio defines its target as "media omnivores," the "young, passionate, connected" and mobile-centered. But it's also using low international rates to target a second audience: South Koreans living in the U.S.

Two Super Bowl spots earlier this year touted the ability of Sprint and Mobile ESPN to carry sports video. Some four months later, Walt Disney Co. reported it had lost about $25 million on Mobile ESPN, handled by Arnold, Boston.

Disney's mobile investment
But the company plans to invest $130 million in that venture and Disney Mobile, which intentionally takes a different route, using family-friendly phones designed with parental controls and global positioning systems. Special ringtones and wallpapers are available, but the phones have little multimedia capability. "We do not support streaming video -- it's intentional" because adoption rates are less than 5%, said Lisa Rountree, director-marketing and strategy at Disney Mobile, handled by Buder Engel & Partners, San Francisco.

Sprint provides the backbone for both Disney products, as well as Virgin Mobile and subsidiary Boost Mobile, in addition to providing mobile service for cable companies through a joint venture, but has applied a brake to its MVNO machine. "We are focusing on maximizing our current partners," said Thad Langford, VP-strategic partners, Sprint.

Sprint's offerings for its general customer base are similar to those of its MVNOs, Mr. Langford said, but the target is different: Mobile ESPN attracts sports fanatics, while Sprint sports videos are for people who like sports but have other interests.

Mr. Langford said MVNOs need more time to "get up and running ... get offers in place and attract the right customers. It takes four to six quarters to build momentum."
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