Virgin to become virtual mobile operator in France

Virgin Mobile in talks with Orange about launching a mobile virtual network operator

The French mobile phone market may be about to get a bit more crowded. Virgin Mobile Holdings said on Monday that it's in talks with mobile phone operator Orange about launching a mobile virtual network operator (MVNO) in France.

MVNOs don't own their own mobile networks. Instead, they typically buy network capacity from existing operators and resell it to customers. Virgin Mobile currently offers MVNO services in the U.K., U.S., Canada, and Australia.

Virgin Mobile is in talks with Carphone Warehouse Group, a retail chain that sells mobile phones and service, to jointly deliver the mobile phone service in France. The offering would be sold under the Virgin Mobile brand and use the Orange network in France. A spokesman for Virgin Mobile could not comment further on the company's plans.

Until recently, MVNOs struggled to sign deals with mobile operators in France. However, the French telecommunications regulator recently found that mobile phone prices were higher in France than in other European countries. To help reduce prices, it negotiated with French operators to require them to open their networks to resellers on a limited basis. Swedish mobile operator Tele2 AB, which owns mobile networks in several European countries and resells fixed-line voice and data services across Europe, launched an MVNO in France this summer based on Orange's network.

An agreement with Carphone Warehouse may be key to Virgin's expansion into France. Virgin sells its phones through its Virgin Megastores and, in the U.K., at Carphone Warehouse. Virgin has fewer Magastores in France than in the U.K., however, so it could use the help from a partner, said John Strand, chief executive officer of Strand Consult.

"If Virgin wants to start in France, they need something beside their brand," he said. "They need distribution power, and one of the easiest ways is through Carphone Warehouse." Carphone Warehouse already has a strong presence in France, he said.

Virgin Mobile may be looking to expand in other European countries, including Spain and Italy, according to Strand. As it does so, it may increasingly come up against easyMobile, an MVNO that began launching across Europe earlier this year.

EasyMobile uses a business model that was pioneered in Nordic countries where it sells just SIM (Subscriber Identity Module) cards, and only via the Internet.

"The big advantage easyMobile has is the leanest overhead of any virtual operator," said James Rothnie, director of corporate affairs at EasyGroup. "Therefore, over the long term we have the best combination of price and service." Without retail stores to support, online-only MVNOs like EasyMobile can offer lower prices to users, he said.

EasyMobile has launched in the U.K. and the Netherlands and is soon to launch in Germany. France is among the countries where EasyMobile hopes to launch, but it has no launch date there yet, Rothnie said.